Wednesday, December 05, 2007 Effect of subsidy removal ‘very minimal’
THE industry sector welcomes the removal of the inter-class cross subsidy in power rates, although its effect is “very minimal,” an official of the Cebu Chamber of Commerce and Industry (CCCI) said yesterday.
Carlos Co, chairman of the Cebu Power Core Group of the CCCI, said the total production cost of industries in Cebu will go down as well as the overall operations cost of commercial establishments as a result of the removal of the inter-class cross subsidy.
The rate of decrease, he said, depends on how much of the industry or commercial establishment’s production or operations cost is the result of power consumption.
The manufacturing sector, as well as malls, is among heavy users of electricity, he said.
As provided under Republic Act 9136, or the Electric Power Industry Reform Act, and with the approval of the Energy Regulatory Commission (ERC), the Visayan Electric Co. (Veco) removed the inter-class cross subsidy enjoyed by selected electricity consumers – like residential users, general services, government hospitals – at the expense of commercial and industrial users.
Chona Y. Tiu, Veco vice president for administration and chief finance officer, said the removal meant 17 centavos per kilowatthour less on commercial and industrial users but 17 centavos per kilowatthour more for residential users.
Streetlighting
According to the ERC, the subsidy was also granted to government hospitals and agencies that pay for electricity used for streetlighting.
“The reduction is very minimal,” Co said in an interview, adding that the average power rate for industry in Cebu is about P50 per kilowatthour.
“That’s about three percent only. If, for example, the total production cost of an industry is P100 and its power consumption is P5, the three percent would only be 15 centavos,” he said.
Tiu told news reporters in a seminar on power issues last Monday that the removal of the inter-class cross subsidy can be reflected in the November 2007 bill of Veco’s customers.
Residential users
Although the removal of the inter-class subsidy would hurt residential consumers, Tiu said consumers are enjoying, starting Nov. 10, a rate reduction due to a decrease of 10 centavos through the generation rate adjustment mechanism (Gram) and three centavos less as adjustment of the incremental currency exchange rate (Icera).
For residential consumers, however, there is still a four centavo per kilowatthour increase after factoring in the cross subsidy removal, and Gram and Icera adjustments.
Veco consumers also used to enjoy a seven-centavo cash cost recovery but the reduction ended last October.
The seven-centavo cash cost recovery came from the return of what Veco gave in advance to the Cebu Private Power Corp. (CPPC), one of the distribution utility’s private power suppliers, to help the latter cope with financial difficulties in the past.
The adjustment in the Gram is the result of a decrease in the cost of electricity generation while the decrease in Icera was due to the appreciation of the peso against the dollar.
Veco information officer Ethel Natera said the decrease of the power rates through Icera and Gram will be reflected starting with the Nov. 10 billing cycle for seven months. (LAP)
