Despite the reduction in its rates owing to savings in its expenses and a marching order from President Arroyo to reduce rates to P4.11 per kilowatt-hour (kWh), National Power Corp. (Napocor) remains optimistic that it will be able to remain in the black this year.  

Dennis Gana, Napocor corporate communications manager, told the BusinessMirror that such cut in rates as ordered by President Arroyo, except for the rate-reduction programs owing to the generation rate adjustment mechanism (GRAM) and incremental currency exchange rate adjustment (Icera)—which are both passed through—could have an impact in Napocor’s bottom line.

“We have yet to complete our financial simulations, but considering that we have sustained our financial turnaround since 2005 up to last year, we could probably shoulder or absorb that cost [of reducing rates],” Gana said in a phone interview.

Unlike the cut in rates as ordered by President Arroyo, the Napocor official explained that the GRAM and Icera are Energy Regulatory Commission (ERC)-approved adjustment mechanisms that cover a utility’s expenses for purchased power, fuel costs and fluctuations in the foreign exchange rate.

Gana said the GRAM and Icera are revenue-neutral and Napocor does not earn any additional revenues from their implementation.

In another development, Gana emphasized that Manila Electric Co. (Meralco) could have even sourced its electricity from Napocor even before President Arroyo had ordered them to cut their rates to P4.11/kWh.

Gana noted that Napocor can provide Meralco, based on its average off-peak Time-of-Use (TOU) rates for Luzon, with electricity at just P3.89/kWh.

“Perhaps, they can buy from us [Napocor] during off-peak and instead source their electricity from their independent power producers during peak hours,” Gana said.

The Napocor official earlier said the government-run power company is moving to reduce power rates in the Luzon grid by more than P0.40/kWh.

Gana said Napocor is in the filing a petition to adjust the GRAM and the Icera components of its rates before the ERC. “If approved, the 9th GRAM and 8th Icera applications of Napocor will reduce rates by P0.4047/kWh in Luzon and by P0.39/kWh in Mindanao.

“We are just awaiting the approval of the Napocor Board, the policy-making body of Napocor, before we file the petitions with the ERC,” he added.

From January to March 2008 alone, Napocor had reduced its rates in Luzon by P0.67/kWh, and in the Visayas by P0.03/kWh.

In 2007, the series of rate reductions implemented by Napocor in the Luzon grid totaled P1.5867/kWh. Similarly, in the Visayas and Mindanao, Napocor’s rates went down by P0.57/kWh and by P0.3440/kWh, respectively.

Napocor also assured that it will comply with the order of the ERC to explain why it had not filed for adjustments to the GRAM and Icera from July 2006 to March 2008, even as it denied that there were any overrecoveries made during the period.

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Despite the reduction in its rates owing to savings in its expenses and a marching order from President Arroyo to reduce rates to P4.11 per kilowatt-hour (kWh), National Power Corp. (Napocor) remains optimistic that it will be able to remain in the black this year.