Tuesday, July 08, 2008 Veco rates to remain unchanged until ERC process ends in 2009
CUSTOMERS of the Visayan Electric Co. (Veco) can breathe easy, at least, between now and the end of 2009 as it waits for the completion of the process in which the Energy Regulatory Commission (ERC) evaluates and approves applications for rate increase.
Erramon I. Aboitiz, Aboitiz Equity Ventures (AEV) executive vice president and chief operating officer, said Veco is among the distribution utilities (DUs) that are included in the third batch of DUs whose rate adjustment applications will be evaluated by the ERC under the performance-base regulation rate setting method by the end of this year.
“I would think that (once our application is evaluated and approved) it would be followed by an increase. (But given that the process of evaluation and approval) takes 18 to 24 months, if anything, the increase would be sometime in 2010,” said Aboitiz.
He also said he cannot say how much the increase would be, but stressed that Veco needs to adjust its rates to cope with the current inflation.
Veco’s rates are based on expenses and assets in 2000 yet, he said.
“(Since then) the prices of wire, transformers and everything have gone up. Everything has gone up like crazy,” he said in a dialog between Aboitiz executives and the media.
He said Veco’s latest power rate increase was in 2004.
In 2004, Veco secured approval to implement an increase of 12 centavo per kilowatt hour. Veco officials had pointed out that prior to the 2004 increase, the DU did not adjust its rates in 11 years.
Aboitiz said a new rate-setting method used by ERC, the performance-base regulation (PRB), benefits both the DU and the consumer.
The PRB, which replaced the return on rate-base method, encourages the utility company to make itself more efficient. It also enables the utility company to share whatever savings it obtains through improved efficiency with consumers.
The rate adjustment by distribution utilities under the PRB method takes into account the companies’ yearly spending program and desired return as approved by the ERC.
Aboitz said the method allows the distribution utility to factor into the rate adjustment future projects meant to enhance its efficiency.
If after four years (or the next round of review), the distribution utility was unable to implement the projects it had identified earlier, the ERC will order the DU to bring down its rates. (LAP)
