Consumers told to brace for ‘true costs’ of power

CONSUMERS MAY have to brace themselves for higher electricity prices as the government wants to start reflecting the “true costs” of power, given the bulk of pending applications for rate increases.

“It’s time we face up to it. These are the realities. We have to pay for all the inefficiencies committed in the past,” said Energy Secretary Jose Rene D. Almendras in a briefing Tuesday.

Almendras pointed out, for instance, that the debt of state-run National Power Corp., which had ballooned to a whopping $16 billion, would largely be shouldered by the consumers through the universal charge component in their electricity bills.

PSALM has already lodged a petition before the Energy Regulatory Commission, seeking to pass on to consumers over P570 billion worth of stranded debt and contract costs of Napocor.

Stranded debt refers to an unpaid financial obligation of Napocor that has not been covered by the proceeds from the sale of Napocor’s power assets. Also, the estimated stranded cost of an eligible contract is calculated every year as the difference between the contractual payment obligation and the revenue earned from the sale of contracted energy.

Napocor also has a number of pending rate hike applications before the ERC under the Generation Rate Adjustment Mechanism (GRAM) and the Incremental Currency Exchange Rate Adjustment (Icera).

GRAM is a mechanism that allows utilities to recover costs associated with fuel and purchased power, while Icera allows utilities to recover foreign exchange-related costs.

“We would study all pending applications for rate hikes. I hope that it’s not an intentional design to hold back (these applications). We hope that appropriate decisions will be made soon,” Almendras said.

“The President already explained that there are projects and expenses made in the past that would have to be paid for in the future … But the government will try to do whatever it can” to mitigate it, Almendras stressed.

According to the energy chief, they are now studying how to bring down, not just the impending universal charge for stranded debt and contract costs, but also other components of an electricity bill, including generation, transmission and distribution costs. –Amy R. Remo, Philippine Daily Inquirer