NEA proposes emergency fund for power co-ops

The National Electrification Administration (NEA) is proposing a new scheme that would allow electric cooperatives (ECs) to set aside funds for emergency cases like natural calamities.

"May we propose that the commission consider a provision for contingency fund for the rehabilitation/replacement of damaged distribution systems caused by force majeure such as typhoons and other natural calamities beyond the control of the ECs," NEA administrator Edita Bueno said in a letter to Energy Regulatory Commission (ERC) chairman Rodolfo Albano Jr. said.

Bueno noted that operations of the ECs have been disrupted due to the typhoons that hit the country.

"For the past few months, the series of typhoons severely devastated the ECs coverage areas particularly in Luzon and in some parts of the Visayas," she said.

According to Bueno, millions of pesos have already been spent for the rehabilitation of the facilities of ECs.

"Estimated rehabilitation costs of distribution lines damaged by typhoons Milenyo, Reming, and Seniang amounted to P733.059 milion," she pointed out.

As of Sept. 28, the cost of damages brought about by typhoon Milenyo reached P200.4 million. For typhoon Reming, she said the cost of damages as of Nov. 30reached P445.345 million, while as of Dec. 4, typhoon Seniang’s damages reached P87.314 million.

The NEA chief pointed out that these expenses could not be shouldered by ECs.

"It is certain that the ECs could hardly predict force majeure and include in their projections for rate application the costs associated with such events," she said.

Bueno said the creation of a mechanism that would enable the ECs to allocate a portion of their resources to cover for such untoward events would be appropriate.

"Accordingly, the cost for restoration of the damaged distribution systems shall form part of the rate for ECs situated in typhoon-prone areas, through a mechanism that the Commission sees fit," she said.

Unlike the distribution utilities (DUs), ECs have no way to recover the costs incurred from rehabilitation of their facilities damaged by natural calamities.

DUs have the "force majeure" recovery mechanism that allows them to pass on the cost of the rehabilitation of the damaged facilities.

"There should be some recognition of a force majeure. It should be inputted in the ECs’ five to 10-year plan submitted to NEA. The plan would include provision for a fund that would cover for these force majeure instances," Bueno said.