ERC rules on NPC fuel and power cost recovery

Section 43 of Republic Act No. 9136 (Electric Power Industry Reform Act of 2001 or EPIRA) empowers the ERC, in the public interest, to establish and enforce a methodology for the recovery of fuel, purchased power costs, and incremental foreign exchange adjustments by the NPC.
On February 24, 2003, the ERC adopted Implementing Rules for the Recovery of Fuel and Independent Power Producers (IPP) Costs covering Generation Rate Adjustment Mechanism (GRAM) and Incremental Currency Exchange Rate Adjustments (ICERA).
The ERC adopted the automatic recovery rules for the NPC after PSALM sought approval of proposed rules filed as ERC Case No. 2008-019 RM.
The ERC’s issuance follows public consultation processes conducted in connection with related proposed rules, including a proposed set dated December 17, 2008.

The Resolution adopts a rules framework enabling the automatic recovery of monthly fuel costs and purchased power costs by the NPC.
The framework also covers foreign-exchange related costs of the NPC under the recovery methodology delegated by Section 43 of EPIRA.
The Resolution is adopted to operationalize a cost recovery mechanism through detailed rules governing fuel and purchased power and the relevant foreign-exchange cost components.

The ERC issued an Order on October 21, 2008 setting the PSALM proposed rules for public consultation on November 13, 2008.
During the November 13, 2008 public consultation, stakeholders raised issues and concerns considered in finalizing the adopted rules.
The ERC proposed a separate set of rules for public consultation, with a notice dated December 17, 2008, set for public consultation on January 26, 2009.
During the January 26, 2009 public consultation, stakeholders raised issues specifically on:
- Clarification on the definition of terms
- Unit of measurement of the reference prices of fuel
- Relaxation on the limit of adjustments for reference prices
- Other Fuel Cost Adjustment (OFCA) and Other Purchased Power Cost Adjustment (OPPCA)
- Test period of filing the adjustments
The ERC posted the proposed rules on its website on February 11, 2009, and issued a notice directing interested parties to submit comments on or before February 25, 2009.
The ERC received multiple comment submissions on various dates and considered them in finalizing the rules.

The ERC resolves to adopt the Rules for the Automatic Recovery of Monthly Fuel and Purchased Power Costs and Foreign-Exchange Related Costs by the National Power Corporation (NPC).
The adopted rules are attached as an ANNEX to the Resolution.
The adoption is expressly made after thorough and due deliberation on all submitted stakeholder comments and issues raised during consultation.
The Resolution is grounded in ERC authority under EPIRA, specifically Section 43, to enforce a cost recovery methodology.

The Resolution provides that the adopted automatic recovery rules govern the recovery process of NPC’s monthly fuel and purchased power costs and the applicable foreign-exchange related costs.
The Resolution’s effectiveness is conditioned on publication in a newspaper of general circulation and a fifteen (15) day waiting period.
The ERC requires circulation of the Resolution by furnishing copies to UPLC-ONAR, NGCP, PCCI, and all distribution utilities.
The ERC’s adoption is implemented through the attached ANNEX containing the operative rules governing automatic recovery.

The Resolution states its effectivity rule of fifteen (15) days following publication, governing when the adopted rules begin to bind.
The Resolution provides for adoption and implementation through the ANNEX, and does not establish any sunset or termination date.