The P0.1938 per kwh charge

THE bad news is that electricity consumers will have to pay an additional P0.1938 per kilowatt hour beginning this March. Not that the cost of power increased. Neither did generation, transmission and distribution costs. But the amount will be collected to shoulder the stranded contract costs of the National Power Corporation (NPC). Consumers can complain and question the propriety of the charge. But its imposition has already been approved by the Energy Regulatory Commission (ERC).

In fact, the power bill for consumers this month will now reflect the new fee as a new component of the universal charge (UC). It will now appear this way: Missionary electrification - P0.1163; Environmental charge - P0.0025; NPC stranded cost – P0.1938. The UC will now total P0.3126.

As I have repeatedly emphasized in previous write ups, the electric cooperatives and the distribution utilities will act as collection agents of this newly imposed charge. And again, all electricity consumers in the entire country will be assessed of the same cost. Your guess is as good as mine. This is one of those charges that will suddenly be rammed down the throats of consumers.

We are indeed helpless. But that’s what the law says. The Electric Power Industry Reform Act (EPIRA) says that aside from generation, transmission and distribution costs, consumers will also have to pay other charges. The P0.1938 is among them. The rate is the result of the petition the Power Sector Assets and Liabilities Management (PSALM) earlier filed before the ERC to recover the NPC’s stranded contract cost from 2007 to 2010. PSALM wanted to collect P74.298 million. But the ERC approved only P53.581 million. This is the amount to be shared by all electricity consumers in the country.

But how come the electricity consumers are made to pay this stranded contract cost? It’s in the law. Sec. 34 of the EPIRA allows the collection of charges for the recovery of stranded debts, stranded contract cost of NPC and other mandated purposes. It is a non-bypassable charge which shall be passed on and collected from all end-users on a monthly basis by the distribution utilities. So it’s a must. Avoiding it is not an option.

But what is this NPC stranded contract cost that we are all made to pay? Prior to the enactment of the EPIRA in 2001, the NPC needed to construct power plants to avoid power outages and be able to supply the country’s power requirements. The NPC then has also to enter into power supply agreements with independent power producers. The stranded contract costs refers to the excess of the contracted cost of electricity the NPC entered into with IPPs over the actual selling price of the contracted energy output of such contracts in the market.

The EPIRA mandates the ERC to fix the cost of the payment of these stranded contract costs based on PSALM’s calculation. The EPIRA created the PSALM to handle and assume all of NPC’s assets and liabilities. PSALM now wants this stranded contract costs collected.

Thus, it is not your EC that imposed the P0.1938 charge. It will simply collect and remit to PSALM.

Ledesma also explained that financial obligations forming part of the stranded debts are actual obligations incurred by NPC prior to the enactment of the EPIRA as a result of the need to construct power plants to avoid power outage and to supply the country's electricity requirements. These financial obligations include additional debts incurred by NPC to subsidize plant operations in light of the rate capping measures previously implemented by the government to ensure more affordable electricity costs to consumers at that time.

The EPIRA defines stranded debts as any unpaid financial obligation of NPC that has not been liquidated by the proceeds from the privatization of PSALM’s generating assets, and stranded contract costs as the excess of the contracted cost of electricity under eligible contracts over the actual selling price of the contracted energy output of these contracts in the market.