Electricity Rates in Northern Mindanao Skyrocketing

Sep 13, 2018

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Cepalco now has highest electricity rates in Normin at P12.79/kWh

 

Have you noticed an unusual increase in your electricity bills lately?

That’s because over the last four years, electricity rates in Northern Mindanao have been climbing, to as much as nearly 50 percent for its largest distribution utility.

For the month of July, the Cagayan de Oro Electric Power & Light Co. (CEPALCO) electricity rate for residential consumers increased by P4.41 per kilowatt hour (kWh) from P8.38 in July 2014, to P12.79 in July, 2018.

That’s a 48 percent increase in your electricity bill!

“Shocking increase of near 50 percent for Moresco 1!” commented Engr. Elpidio M. Paras, president and CEO of UC-1 Corporation which owns and operates the world-class Seven Seas Water Park & Resort in Barra, Opol, Misamis Oriental. “That’s why our monthly bill is seven digits now!”

Although the Misamis Oriental Rural Electric Service Cooperative II had the smallest percentage increase over the same period, that’s because they already had the second highest rate as of July, 2014 at P9.39/kWh.

According to the advocacy group Mindanao Coalition of Power Consumers (MCPC), this steady increase can be mainly blamed on the way distribution utilities (DUs) like CEPALCO have been managing the way they buy electricity from their suppliers. (Please refer to Table 1)

Table 1. Distribution Utility Companies in Northern Mindanao Comparative Rates for Residenital Consumers (July 2014 vs. July 2018)

“The tabulation shows that the rates for electricity in Northern Mindanao (but also true throughout Mindanao) have increased by around four pesos more than the rates five years ago,” said Engr. David A. Tauli, MCPC president and spokesperson.

“The basic reason for the increase is because distribution utility companies (electric cooperatives and investor-owned DU’s) are using coal-fueled baseload power plants to supply the electric power requirements for intermediate loads (which occur during daytime from 8 a.m. to 5 p.m) and peaking loads (usually in the evenings from 5 p.m. to 9 p.m.).

“Electricity from coal plants costs twice the baseload rate when used to supply intermediate loads, and cost four times the baseload rate when used to supply peak loads!” Tauli noted.”

“Thus, while the baseload rate for electricity from coal power plants is P5.00 pesos/kWh, the rate for intermediate loads doubles to P10.00/kWh, and doubles further when used to supply peak loads at P20.00/kWh!”

Table 2. Generation Component of Rates of Distribution Utility Companies in Northern Mindanao


Prior to the operation of coal plants in Mindanao, the average cost of generation was less than P3.00/kWh, coming mostly from the Agus-Pulangi hydroelectric power plants.

The increase in the costs of generation in Mindanao, starting middle of 2017, was caused by the DUs use of expensive electricity coming from coal power plants. Thus, the average rate of power supply from coal power plants in July 2018 was around 9.50 PhP/kWh (nine pesos and fifty centavos),or three times the previous average cost.

“When the coal power plants were being contracted by the DU’s in 2013-14, the prospective rates published by DU’s and generation companies (Gencos) was not more than P5.00/kWh,” Tauli explained. 

MInergy Coal fired power plant in Balingasag, Misamis Oriental

“The sad reality is that as of July 2018, the generation component, mainly because of the coal plants, has risen to as much as P7.55/kWh for CEPALCO, which again registered the highest increase at 86%,  mainly because consumers are absorbing the full brunt of the recovery costs for the P14.5-Billion Minergy Coal Plant in Balingasag, Misamis Oriental which exclusively supplies CEPALCO. (Please see Table 2)”

Tauli notes electricity from coal power plants are relatively cheap (not counting environmental costs) when used to supply base loads of end-use consumers, buy expensive when used for loads above base load.

Iligan Light and Power, Inc. (ILPI) has lowest rates in Region 10 (and throughout Mindanao) because it does not use power supply from coal plants for their intermediate and peak loads, he further noted.

Iligan Light & Power Inc uses the Mapalad Power Corp Iligan Diesel Plant ,but still has the lowest retail rate in Region 10 since they only use power from coal power for baseload.


Besides the disadvantageous management of their respective energy portfolios, most DUs are also paying Gencos “through the nose” for disadvantageous provisions in their supply contracts which they have so far failed to re-negotiate since it costs them nothing since it is the end-users and consumers who end up paying for it.

“Around 70% of the increase in the generation component of electricity prices comes from DUs using coal for intermediate and peaking loads, and  30% from the failure of electric cooperatives to address the dire consequences of using “OR” instead of “AND” in their contracts to purchase power from coal plants,” Tauli noted.

A significant part of the increase in generation rates (around 30%) is due to the take-or-pay (as contrasted from take-AND-pay) provisions in some of the contracts, such as those one with FDC Misamis Power Corporation, Tauli explained.

The take or pay provision in the power supply contracts of many electric cooperatives with FDC Misamis Power Corp is forcing consumers to pay for electricity even if they don’t use it.


 “A simple change of one preposition in the contract (from “and” to “or”) results in billions of additional profits for the coal power plants, or billions of savings to consumers should the electric cooperatives choose to re-negotiate their contracts,” Tauli stressed.

“Plainly speaking, the “take-or-pay” provision in the coal contracts forces consumers to pay for electricity that they did not use.”

Private DUs like CEPALCO, DLPI, CLPI and ILPI) do not have “take-or-pay” provisions in their coal contracts

A Mindanao Power Situation Forum will be held on September 19, 2018 at the Performing Arts Theater, Engineering Complex Bldg. of the USTP – Cagayan de Oro Campus, Cagayan de Oro City.

The Forum aims to help the power industry stakeholders, especially the small and household consumers better appreciate the current power situation in Mindanao, identify factors causing high power rates despite the excess power supply; and identify technologies and mechanisms that can redress the present situation.

Jointly undertaken by the MCPC, Association of Mindanao Rural Electric Cooperatives, the University of Science and Technology of Southern Philippines’ (USTP) Institute of Power Sector Economics (IPSEc), the forum brings together the various government agencies in the power sector, public and private players in the power industry, and academic institutions with niche programs on power systems.

This forum is the first of a series to be held this October and November, which will include the Mindanao Congress of the Advocates for Renewable Energy and Rural Electrification and Development (MinCARED 2018), with the one in October purposely to assess a decade of the Renewable Energy Law. 

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