To correct widely-perceived distortions in electricity tariffs, the Energy Regulatory Commission (ERC) bared that it is inching very close to promulgating the rules for the automatic generation charge adjustment for state-run National Power Corporation.

“We have already approved the rules. It is now being scheduled for promulgation,” ERC executive director Francis Juan said, when asked about developments on this specific policy direction.

The regulatory body first allowed the distribution utilities (DUs) to implement automatic adjustments on cost components such as supply procurement, fuel price fluctuations and foreign exchange rate adjustments. These cost movements, which the DUs deem to be beyond their control, are reflected monthly in their customers’ billings.

The automatic cost adjustment for NPC appeared left out in policy improvement domain, but investors have been hard pressed on getting it done, with the overarching intent “to reflect the true cost of electricity.”

The ERC noted it lent attention to the plea for NPC’s automatic cost recovery, having weighed the hurdles brought about by “the delays in filing cost recovery applications, regulatory lag, non-matching of prices versus costs in operating the plants and imposition of carrying charges to compensate the generator for the cost of money attributed to cost recoveries and uncertainty in the recovery period.”

Masinloc plant buyer AES Corporation, for one, has always been vocal about having the policy implemented, noting that the deferred cost recovery schemes inadvertently affected the entire power industry’s viability because of the “cost mismatch” on NPC’s tariffs.

The automatic cost recovery rules will then eclipse the Generation Rate Adjustment Mechanism (GRAM) and Incremental Currency Exchange Rate Adjustment Mechanism (ICERA) that have long been imposed on power utilities.

The latest filing made by NPC on its quarterly generation charge recovery was for January to March 2009 costs. When the automatic cost recovery rules take effect, the ERC said NPC can already adjust its charges to reflect cost movements for that particular billing month. The effectivity date comes 15 days after the publication of the rules.

Similar to what had been set as a policy for the DUs, the automatic cost recovery for NPC will be subject to confirmation process every six months. This will allow the regulatory body to determine whether the power firm has just only been passing on to consumers prudently-incurred and allowable costs. (MMV)