POSTSCRIPT / June 26, 2007 / Tuesday


Philippine STAR Columnist

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Nasecore for or against interests of power users?

PRO OR CON?: By its name, the National Association for Electricity Consumers for Reforms purports to be pro-consumers. But by its acts, Nasecore appears to be a runner of the mafia lording it over the National Power Corp. and making life miserable for electricity users.

Why is Nasecore against the proposal of the Department of Energy to allow the timely recovery by power distribution companies of generation and foreign exchange-related costs that bloat electricity rates?

The DoE recently promulgated changes in the implementing rules and regulations (IRR) of the Electric Power Industry Reform Act (EPIRA), specifically Rule 3, Section 4(e), which provides a more efficient recovery or adjustment of costs resulting from fluctuations in the foreign exchange rate of the peso and other variables.

The change restores the automatic recovery of currency adjustments and other pass-through charges, but subject to the subsequent verification by the Energy Regulatory Commission to avoid over-recovery.

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DEAFENING SILENCE: If Nasecore is indeed the voice of electricity consumers as it styles itself to be, it would not be protesting left and right over the changes being introduced in the IRR.

We consumers never heard the group voice our concerns when the Napocor bungled the Masinloc and Calaca power plants privatization. Neither did we hear it howl over the recent power outages that sent electricity rates soaring.

Now Nasecore has been unleashed against the DoE and the ERC for allegedly conniving with public utilities in amending the IRR.

The group said foreign exchange or pass-through recovery adjustments are actually rate increases that must go through public hearings.

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PUBLIC HEARINGS: Previously, the Epira IRR allowed power generation and distribution firms to automatically recover — using a set formula — generation costs resulting from currency adjustments and other pass-through charges.

That way, when rate reduction is in order, such as when the peso appreciates or the cost of fuel drops, it can be carried out faster.

But through a petition with the Supreme Court, Nasecore succeeded in nullifying this mechanism. So now all cost-recovery applications under the Generation Rate Adjustment Mechanism (GRAM) and the Incremental Currency Exchange Rate Adjustment (ICERA) will have to go through ERC public hearings.

Because of the initiative of Nasecore, power generation and distribution firms have to go through hearings every time they seek to recover adjustments resulting from the fluctuation of the peso and other pass-through charges.

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DILATORY DEVICE: To visualize the grand delay, note that the ERC has to conduct around 1,680 hearings each year.

This dilatory device of a public hearing comes at a time when consumers badly need the P90 billion and the P65 billion that the Napocor collected for foreign exchange adjustment last year and in 2005. That breaks down to an average refund of P400 for every household.

The Napocor was under obligation to immediately apply for rate adjustment to lower the power rate since last year, but it deferred any application. Instead, the Napocor claimed that the P90 billion was its profit to keep.

That is questionable because the amount is not profit arising from efficiency, but from factors beyond the ken of the Napocor — the strong appreciation of the peso against the US dollar and the lower costs it pays fuel suppliers and Independent Power Producers (IPPs).

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RED TAPE: The recovery process is in addition to the ERC hearings already being conducted on distribution and transmission rate increases, promulgation of new industry rules, unbundling of rates and even consumer complaints.

Even though ERC conducts one hearing of GRAM-related application per day, it would need four years to complete all 1,680 expected applications each year!

Any recovery application within the automatic recovery system is easily verifiable, because of the transparent movements of foreign exchange and international fuel prices inputted into IPP contracts.

The pass-through charges do not need public hearings, because a specific, pre-approved formula can be used to compute the adjustment. Actually distribution utilities derive no benefit from collecting them.

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CONSUMERS HIT: But Nasecore would have none of it. It has always insisted on making the ERC process more tedious — to the prejudice of electricity consumers.

If pass-through charges are automatically recovered under a formula as provided for by law, consumers will be able to enjoy power rate reduction earlier.

But because of such advocacy groups as Nasecore, electric consumers will have to wait a long time before any adjustment or refund is made.

The protracted failure of power firms to recover adjustments work against consumers in the long run. Power utilities make advance payments to Napocor year-on-year on a particular peso-dollar exchange rate. They then pass on to consumers the cost of money.

This is deplorable because the funds they advance could have gone to capital expenditures to improve service.

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QUESTIONS: On whose side is Nasecore? Is it really for consumers? Is it an independent group that it claims to be?

Nasecore attacks the ERC, DoE, the Joint Congressional Power Commission and distribution utilities whenever applications for rate adjustments by virtue of GRAM are filed.

In contrast, Nasecore has always been silent when the Napocor applies for its GRAM or a rate adjustment.

Nasecore was silent when power shortages hit many parts of Metro Manila and Luzon last summer. It was also quiet when the Napocor used such shortages to justify importing coal, under the pretext of an emergency, at unconscionably high prices.

Nasecore is also against anything that advances the Napocors privatization and removes the monopoly in the power sector. Why?

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(First published in the Philippine STAR of June 26, 2007)

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