To recover money spent on supplier: VECO to hike power rates next month

Consumers of the Visayan Electric Company (VECO) shall expect an increase in electric bills starting next month.

This as the Energy Regulatory Commission (ERC) recently approved the power utility's petition for the recovery of the additional costs it incurred due to emergency measures it undertook to prevent the shutdown of its power supplier - Cebu Private Power Corporation (CPPC).

In its November 3 decision, ERC has authorized VECO to recover the additional costs it spent to prevent the shutdown of CPPC in the amount of P243,478,287 effective this November through the implementation of the Automatic Adjustment of Generation Rates and Systems Loss Rates or AGRA.

This translates to an increase of P0.1580 per kilowatt-hour in VECO's rates.

Last August 10, the ERC issued the decision approving VECO's petition. The amount to be recovered was initially pegged at P15 million per month, covering operating and maintenance costs of CPPC.

In relation to this, on August 30, VECO submitted its "compliance" together with its proposed recovery scheme.

Under the proposal, the power utility firm said it has an unrecovered amount of P261,521,009 for the billing period from December 2005 until July 2006 for the 136,174,666 kilowatt-hour of power delivered by CPPC.

Under the proposed scheme, VECO shall spread the recovery of the amount of P261,521,009 for one year starting the September 2006 billing period until August 2007.

VECO estimated the price adjustment of its power cost for the 12-month period at P0.1703 per kWh, which is two centavos higher than the amount approved by the ERC.

On October 12, ERC issued an order directing VECO to submit the details and computation on the cash cost methodology with the breakdown of the actual monthly operating and maintenance expenses and fuel cost from December 2005 to July 2006, including supporting documents.

The commission also asked VECO for the details of the computation of the 98 percent of the National Power Corporation's effective rate for the same period and the two years monthly forecasted sales from September 2006 to the August 2008 billing period.

On October 18, VECO complied with the ERC directive and submitted the documents needed.

VECO explained that from December 2005 to July 2006, it paid the expenses of CPPC amounting to P167,382,980, which covered salaries of its employees, parts and supplies, TransCo ancilliary services, insurance, other operating expenses, business permit, taxes and real estate.

ERC said the recently adjusted operating and maintenance (O&M) cost is higher than the O&M cap of P15 million per month it approved in August.

The commission made its own adjustment on the expenses incurred and recoverable amount and determined that computed recoverable amount is P243,478,287, which is lower by P18,042,722 from the amount based on VECO's computation.

ERC said, the estimated increase in the generation cost amounted to P0.1580 per kWh and this shall be recovered within a period of one year. In November 2005, CPPC threatened to shutdown its operations after a failed negotiation with VECO on their 15-year contract. Citing rising fuel costs used by its diesel generating units, CPPC asked for an amendment of their contract by asking upward adjustment on the electricity rates it supplies to VECO, which the latter opposed. The threat prompted VECO file a civil suit against its supplier at the Regional Trial Court, which it later withdrew.

In the meantime, VECO offered to advance the costs needed to operate CPPC's plant, which the latter accepted on the condition that VECO will pay all cash costs needed to operate the facility.

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

Consumers group Freedom from Debt Coalition said ERC's recent decision would mean additional burden for power consumers especially residential electricity users.

"Its effect on the consumers is very big. Why should consumers be penalized?" said FDC-Cebu president Atty. Michael Enriquez. He, however, added there's no one to blame but the consumers and local government units who did not make a concerted effort to intervene in the case between VECO and CPPC.

FDC has become an intervenor in the case between VECO and CPPC and has filed its position before the ERC in the case.

The group had accused VECO of forum shopping because the latter had filed a civil suit against CPPC at the RTC for cost recovery and had also filed similar petition at the ERC. "In the original case, our contention was forum shopping but we were preempted because VECO has eventually withdrew the case at the RTC," Enriquez told The Freeman. "We have done our part through our intervention. All sectors of the society should have joined against it (VECO's petition for rate increase) but the society has not been united on its stand," he added. - /NLQ