Mindanao Power Rates To Go Down With Refund

By: Ryan D. Rosauro

Inquirer Mindanao

OZAMIS CITY-Power rates in Mindanao were expected to sharply go down following the order of the Energy Regulatory Commission (ERC) to the Aboitiz-owned Therma Marine, Inc. (TMI) to refund consumers for over-recovery in capital cost.

TMI's capital cost recovery charges were being collected since MArch by the National Grid Corp. of the Philippines (NGCP) as ancillary charge in the electric bill of Mindanao power consumers.

In a decision dated Oct. 4, which the Inquirer obtained on Friday, the ERC adjusted the rate of ancillary services charged by TMI to electricity consumers, taking into account a radically lower figure for capital recovery compared to that proposed by the company.

The ERC said TMI's proposed capital cost of P2.04 billion for each power barge was too much.

The ERC noted that TMI acquired M1 (formerly Power Barge 118) in Maco, Compostela Valley; and M2 (Power Barge 117), located in Nasipit, Agusan del Norte; from the National Power Corp. (Napocor) at only P651.2 million and P739.5 million respectively.

The ERC said "there was no sufficient justification" to use the company's appraised value in computing capital cost.

TMI said it would contest the order.

In adjusting the charges, the ERC computed the total rate base by adding the acquisition cost of the power barges with "the cost of procurement of the excluded equipment and replenishment of spare parts..."

With this, the ERC said the total rate base for M1 should only be P870.0 million while M2 should be P962.6 million.

The regulatory body also lowered the weighted average cost of capital (WACC) from 18 percent to only 15 percent.

TMI said under the ERC computation "the reductions are in the order of P0.5218 per kilowatt-hour for M1, and P0.49085 per kilowatt-hour for M2."

TMI acquired Power Barge 118 on Feb. 5 and Power Barge 117 on MArch 1 from Napocor.

As part of the decision, the ERC directed the NGCP "to recalculate... the (ancillary service) rates from its effectivity" and submit to it a refund scheme within 15 days.

Ancillary services generally consist of reserve capacity "essential to maintaining the power quality, reliability and security of the national grid."

As grid operator, the NGCP will collect charges for use of ancillary services even if actual power was not delivered to the Mindanao grid.

At present, the NGCP has two one-year Ancillary Services Procurement Agreements (ASPA) with TMI, which was inked on Feb. 1 covering the two barges.

Each barge has a power generating capacity of 100 megawatts, consisting of two 50-megawatt engines. The ASPAs bind 50 MW of each barge for ancillary services to NGCP.

As a fee levied on power consumers, ancillary services fees also consist of charges for capital recovery, also referred to as capacity fee; fixed operation and maintenance expenditures; and energy costs.

When Napocor still operated the power barges, the ancillary service fee in Mindanao was only at P0.1830 per kWh.

But under TMI's ASPA, the ancillary service billing for M1 is at P1.40154 per kWh comprising of capacity fee of P0.92290, fixed operation and maintenance fee of P0.32973, and energy fee of P0.14891.

But the ERC said the reasonable rate is only P0.87636 per kWh comprising of capacity fee of P0.39962, fixed operation and maintenance fee of P0.32783 and energy fee of P0.14891.

The difference between the ASPA rate and the ERC's computation is P0.52518 per kWh. largely from reduction of the capital recovery fee.

The ASPA for M2 ancillary service was pegged at P1.39692 per kWh comprising of capacity fee of P0.92277, fixed operation and maintenance fee of P0.32524, and energy fee of P0.14891.

But the ERC found that a reasonable rate is at P0.90607 per kWh comprising of P0.43192, fixed operation and maintenance fee of P0.32524, and energy fee of P0.14891.