By: Engineer Bienvenido Anatan of Alliance
of Pinoy Volunteers for a Better Tomorrow (ALL-PINOY)
(I'm editing this piece for my husband and I decided to post it here so people will know what's going on in Iloilo City concerning Power Rates and Distribution and How it's affection the citizens of Iloilo. Wala lang ....)
D I S C U S S I O N
Power industry is a heavily
regulated industry and consumers expect power rates to be fixed. Any changes
in the rates will come by way of proper application to the regulating agency,
in this case, the Energy Regulatory Commission. Last year, three cases were
decided by ERC which is shown below.
ERC APPLICATION
|
ERC CASE NO.
|
DECISION/EFFECTIVITY
|
LAST DATE OF HEARING
|
Electric Purchase Power Agreement (EPPA) –between
PEDC-PECO
|
2010-097 RC (Generation Charge - Coal)
|
With Final Decision last August 22, 2011 but with
on-going Motion for Reconsideration.
Rate effective: October 2011
|
November 22, 2011
|
PECO Annual Revenue Requirement (ARR) – for
Performance Based Regulation (PBR) and Rate Class Translation
|
2010-124 RC and
2011-117 RC
(Distribution Charge)
|
With Final Decisions dated July 6, 2011 and November
2, 2011.
Rate effective: November 2011
|
September 15, 2011
|
Amended and Restatement of Power Purchase
Agreement (AREPPA) – between PPC-PECO
|
2010-163 RC
-Generation Charge Diesel
|
With Provisional Authority dated March 14, 2011. Final decision to be rendered on or before
March 14, 2012).
Rate effective: April 2011
|
May 2011
|
GENERATION CHARGE AS PER APPROVED BY ERC CASE NO. 2010-097 RC –Electric
Power Purchase Agreement (EPPA) between PEDC-PECO (COAL PLANT)
In page 51 of the ERC decision
dated August 22, 2011 in ERC Case NO. 2010-097, the Commission affirms that,
“With
the EPPA and the AREPPA in place, the blended rate of PECO’s generation cost
would be Php 7.4063 per kWh which is lower by Php 1.85/kWh.”
However, the Mixed Generation
Charge as reflected in PECO bills from October 2011 to December 2011 are
steadily increasing as shown below. It is already higher by Php 0.5257/kWh from
the PECO-submitted simulated mixed rate found in the ERC decision.
PECO
GENERATION CHARGE AS FOUND IN THE BILLS:
October 2011 - 7.4246
November 2011 - 7.7500
December
2011 - 7.9503
Three factors were considered
that possibly caused the increase in the generation cost.
1.
FOREX
2.
FUEL PRICE (COAL/DIESEL)
3.
GENERATION MIX
1. The
FOREX bears no significant upward trend with rates fixed at around Php 43.00
FOREX (Php / USD) as published in
Bangko Sentral (www.bsp.gov.ph):
MONTH MONTH AVERAGE MONTH END
Applicable Rate for the Billing Month of
September 2011 43.02 43.63 OCTOBER 2011
October 2011 43.45 43.02 NOVEMBER 2011
November
2011 43.27 43.81 DECEMBER 2011
FOREX is based on the Meter
Reading date which is the 25th of the month[1].
Note that the applicable FOREX for the current month (say, December) is based
on the previous month (November) since the current bill (December) is the
consumption of the previous month (November).
2. There
is, in fact, a downtrend on the prices of coal and no upward trend in the
prices of crude oil
DUBAI CRUDE OIL (USD/ BARREL) as published in http://www.indexmundi.com
September
2011 106.00
October 2011 103.88
November
2011 108.52
September
2011 131.3
October 2011 127.49
November
2011 121.93
Since the cost of coal and crude
oil indexes are merely indication of prices in the global market, the actual
FOREX and the fuel cost in our Generation Charge can be verified if we have the
PPC and PEDC monthly billings. Note that fuel prices for the current month
(say, December) is based on the previous month (November) since the current
bill (December) is the consumption of the previous month (November).
