Energy Regulatory Commission okays 22% power rate hike of Aboitiz-run VECO

MANILA, Philippines - Despite a shortage of power supply in Cebu, the Energy Regulatory Commission (ERC) has approved a 22 percent increase in the electricity rates of Aboitiz-run Visayan Electric Co. (VECO).

VECO is owned and managed by publicly-listed Aboitiz Power Corp. and Vivant Corp. It is the second largest electric utility in the Philippines after Meralco and serves the cities of Cebu, Mandaue, Talisay and Naga and four municipalities of the greater part of Metro Cebu - Liloan, Consolacion, Minglanillla and San Fernando. Its franchise service covers an area of about 672 square kilometers with an estimated population of 1.73 million.

In its decision, the ERC gave VECO a rate adjustment averaging 22.67 centavos per kilowatthour (kwh). 

VECO originally applied for an adjustment of 35.14 centavos per kwh. However, the ERC reduced the rate originally applied for by disallowing some of the costs included. 

The power firm filed for an adjustment to cover payroll, operating and maintenance expenses, taxes other than income tax, depreciation and amortization based on audited financial statements for 2008 using the rate of return base (RORB) methodology under the uniform filing requirements (UFR).

Its last rate adjustment was granted on Aug. 30, 2004 and its approved rates then were based on calendar test year 2000.

In the same decision, the ERC also approved a new scheme in granting discounts to lifeline electricity consumers. The new scheme has  eight discount levels compared to six levels presently being implemented under the approved unbundled rates.

 Those consuming 20 kwh or less a month do not have to pay any distribution, supply and metering charges, except the minimal monthly charge of P5. 

Other consumers considered to be within the lifeline level as defined in the new scheme will accordingly be entitled to the following discount rates on the same charges: 0 - 20 per kwh will get 100 percent discount; 21 - 25 (50 percent); 26 - 30 (40 percent); 31 - 35 (35 percent); 36 - 40 (30 percent); 41 - 45 (25 percent); 46 - 50 (20 percent); and 51 - 55 (15 percent).

The new lifeline discount scheme reduced the subsidy charge to non-lifeline consumers from 9.09 centavos per kwh to 0.0746 centavos per kwh.

VECO’s rate application was intended to be its last to be filed under the RORB and was sought primarily to update its charges prior to its entry into the internationally-accepted rate-setting scheme known as the performance-based rate-setting (PBR) methodology in July 2010. 

The PBR provides incentives to utilities to achieving certain levels of efficiency and penalizes them for not meeting their guaranteed service level commitments.