Rate increase due to generation cost

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The changes in generation cost remains to be the driver for the increase or decrease of electricity bills issued monthly to member consumers.

Melchor Licoben, Beneco’s OIC general manager, said the uptick in the generation charge on a monthly basis is legally allowed even without approval by the Energy Regulatory Commission (ERC) compared to the other components of the electric bill.

Beneco will charge its more than 140,000 consumers P9.4007 per kwh this August, up from P8.5989 per kwh in July. The increase was caused by the generation cost that had to be adjusted following the increase in the demand of electricity that pushed fuel cost up, coal in particular.

Licoben said the generation sector is by law recognized as a deregulated sector of the power industry pursuant to the Electric Power Industry Reform Act (EPIRA). “This means that there is no need for ERC approval of the generation cost since it is governed by the contract between the power supplier and the distribution utility,” he said.

The contract incudes terms and variations based on foreign exchange rate and fuel costs whose price changes are indexed in a pre-agreed formula, Licoben said.

Beneco, just like other ECs, will have to pass such cost and its adjustments to the consumers as the cost is deemed a “pass through” charge, or one that Beneco as a distribution utility, will have to collect as a collecting agent for the power supplier.

The change in fuel cost adversely affected Beneco’s power supply pact with Team Energy that runs the coal fired power plant in Sual, Pangasinan where Beneco’s power supply comes from.

The Beneco and Team contract provides that the generation cost from Jan. to June will be P3.85 per kwh and from July to Dec., P3.80 per kwh.

The increased demand for power pushed coal prices high this year, thus breaching the coal bandwith between Beneco and Team.

“The generation cost will then be rebased, meaning the formula for its computation will be adjusted to absorb the index prices,” Licoben said, adding that the generation cost eats up more than 50% of the power bill.

The distribution, supply and metering (DSM) charges, and the reinvestment fund for sustainable capital expenditure (RFSC) in the bill, however, have remained at the average of P.099 and P.2178 per kwh, respectively.

The RFSC and DSM are Beneco’s “pass on” charges to the consumers or the charges that it collects and retains for its operations and capital outlays.

Licoben said that compared to the generation charge, the RFSC and DMS charges cannot be changed at the will of the electric cooperative since the distribution sector is a regulated sector of the power industry where any change is such bill components must be approved by the ERC.

“The volatility of global coal prices will definitely affect the generation charge of distribution utilities. Our power supply agreement with Team was very attractive as it gave Beneco the lowest power cost for the last three years,” Licoben said.

However, Licoben said that the revival of economic activities following the pandemic this year caused a surge in electricity demand that effectively pushed coal prices upward.

Team was compelled to ask Beneco’s consumers to shoulder the increase in generation cost, he said.

By Delmar Carino

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