Forum seeks answers to rise in CEPALCO power rates

Sep 14, 2018

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A forum on the Mindanao Power Situation has been scheduled this week to shed light on the unprecedented rise in the prices of electricity in Northern Mindanao, especially in the franchise area of the Cagayan Electric Power and Light Co. (CEPALCO) which covers Cagayan de Oro City and the municipalities of Tagoloan, Villanueva and Jasaan, Misamis Oriental.

 

“We are inviting CEPALCO officials to explain how the costs of their electricity sourced from their coal-fired power plant is already at P14.00 per kilowatt hour (/kWh) in July 2018, and not the P5.00/kWh promised in July 2015 when the rate for coal power supply was approved by the Energy Regulatory Commission (ERC),” said Engr. David A. Tauli, president and spokesperson of the advocacy group Mindanao Coalition of Power Consumers (MCPC).

The 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.

MCPC estimates show the rate for power purchased from coal power plants by CEPALCO to be P14.38/kWh as of July 18, compared to P3.00 for the average rate purchased from the PSALM-NAPOCOR hydroelectric power plants and P7.55 for power purchased from all sources.(Please refer to Table: Cost of Power Supplied to CEPALCO Consumers July 2018).

“Estimation is simplified by assuming that CEPALCO draws power supply only from PSALM-NAPOCOR and from coal power plants, with 60% coming from PSALM-NAPOCOR and the 40% balance from coal fired power plants,” Tauli explained.

We also assumed that a rate of P3.00/kWh is paid by CEPALCO to PSALM-NAPOCOR, he added.

“These are conservative assumptions, and will result in an estimated rate of coal power supply to CEPALCO that should be lower than the actual rate for July 2018,” Tauli noted. “The P7.55/KwH average rate of power purchased by CEPALCO from all sources is public data.”

If a satisfactory explanation is not given by CEPALCO to show that the high rates are only temporary, then the consumers of CEPALCO should petition the ERC for a reduction in the rates of the coal power plant on the grounds based on the evidence shown in their monthly bills.

“We expect CEPALCO to explain the high costs of power supply from coal plants during the Mindanao Power Situation Forum,” Tauli stressed.

 

Because the P14.5-Billion Minergy coal fired power plant supplies electricity exclusively to CEPALCO, its consumers are burdened with the highest generation component among DUs in Region X (ELEX photo)

Another energy stakeholder who requested not to be identified said one of the main reasons why CEPALCO’s Coal energy is high compared to the average price from other coal power producers is that they are recovering the cost of the expensive 138kv power transmission line and 138lv substation they constructed solely from the customers/ consumers of CEPALCO.

 

“Cepalco would have paid only a very minimal transmission cost had they approached the National Grid Corporation of the Philippines (NGCP) to build it for them. NGCP recovers cost of its assets on a nationwide basis, not local like CEPALCO.

 

In laymen’s terms, the P800 million cost of the substation and transmission line would have been distributed among the 18,270,000 estimated   power customers in the entire country (based on the latest available figures from the Philippine Statistics Authority’s 2011 Household Energy Consumption Survey (HECS), instead of being apportioned only among the 138,958 CEPALCO Customers (as of April, 2017 as listed in CEPALCO’s official website).

Minergy Coal Corporation’s Tagoloan-Balingasag 138kV sub-transmission line (MIESCOR photo)

 

This scenario becomes all the worse when it is applied to recovery costs of the Minergy Coal Corporation’s P14.5 billion (US$330 million) a three-unit coal-fired power plant with total capacity of 165 MW in Balingasag, Misamis Oriental. Minergy Coal is a subsidiary of CEPALCO.

 

Since it is an embedded plant or one dedicated solely to supplying its output to CEPALCO, its recovery costs will be tacked on to the bills of all 138,958 CEPALCO customers for the next 25 years.

 

Another query raised by our source was the whereabouts of the excess power contracted by CEPALCO to PSALM-NAPOCOR if the entire 165MW of the Minergy coal plant in Balingasag is consumed by Cepalco customers.

 

“If they are not consuming all the power of their coal plant, then who will pay for that stranded power?”he asked. “Since it is an embedded power plant dedicated exclusively to CEPALCO, this means all stranded costs would be paid by CEPALCO consumers within the utility’s franchise area in Cagayan de Oro, Tagoloan, Villanueva and Jasaan.”

 

Earlier this year,  CEPALCO advised its customers of a “slight increase” of three centavos per kilowatt hour in its electricity rates due to the implementation of the Tax Reform for Acceleration and Inclusion (TRAIN) Law.

This would result to an additional P6 in the monthly bill of a typical household consuming 200 kilowatt hours per month estimated at P1, 500 in 2017, while households consuming 300kWh per month would incur an additional P9, and those using 400kWh an additional P12 per month.

However, the actual amount paid by consumers would depend on current coal and petroleum prices and foreign exchange fluctuations which are allowed by ERC to be “passed on” to consumers since CEPALCO does not profit from it, the utility said.

Jointly undertaken by the MCPC, Association of Mindanao Rural Electric Cooperatives (AMRECO), 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 subsequently held in October and November, including 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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