Dr Allan Nerves was my research adviser for my undergraduate research, Very understated but a great adviser. The attack dogs are coming Doc Nerves, God Bless. Sir Ivan and Sir Wally we my professors.
Power rates could drop by P2 per kWh, UP study shows
By Donnabelle Gatdula
Tuesday, August 5, 2008
Power rates could be reduced by as much as P2 per kilowatt-hour (kWh) if the government and the private sector will come together to do their share in reducing electricity rates, according to initial results of a study commissioned by the University of the Philippines.
In a public forum which presented the draft study entitled “Anatomy of the Power Rates in the Philippines,” the four-man research team had listed 10 items in the power rates that would be looked at.
The study, which will be released in its final form within the month, is authored by Edna Espos, Allan Nerves, Ivan Benedict Nilo Cruz and Rowaldo del Mundo. The team is working on a UP Diliman Open Grant research program Office of the Chancellor through the Office of the Vice-Chancellor for Research and development).
The paper has four parts including generation; transmission and distribution; other issues such as stranded cost, incremental currency exchange rate adjustment (ICERA), subsidies and taxes; and conclusion and summary of how to reduce the electricity rates by at least P2.0913 per kWh.
Among the items in the list of possible areas that could help in the reduction of power, according to the UP research team, and their corresponding savings are: Manila Electric Co. (Meralco) power cost at optimal mix (88 centavos per kWh); reduction in generation rate adjustment mechanism (GRAM)and ICERA charges of the National Power Corp. (Napocor), (30 centavos); reduction in Napocor basic average generation charge from peso appreciation (0.06 centavos); reduction in Napocor basic charge average generation charge from plants sold and removed from rate base (32 centavos); adjustment of the National Transmission Corp. (TransCo) charges from removal of appraisal increase (18 centavos); adjustment of distribution charges from removal of appraisal increase (10 centavos); cost of missionary electrification assumed by government (3.73 centavos); removal of charge for benefits to host communities (0.04 centavos); removal of value-added tax (VAT) system loss 0.6 centavos and removal of government unencumbered share of natural gas royalty (15 centavos).
“The reduction in electricity rates can be effected through a combination of simple adjustment in regulatory/implementing policy and amendment of the EPIRA,” the team said.
Former energy secretary and UP College of Engineering Dean Francisco Viray said the recommendations made by the team of Professor Del Mundo should be restudied to take into account the present regulatory and legal framework.
Citing an example on the costs of the IPPs and Napocor as mentioned in the study, he said, “You cannot compare the avoided cost today (which is actually not an avoided cost as there is still a subsidy) with that when these IPP projects were conceived.” He added that rate cases or simulations are best tossed to the proper body which is the ERC.
The group also recommended that there should be an adjustment in regulatory and other policies to auction values of Napocor’s generating assets; for proper application of the performance-based rate; and ICERA.
They said these recommendations may also require legislative action such as the amendment of the EPIRA which include WESM; assignment of the government unencumbered share of the natural gas royalty by way of a corresponding reduction in generation charges; the removal of the universal charge for missionary electrification, stranded debts and stranded contract costs of Napocor, equalization of taxes and royalties; and environmental charge.
The recommendations, however, elicited different reactions from the industry stakeholders who were present during the forum.
Meralco president Jesus Francisco, for his part, said only 24.73 centavos of the proposed P2 per kWh of the UP-sponsored study would be adopted.
Francisco also noted that “while the study is supposed to analyze the cost structure and the technical, financial and regulatory elements of the electric power industry, we find that many of the recommendations are lacking in such analysis.”
“Since the full paper is still to be completed, we trust that our comments will be addressed in the final output,” he said.