ERC approval of ACA effectively brings down power rates nationwide–PSALM

by Lenie Lectura - July 25, 2016
http://www.businessmirror.com.ph/2016/07/25/erc-approval-of-aca-effectively-brings-down-power-rates-nationwide-psalm/

THE Energy Regulatory Commission (ERC) has approved the Power Sector Assets and Liabilities Management (PSALM) Corp.’s omnibus motion to set to zero its monthly fuel, purchased power and foreign exchange-related cost adjustments, collectively known as automatic cost adjustments (ACA).

The ERC decision effectively reduced the cost of electricity of its power customers as the fuel, purchased power and foreign exchange-related charges will no longer form part of PSALM’s power bills effective June 2016 billing period, according to PSALM Officer in Charge Lourdes Alzona.

PSALM’s power customers refer to electric cooperatives (ECs), private utilities, industries and government agencies in the Luzon, Visayas and Mindanao grids that obtain their power requirements from PSALM under contract for the supply of electric energy.

“The impact of this ERC approval will be greatly felt by power customers in Mindanao, where PSALM still has 49 existing power contracts,” Alzona said. When sought for comment, the ERC said it granted PSALM’s application to avoid any accumulation of overrecovery.

The zero ACA stemmed from the earnest efforts PSALM exerted in privatizing fuel-based generating assets and independent power producers (IPP) plant contracts. This development in the implementation of the privatization program significantly lessened PSALM’s operational costs, warranting the setting of ACA to zero.

“To extend the benefits of the privatization program to PSALM’s customers, PSALM filed the omnibus motion before the ERC,” Alzona added. PSALM’s remaining plants in Luzon are composed of hydropower plants, except for the Malaya power plant, which is designated as a must- run unit, to which no actual fuel component can be attributed. But due to the ACA of PSALM’s basic generation charge (BGC), the rate charged, when adjusted, results in an overrecovery.

Meanwhile, in the Visayas grid, the ACA results in an underrecovery due to the portfolio of the remaining plants in that area. However, such is not enough to offset the overrecovery in the other grids.

Since the approval of the BGC in 2009 and the implementation of the ACA in 2010, PSALM had sold and privatized most of its generating assets and IPP plants, leaving the following plant portfolio as of May 2016, which are the Malaya, CBK, Benguet mini-hydros, and Casecnan in Luzon; Unified Leyte in the Visayas; and Agus-Pulangi, Mindanao coal in Mindanao.

The ERC’s ruling on the motion of PSALM finds its basis on ERC Resolution 19, Series of 2009, which provides that “where there is good cause, the ERC may allow an exemption from any of the provisions, if such is found to be in the public interest and is not contrary to law or any other related rules and regulations.”