ERC's approval of Veco-CPPC supplementary accord sought

The Visayan Electric Company yesterday asked the Energy Regulatory Commission to approve its supplemental agreement with Cebu Private Power Corporation on the new pricing formula in supply of power, and an adjustment in power distribution rates.

Veco filed at the ERC last September 4 a petition for approval or review of a supplemental accord it intends to add to the power purchase agreement it has with CPPC.

The agreement contains CPPC's pricing formula in billing Veco for the supplied power, and the new rates that Veco would impose on its consumers to recover the costs.

An ERC approval of the petition would mean a P0.25 per kilowatt-hour pricing of power supply or P1.40 per day increase in rates to consumers.

Veco officials, in a public hearing at the ERC-7 office yesterday, explained that CPPC is a vital power supplier, the shutdown of which could affect Veco's operations.

Valentin Saludes, Veco's vice president for engineering, said CPPC's importance also covers the entire Cebu-Negros-Panay grid, which is now being threatened by shortage of power supply.

As of recent September, Saludes said Veco has total peak demand of 297 megawatts, of which 61mW comes from CPPC, 231mW from the National Power Corporation and 5mW from Toledo Power Corporation.

Veco's existing power capability is enough to meet the existing demand but "if one of our suppliers shuts down, it would mean power shortage and interruptions in the Cebu-Negros-Panay grid," Saludes said.

Last August 10, the ERC allowed Veco via an interim agreement to hike its rates and recover the P15 million additional costs it previously spent for emergency measures to avert CPPC's shutdown of operations at the time.

Rodrigo Thadeo Nocete, Veco's power procurement and regulatory officer, said the present set-up, based on the interim agreement, has Veco and CPPC on a cash cost rate arrangement, in which Veco pays CPPC in advance the power it gets from the latter.

Veco then recovers such payment by implementing the Adjustment in the General Rates, or Agra, and the systems loss rates.

This interim agreement however would expire this coming December 25, prompting Veco and CPPC to forge a permanent one, via this supplemental agreement already filed at the ERC, said Nocete.

The supplementary agreement, which would supersede the interim one, removes a provision for prompt payment discount, as contained in the 1997 PPA that was forged between Veco and CPPC to alleviate the latter's financial burden and maintain reasonable power rates.

It would also suspend the minimum off-take provision of the 1997 PPA, which means that VECO would be allowed already to dispatch power from CPPC at a level lower than the previous minimum requirement of 33 million kilowatt-hour.

This would minimize the financial impact of the new pricing scheme over Vecon and its consumers.

The new pricing scheme shows that while the generation charge is higher than the temporary cost arrangement, it is lower by P0.0390 than the interim agreement. - Wenna A. Berondo