VECO set to hike power rates again

Consumers should brace for higher electricity rates as the Visayan Electric Company is set to implement rate increases this February and next month.

The first rate increase is the result of the Energy Regulatory Commission's approval of the supplemental agreement between the VECO and Cebu Private Power Corporation on their new pricing formula and new rate.

However, VECO said it could not yet reveal how much the increase would be.

CPPC supplies 61 megawatts or about 20 percent of VECO's 297 megawatts total power demand. The power utility gets the bulk of its power supply from National Power Corporation (231 MW) and Toledo Power Corporation (5 MW).

"The effect to our consumers would be very minimal because the increase would not be entirely passed on to them. CPPC is just one of our suppliers. Whatever adjustment CPPC will get from the agreement will not be fully reflected to our customers. We still have to compute the rates of our other suppliers to get a blended rate," said Ethel Natera, VECO spokesperson.

Natera said the approval of the agreement would mean reliable power supply to VECO because CPPC rates that are approved are long-term rates. She added that since 2002, the power firm's power supply has been in danger because of CPPC's threat to shutdown its operations due to losses.

With the agreement's approval, she said VECO would now have reliable power supply because there is no threat from its supplier to shutdown.

In granting VECO's petition for approval of its supplemental agreement with CPPC, the ERC recognized that the continued operation of CPPC is not only very vital to VECO but also to the entire Cebu-Negros-Panay grid.

In its 25-page decision, the ERC also emphasized that the supplement to the 1997 power purchase agreement between VECO and CPPC was executed upon the instructions of the commission to address three major concerns, which include prevention of CPPC's shutdown, that CPPC has to remain financially viable and the supplement should be reasonable to minimize its possible financial impact to VECO consumers.

The ERC explained that power supply from CPPC is indispensable to the VECO franchise area, and ultimately, to the CNP grid, "such that CPPC's shutdown will result to untold inconvenience and economic losses."

The comparison of generation charges under the proposed formula pricing scheme in the supplement, cash cost arrangement and interim agreement shows that while the generation charge is higher than the temporary cost arrangement, it is lower by P0.0390 than the interim agreement.

Under the supplement, CPPC will charge VECO P3.7034 per kilowatt hour of power while under their 1997 interim agreement, CPPC was selling power to VECO at P3.7424. However, under the cash cost agreement, CPPC only charges VECO P3.4599 per kilowatt of power it gets from the supplier.

On September 4, VECO has filed a petition for approval/review of the supplement to the power purchase agreement it has with CPPC before the ERC. The supplemental agreement contains the pricing formula that CPPC will implement in billing VECO and the rates the power utility will implement to its consumers to recover the cost of power.

Prior to the supplemental agreement's approval, VECO and CPPC adopted cash cost rate, a temporary rate arrangement approved by the ERC. Under this arrangement, VECO pays CPPC in advance for the power it gets from the supplier and recovers the amount it pays to CPPC through the implementation of Adjustment in the General Rates and Systems Loss Rates.

But since the temporary rate arrangement between the two parties expired on December 25, VECO and CPPC have to come up with a permanent agreement. With this, VECO proposed for the supplement agreement to their PPA.

On the other hand, another round of increase in VECO's rates may take effect next month as result of upward adjustment in the National Transmission Corporation's transmission charges.

But Natera said they could not yet reveal how much the increase would be because transmission charges differ every billing period. - Wenna A. Berondo/LPM