3. No
available data to analyze the generation mix
As for the Generation Mix, the
blended cost of the PEDC coal plant and PPC diesel plant will depend on whether
both plants are operating in an optimal mix based on the prevailing contracts.
Optimal Mix can only be attained when PPC Diesel Plant will only operate when
load is over 65 MW. It is also possible to attain cheaper cost if PEDC will
supply power to PECO beyond the 65 MW contracted capacity when PEDC engine are
not running in full capacity. Of course for as long as the applicable PEDC
contracted rate will still be enforced. However, blended cost will be higher if
PPC is operated even when the load is less than 65 MW since PEDC plant is not
optimally utilized in this manner. There is still the question of whether PECO
is buying and/or selling power at the WESM-Visayas. All this scenarios can be
verified if we have the monthly hourly load report of PECO and its breakdown as
to the monthly hourly supply of PECO suppliers.
DISTRIBUTION CHARGE AS PER APPROVED BY ERC CASE NO. 2010-163 RC AND
2011-117 RC – Determination of the Annual Revenue Requirement (ARR) and the
translation to Customer Class
In the above cases, an average
Distribution Charge rate increase of Php 0.1801 / kWh from Php 1.0422/kWh to
Php1.2223/kWh was approved effective November 2011 and when translated to the
different Customer Rate Class[3]
will be as follows:
Customer
Class Current Average
Rate Commission Approved Rate Increase
Residential 1.3030 1.5609 0.2579
Intermediate 0.7358 0.9021 0.1663
Commercial 0.8250 1.1420 0.3170
Power 0.8969 1.0084 0.1115
Streetlights 0.8480 1.0136 0.1656
City Government 0.6401 0.7611 0.1210
Other Government 0.6812 0.8053 0.1241
TOTAL 1.0422 1.2223 0.1808
To cite a specific example, take the
case of the Residential Class. Considering the addition of VAT, PECO consumers
expect an increase of the Residential rate of Php 0.29/kWh. However, actual Residential
Rate has already escalated between October to December 2011 by as much as Php
0.97/kWh or roughly Php 1.00/kWh as shown below.
Actual applicable average rate
per class can be easily verified if we have a copy of the Uniform Reportorial
Requirement (URR) that includes the computation of rates per rate
classification.
C O N C L U S I O N
In one of the ERC hearings, PECO
was required by ERC to present a simulation of PECO effective average rate if
the contracts being applied with PEDC and PPC will be implemented. This
simulation was quoted by ERC in their decisions to show proof that Iloilo City
consumers will indeed benefit from the contracts signed by PECO with PEDC and
PPC. Based on PECO’s simulation, it was estimated that generation rates will be
lowered by Php 1.85/kWh. Considering that any reduction of generation rate will
also reduce the applicable 12% VAT, the reduction to the overall average rate
should be around Php 2.00/kWh. Unfortunately, the reduction is only around Php 1.00/kWh if the
December 2011 residential rate of Php 11.87/kWh with the Coal Plant is compared
to the November 2010 residential average bill of Php12.87/kWh[5]
without the Coal Plant.
Furthermore, there are other
factors that can easily wipe out the Php 1.00/kWh gain within the year and will
practically bring PECO power price back to where it was before the operation of
the Coal Plant.
1. PEDC
has a pending generation rate adjustment of nearly Php 692 Million due to
under-recoveries during the billing months of July to September 2011.This
will most likely be spread for the next five years upon ERC approval at an
estimated added generation cost of around Php
0.56/kWh.
2. PEDC
has also under-recoveries of around Php 400 Million during the Testing,
Commissioning and Pre-Commercial Operation applicable to the billing months of
November 2010 to January 2011. This will again add up to the generation
cost by around Php 0.32/kWh for the
next five years.
3. The
cost of coal is projected by experts to increase due to increasing demand.
