ERC steps in to avert plant shutdown
Sunday, December 11, 2005
By MYRNA M. VELASCO
With the nearing December 15 deadline on when 72-megawatt Panay Power Corporation (PPC) may opt to shut down operations due to mounting losses, the Energy Regulatory Commission (ERC) sounded off that the Panay Electric Company (PECO) should be solely blamed on its drastically-reduced distribution tariff that was triggering its failure to settle outstanding obligations with its power supplier.
Obviously appalled by the turn of events, ERC chairman Rodolfo B. Albano stressed that the Commission "should not be blamed for the impending power outage in Iloilo," noting that it just acted on the rate unbundling application of PECO; of which rate was pegged to that of the National Power Corporation (NPC).
He, however, assured the public that the Commission already decided to step into the issue and that a solution is already in place so that the consumers will not be deprived of electricity service while a more permanent fix to this dilemma is being sorted out.
PPC earlier divulged that PECO already owes it around P250 million; to which the latter cannot afford to settle because of its "below market" generation charges.
Albano emphasized that the ERC, in its May 19, 2004 unbundling decision for PECO, it approved a rate for the utility firm which is 2.0427-percent lower than its existing average rate.
"This is mainly due to the pegging of its generation rate to PhP3.7491 per kilowatt hour (kWh) which is NPC’s Visayas grid rate," the ERC chief has further explained.
PECO and PPC have an existing power purchase agreement (PPA) approved by the then Energy Regulatory Board (ERB) on March 20, 2000. This supply agreement stipulates that "PPC rate to PECO shall be equal to or less than the NPC or other bulk power producers in the grid".
It was also stated in the contract that "in the event that PPC’s rate is no longer competitive, the parties shall conduct mutual discussion to resolve or minimize PPC’s non-competitiveness".
However, Albano noted that instead of PECO seeking renegotiation of its PPA with Panay Power, its first line of defense was to question the ERC’s ruling on its rate unbundling, elevating its case before the Court of Appeals.
"Up to such time when the ERC came out with its May 19, 2004 decision on PECO’s unbundling, no renegotiated PPA was submitted to ERC for approval," the ERC chairman pointed out, noting that this rendered the Commission having no other recourse "but to peg its generation rate to that of the NPC, consistent with the provision in their ERB-approved PPA."
Albano added that it took more than one year, October 14, 2005 to be exact, before PECO was able to submit and seek approval for its renegotiated PPA.
"They only submitted their renegotiated PPA for ERC’s review and approval on October 14, 2005, more than a year from the unbundling decision of ERC. PECO and PPC should have realized right after that decision that there is an urgent need for them to renegotiate in order to assure a continuous supply of electricity.
Instead, they challenged it in the Court of Appeals, who sustained and affirmed ERC’s Decision," the chief regulator said.
Panay Power noted that while it regrets the probability of its undertaking forced plant shutdown, it is no longer capable of sustaining its operations, thus, it is just stretching its run until its available fuel supply is fully used up.
It was indicated that the ERC drastically trimmed down PECO’s rate by P2.00 per kilowatt hour (kWh); and this has resulted in a very significant cut also in the amount of payments it could make to PPC.
posted by philpower @ 5:40 PM,
