Review of supply contracts to lead to lower electricity rates, says ERC
Hoping to alleviate the burden of consumers and bring down power rates, the Energy Regulatory Commission (ERC) is scrutinizing the supply agreements entered into by electric cooperatives nationwide.
“The nationwide roll-out of review of power supply agreements (PSAs) is an initiative led by the ERC, together with the Department of Energy, to assist electric cooperatives to explore and formulate immediate and mid-term measures to address the high cost of electricity in the country,” the ERC said in a statement.
It explained the initiative aimed to evaluate primarily the generation component of consumers’ electricity bills.
Generation charge accounts for almost 60 percent of the electricity bill. It pertains to the cost of power generated and sold to distribution utilities through a supply contract with a generation firm or through the Wholesale Electricity Spot Market, the centralized venue for trading electricity as a commodity.
ERC records showed that generation charges across Luzon, Visayas and Mindanao have climbed by more than 20 percent as of August from a year ago as captive consumers contend with pricier fuel and unstable foreign exchange.
“The generation rate increase is driven mainly by the pass-through (nonfixed) component of the rates for the cost of fuel, specifically coal and the upward adjustment in the foreign exchange rate,” it said.
The ERC kicked off the review last Thursday in Laoag, Ilocos Norte. ERC chair Monalisa Dimalanta told reporters they would next move to Cagayan de Oro and Iloilo.
A series of discussions will be held in strategic locations covering all regions nationwide.
“The … caravan is here so we can look at your PSAs and find immediate and long-term solutions for the (distribution utilities) to be able to sustain themselves and for the consumers to enjoy lower electricity rates. This is an industry-wide concern. That’s why we, as regulators, are now taking a proactive stance,” said ERC Commissioner Alexis Lumbatan.
“This is the first of its kind and we are happy to meet you all personally and for us to discuss on the table the possible remedies that we would undertake. This is just the start of a collaboration by the regulator and all stakeholders [to resolve] the challenges of high power rates,” Lumbatan added.
According to the ERC, the forum brought out a significant number of insights and best practices from participating coops.
Joining the Laoag caravan were Central Pangasinan Electric Cooperative Inc., Ilocos Norte Electric Cooperative Inc., Ilocos Sur Electric Cooperative, Pangasinan III Electric Cooperative Inc., Abra Electric Cooperative Inc. and Mountain Province Electric Cooperative Inc.
