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Thursday, November 10, 2005
Veco, IPP interim deal to expire; no extension
The interim agreement between Visayan Electric Co. (Veco) and an independent power producer, Cebu Private Power Corp. (CPPC), will end on Nov. 24.
But sources at Veco said the company is not inclined to renegotiate the agreement. If so, this would mean cheaper electricity for Veco and its clients.
The Energy Regulatory Commission (ERC) ruled that the interim agreement between Veco and CPPC is valid only until Nov. 24 this year. In the same order, the ERC said it will not allow any extension of the agreement.
Least cost
“Veco will always pursue the least-cost option in serving their customers,” a Veco source said.
When the interim agreement is no longer valid, CPPC and Veco will revert to their original power purchase agreement (PPA), in which the pricing scheme is based on the National Power Corp. (Napocor) rate.
Under the PPA, the cost of electricity supplied by CPPC to Veco is two percent cheaper than the Napocor rate.
An interim agreement between CPPC and Veco was granted provisional authority by the ERC in June 2004. It provided for a pricing scheme that sought to increase the cost of electricity that CPPC was supplying Veco.
The interim pricing scheme increased the cost of power by an average of P1.0948 per kilowatt, which will cause Veco consumers to pay an additional 31 centavos per kilowatt-hour (kwh).
Recover
CPPC, which supplies about 60 megawatts to Veco, had warned it will be forced to cease operations due to financial losses.
The increase in the interim pricing scheme was meant to allow CPPC to recover the cost of generating electricity.
Napocor was also granted an authority to increase by ERC. A provisional authority in September 2004 allowed Napocor to implement a 98-centavo increase on generation charges (price of electricity sold by Napocor to electric cooperatives and distribution utilities like Veco).
In April this year, ERC granted final authority allowing Napocor to raise generation charges by .0556 centavos per kwh on top of the provisional increase of 98 centavos. This brought the total increase to about P1.035 per kwh.
Extension
The ERC order, dated Sept. 22, revealed that the validity of the CPPC-Veco interim agreement had been extended twice, the first on Sept. 24 and the second until Nov. 24.
The last extension (up to Nov. 24) was allowed by ERC to give time to the two parties to “renegotiate their power purchase agreement.”
The ERC also noted that the letter of agreement filed by both CPPC and Veco on Aug. 1, 2005 set the maximum energy that the distribution utility can draw from CPPC at 33,791.67 megawatt-hours. This was an amendment of the interim agreement that cited the figure as the minimum off-take per month. (LAP)
(November 10, 2005 issue)
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