At present, it is closely tied up with the cost of fuel oil and follows its
price pattern. This is not good considering that based on last year alone, fuel
oil pump prices jacked up by Php 6.00/liter or more than 10%. Experts project an annual increase of 18% for the price of coal based on the
previous five year historical trend. Based on the prevailing coal price, PEDC’s
rate attributed to fuel cost amounts to Php 2.50/kWh. A 10% increase plus VAT
will easily add Php 0.30/kWh to our
generation charge.
4. The
Distribution Charge Rate Class translation effected the heaviest increase to
our Residential and Commercial Consumers. While the distribution rate
increase looks minimal at Php 0.18/kWh, Residential and Commercial consumers
experienced Php 0.25/kWh and Php 0.31/kWh +12% VAT increase or an effective
increase of Php 0.29/kWh and Php 0.35/kWh respectively.
5. The
PECO-PPC AREPPA is still undecided and there is a potential reduction of around
Php 0.20/kWh from the prevailing PPC rate. ERC is required by its own
rules to come up with a final decision within one year from the issuance of the
provisional authority which was issued last March 14, 2011. However, any
reduction coming from the AREPPA will be microscopic compared to the on-going
rate adjustments affecting our overall power rate.
6. The NGCP
application for the acquisition of PEDC assets, if approved, will result to
additional Transmission Charge of more than Php 1.00/kWh to all PECO consumers.
This case was adjourned indefinitely last December 6, 2011 considering
the volume of oppositions, motion to dismiss and motion for reconsideration
filed by intervenors. This case remains unpredictable.
R E C O M M E N D A T I O N S
1.
PECO should explain and regularly update the Iloilo consumers on any
changes in their rate for transparency and accountability in compliance with
EPIRA.[6]
As of today, the internet is
bereft of any announcement on the increase of PECO’s distribution rate and an
explanation on the continued increase in their generation rate / overall
average power rate. The EPIRA Law and the consequent ERC resolutions are clear
in their mandate to all DU’s to properly inform their consumers regarding their
prevailing rates, update them on any changes and the power situation in their
franchise area:
a. The
main thrust of R.A. 9136 (EPIRA) is found in Chapter 1 Section 2(c)-
Declaration of Policy;
“
To ensure transparent and reasonable prices of electricity in a regime of
free and fair competition and full public accountability to
achieve greater operational and economic efficiency and enhance the
competitiveness of Philippine products in the global market.”
b. Magna
Carta for Residential Consumers, Article 15, Right to Information;
Scheduled Power Interruptions.-
“In
order to increase consumer awareness, all offices of distribution utilities
must provide a Consumer Bulletin Board where major announcements / documents
issued affecting consumers will be posted. Furthermore, they must establish
communications facilities, including but not limited to a customer hotline and
Short Messaging Service (SMS), to cater exclusively to their customers.
Major
announcements/ documents shall include, but not be limited to rate
schedules and any changes thereon;… decisions and orders of the ERC.”
c. Resolution
No. 5, Series of 2007[7]
-
“…the
Commission hereby resolves that all Distribution Utilities (DU) to
post in their respective websites the itemized breakdown of their generation
charges following the prescribed format… including but not limited
to their sources.”
2.
LGU should have access to vital information with
regards to PECO Distribution and Generation Rates and Power Interruptions/Situations
It is high time that the LGU
should be vigilant in making sure that electric rates are kept to the lowest
cost possible under these present circumstances. The City Government has little
influence or control over the prevailing power rates since regulation and rate
fixing is the domain of ERC. However, the City Government has to right to
timely and accurate information of the power situation in order for it to
properly apprise its constituents and investors. The local government may be
informed of the prevailing power rates of PECO on a monthly basis since PECO
submits monthly reports to ERC.
a.
Resolution No. 24, Series of 2011, “A
Resolution Adopting the Revised Uniform Reportorial Requirement (URR) by all
Distribution Utilities” dated September 26, 2011 and will be effective starting
January 2012. The monthly URR will validate the billing charges of all DU
versus the approved charges.
a. The
LGU may request ERC/PECO to be furnished with the monthly copy of the URR,
particularly, but not limited to the following forms (see attached Forms):
i.
Generation Rate Calculation Data
ii.
