By Alena Mae S. Flores

The Energy Regulatory Commission has provisionally approved an increase of P0.4682 per kilowatt-hour in the basic rate of National Power Corp. for Luzon, P1.1460 per kWh for Visayas and P0.7147 per kWh for Mindanao.

The ruling issued on Feb. 16 means customers of Manila Electric Co. will experience an increase in electricity rates of P0.17 per kWh starting in the April billing period. Meralco bought 36 percent of its electricity requirements from Napocor in January.

The commission said in a statement that it granted provisional relief to Napocor and Power Sector Assets and Liabilities Management Corp. ?to immediately alleviate Napocor?s current financial difficulties given its current costs of generating power, including the costs of the discounts that it is mandated to extend to certain customers.?

The energy regulator allowed Napocor to raise last its basic rate in September 2004.

Napocor?s new average basic rates are now pegged at P4.3648 per kWh in Luzon, P4.0339 per kWh in Visayas and P2.8177 per kWh in Mindanao effectively for the Feb. 26 to March 25 billing period.

Napocor and PSALM on January jointly filed an application to increase the basic rate by P0.8332 per kWh in Luzon to P4.7298 per kWh from P3.8966 per kWh.

It sought to raise rates in the Visayas by P1.3815 per kWh to P4.2694 per kWh from P2.8879 per kWh and by P1.0686 per kWh in Mindanao to P3.1717 per kWh from P2.1030 per kWh.

ERC rejected some of the cost items proposed by Napocor and PSALM, including those that relate to power plants already privatized and those associated with spot sales or those sold in the Wholesale Electricity Spot Market.

Napocor and PSALM cited figures in its audited financial statements for the test year 2007. The data showed that Napocor?s costs had significantly increased from the 2002 to 2004 cost levels on which the last rate approval was based.

?The ERC?s mandate is to set the rates at such level that will allow recovery of just and reasonable costs in the provision of the service and a reasonable return on the capital employed in the business subject to regulation. The ERC cannot shirk this responsibility if it becomes difficult and unpopular to do so,? said ERC executive director Francis Saturnino Juan.

Napocor said in its petition that the 12 percent return on rate base it sought under the provisions of the electricity law would ?alleviate the financial burden of applicant in providing customers incentive schemes such as the P0.30 mandated rate reduction and the prompt payment discount.?

It said the 12 percent return also complied with loan covenants with foreign creditors, such as the World Bank and the Asian Development Bank. Napocor said its non-compliance could result in cross-default of government loans due to Manila?s guarantees.