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 CASE NO.
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
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
-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
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.
Three factors were considered that possibly caused the increase in the generation cost.
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):
FOREX is based on the Meter Reading date which is the 25th of the month. 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
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 will be as follows:
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 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.
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 -
“…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
The bottom line of the issue is whether the money Iloilo City consumers pay for their electric bills is money for medicine of the sick or for tuition fees of their children or for food at their table or for their other basic necessities like clothing and shelter. The least among the concerns of a poor Iloilo City resident right now is whether cost of electricity is competitive with his neighboring towns and municipalities.
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
 PECO reading schedule was changed from end of the month to 25th to coincide with NPC and Grid meter reading.
PEDC-PECO EPPA ERC Case No. 2010-097 Decision dated August 22, 2011 page 4
 page 8, PBR Rate Translation ERC Case No. 2011-117RC
 For a Residential customer with 200 kWh of consumption
 Based on Residential customer with 200 kWh consumption.
 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.
 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.