Supplier and Transmission Data
iii.
Actual Implemented Rates Data
b. The
LGU may request ERC/PECO/PEDC/PPC to allow LGU/COA representative/s to witness
during the monthly reading and calibrations of meter as a third party that can
verify the trustworthiness of the reading.
c. The
LGU may request ERC/PECO/PEDC/PPC to be provided with the monthly billing of
PEDC/PPC and all other Power Suppliers together with the corresponding
computations to verify the derivation of generation rates.
d. The
LGU may request ERC/PECO/PEDC/PPC to be provided with the monthly hourly
purchased power from the different power suppliers; i.e, PEDC/PPC/etc. in order
to check whether the mix generation resulted to the lowest cost possible for Iloilo City
consumers.
b.
Resolution No. 11 and 12, Series of 2006,
requires all Distribution Utilities to submit their Power Quality and
Reliability Report including their Quarterly Interruption Report (QIR). These
reports will show PECO’s service performance and whether they met their
Guaranteed Service Level (GSL). PECO’s Distribution Charge has a Performance
Incentive Scheme (PIS) mechanism based on their attaining the required
Guaranteed Service Level (GSL).
a. The
LGU may request ERC/PECO to be provided with these reports in order to verify
whether they reflect the actual performance of PECO.
i.
These reports will be material evidence for the
next hearing on the review of their performance and the corresponding
distribution rate for 2012. PECO’s Distribution Rate will be reviewed every
year up to 2015 around the month of September and the rate will be adjusted
accordingly based on their previous year’s performance and expenditures.
ii.
The right to information especially of power
interruptions is also assured by Article 15 of the Magna Carta for Residential
Consumers and gives special preference to the LGU,
“…
the distribution utility must set up a Bulletin Board where announcements of
scheduled power interruptions will be posted in an area that could easily be
seen by its customer, preferably along roadsides or
in front of the entrance to the City/Municipal Hall
or Public Market.
C O M M E N T
Alliance of Pinoy Volunteers for
a Better Tomorrow (ALL-PINOY), true to its advocacy of reasonable and just rate
for Iloilo City residents, is coming up with
mitigating measures to alleviate the situation and also measures that will
reduce the rates. The City Government will be expected by their constituents to
do the same.
Ironically, this is never the
obligation of ALL-PINOY and the Iloilo City Government. It is PECO’s sole obligation
to come up with effective measures and sincere steps to provide their customers
with the lowest cost possible. We thought they did so.
PECO
and their power supplier made assurances that the Coal Plant is the solution to
our high cost of electricity here in the city. They should now start being candid with regards
to the never-ending changes in their rates. The principle of regulation is rate
fixing. Steady and unchanging rate gives stability to consumers. Like MERALCO,
any changes in the rates, however minute or insignificant they may be, are
properly accorded with appropriate information dissemination normally through
timely press releases in the TV, radio, print and most recently internet media.
Hence, update on MERALCO rate changes are reported regularly. At the moment,
the most accessible and permanent announcements are found in the internet. It
is the appropriate time that PECO should be compelled to come up with regular
updates concerning their services and rates and also be made accountable to its
mandate in Section 23 of the EPIRA which clearly states that “A
distribution utility shall have the obligation to supply electricity in the
least cost manner to its captive market”. (e-ma
[1]
PECO reading schedule was changed from end of the month to 25th to
coincide with NPC and Grid meter reading.
[2]PEDC-PECO
EPPA ERC Case No. 2010-097 Decision dated August 22, 2011 page 4
[3] page 8, PBR Rate Translation ERC Case No.
2011-117RC
[4]
For a Residential customer with 200 kWh of consumption
[5]
Based on Residential customer with 200 kWh consumption.
[6]
During my time, Mayor Trenas often calls a press conference with the Iloilo
Press Corps in his office and asks me to explain and to answer questions about
the rates and/or brownouts.
[7]
PECO promised to put up their website and published the breakdown of their
generation charge when I raised this issue during the PECO-PPC AREPPA hearing
but after one year, PECO had none.
