VECO rate hike okayed by ERC

Consumers will soon have to brace for higher electric bills soon because the Energy Regulatory Commission recently allowed the Visayan Electric Company to hike its rates.

VECO's raising of rates was meant to recover the P15 million additional cost it spent for emergency measures to skirt a shutdown of operations of Cebu Private Power Corporation, one of its suppliers, the ERC said in its 18-page decision.

ERC allowed VECO to recover the cost by enforcing the Adjustment in Generation Rates and Systems Loss Rates, or AGRA, for the August and September 2006 billing periods.

The ERC also ordered VECO and CPPC to forge a permanent agreement that would resolve any problem between them and ensure enough power supply for Cebu.

The CPPC was also ordered to stop from doing anything that would cause a shutdown or cessation of operations otherwise the firm would be held liable for contempt.

VECO, for its part, was warned to "exercise utmost prudence in minimizing its own financial exposure and ultimately of its customers, in deciding on the CPPC dispatch" to ensure reliable and reasonably priced electricity.

The ERC order came after VECO petitioned for ways to recover the cost incurred due to CPPC's threat to shut down operations last November. The CPPC failed to negotiate an amendment of the 15-year contract to include a raise in rates of power it supplied to VECO.

CPPC cited rising fuel costs of its diesel generators but VECO in turn filed a civil suit against the firm, which is now pending at the Regional Trial Court.

To avert a shutdown, VECO meanwhile paid CPPC P15 million to cover the costs of operating the CPPC's facility, which the latter accepted on condition that VECO will pay the costs for operating the facility.

Last February 20, ERC ordered the two firms to submit every detail of their agreement over the cash costs.

The two firms agreed that P10 million was spent for the operations and maintenance costs of CPPC while the remaining P5 million was for salaries, basic operating expenses, outside services, taxes and other overhead expenses-payable for six months starting last May 25, the date of expiration of the agreement.

Last April 21, due to difficulty in resolving the VECO-CPPC problem, VECO filed a supplemental compliance asking for extension of duration of the cash advance for another four months, or until September 25.

VECO contended that the urgency of the situation at the time CPPC threatened to shutdown its operation required VECO to take immediate measures to avert power shortage in Metro Cebu.

In its finding, ERC said that since CPPC is right at the heart of VECO's franchise area in Ermita, Cebu City, CPPC's continued operation is needed to maintain voltage and stable supply of power.

"With the current energy situation, there is no other generating company that can replace the supply of CPPC," ERC said.

VECO has presently a peak demand of some 280 megawatts, 38 megawatts of which is supplied by Toledo Power Company, 180 from the National Power Corporation, 62 from CPPC and the rest from East Asia Utilities Corporation. - Wenna A. Berondo