Out of the 15 power purchase or energy conversion agreements sealed by state-run National Power Corporation (NPC) with independent power producers (IPPs) in Luzon, only seven were rendered ‘eligible’ in the proposed P22.256 billion universal charge (UC) stranded contract costs recovery for year 2008 that shall be passed on via the bills of electricity consumers.

These are the 1,200-MW Sual coal-fired power facility; 735-MW Pagbilao plant; 22-MW Northern Mini Hydro plant; 440-MW Leyte-Luzon project; 620-MW Limay combined cycle facility; 225-MW Bauang diesel plant; and 108-MW Subic Enron plant.

Depending on the length of stranded contract cost recovery to be approved by the Energy Regulatory Commission (ERC), the UC charges passed on to consumers may range from P0.09 to P0.50 per kilowatt hour.

“Since it is only in the Luzon grid where the Wholesale Electricity Spot Market (WESM) is in place, it is the only grid allowed to recover SCC from the UC,” the Power Sector Assets and Liabilities Management Corporation (PSALM) has stipulated in its filing.

As defined, the stranded contract costs shall refer “to the excess of the contracted cost of electricity under eligible Independent Power Producer (IPP) contracts of NPC over the actual selling price of the contracted energy output of such contract in the market.”

To be eligible for recovery, it was specified that the contracts must have been approved by the defunct Energy Regulatory Board (ERB) at the prescribed cut-off period of December 31, 2000.

For the ineligible IPP contracts, or those not approved by the ERC on prescribed timeline, the corresponding costs that cannot be passed on to consumers shall all be absorbed by NPC.

PSALM noted that while the Rules for UC-SCC recovery was laid down as early as 2007, the company opted to defer its application because the so-called eligible IPPs then registered positive net generation margin; which meant that there should have been no SCC to be recouped during that particular period.