‘Ceneco Mandated to Implement ERC Order’; P0.0817/KWh Takes Effect This Month

“It is an order. Though it weighs heavily on our hearts, we have to implement it. If we don’t follow the order, we will be subjected to sanctions and penalties by ERC,” said Ceneco general manager Simplicio Lagarde, Jr. during the press conference yesterday in Bacolod City.

CENECO OFFICIALS explain the ERC order directing Ceneco to collect P0.0817/KWh from its member-consumers effective this October, during yesterday’s press conference in Bacolod City. (From left) Ceneco corporate planning head Engr. Leomel Tambanillo, Board President Roy Cordova, and General Manager Simplicio Lagarde, Jr.*(Butch Bacaoco photo)

Lagarde was referring to the order of the Energy Regulatory Commission directing Ceneco to pay P232 million to Kepco Salcon Power Corporation and recover the amount from its consumers at monthly rate of P0.0817/KWh for 50 months, or until the amount is fully paid.

For consumers with a monthly consumption of 100 KWh, this translates to an increase of P8.00 in their monthly electric bills effective this October billing.

“If ERC decides favorably on the motion for reconsideration and orders Ceneco to stop the implementation, or even if ERC orders Ceneco to refund whatever amount that might have been collected, we will comply with the ERC order,” he added.

The amount represents the “differential billing” covering the period July 26, 2011 to November 25, 2013 arising from the “load factor-based pricing” for the 24 megawatt additional power which Ceneco contracted with KSPC.

Last week, the Social Action Center of the Diocese of Bacolod City filed a motion for reconsideration of the ERC decision, while consumer advocate Romeo Lavilla, Sr. vowed that he will also file a motion for reconsideration.

Ceneco president Roy Cordova said that he supports the motions for reconsideration and assured consumers that Ceneco will not oppose the motions for reconsideration.

POWER WATCH Secretary-General Wennie Sancho (holding mic), reads his group’s position paper opposing the Energy Regulatory Commission’s (ERC) decision to pass on the P232-M to CENECO member-consumers, in yesterday’s Ceneco press conference.*(Jun de los Reyes / NDB photo)

“If ERC eventually decides favorably on the motions for reconsideration, Ceneco will immediately stop the implementation of this ERC order and we should thank the Social Action Center and Mr. Lavilla,” Cordova said.

“It is public knowledge that I am a consumer advocate. But now that I am already Ceneco’s Board President, I have to balance the interests of the consumers and of the electric cooperative,” Cordova further said, adding that Ceneco is mandated to follow the ERC order, because Ceneco officials are not over and above the law.

Unless and until there is a “cease and desist” order, Ceneco has no choice but to follow the present ERC order, according to Cordova.

Wennie Sancho, Power Watch Negros secretary general, condemned the ERC decision as immoral and unjust to the consumers, alleging that Ceneco over-contracted its power requirements.

In response to Sancho, Engr. Leomel Tambanillo, corporate planning head of Ceneco, cited an excerpt from the ERC decision, which states:

“Since the 24MW is within the intermediate load, it is expected that Ceneco would not be able to off-take all the minimum contracted energy (energy used in deriving the rates). However, it should be emphasized that Ceneco never failed to utilize the 24MW in any billing month, which only shows that the 24MW contracted capacity is within Ceneco’s power requirements.”

Tambanilla narrated the background of the issue and explained the rationale behind the collection of the differential billing.

He said that, on July 16, 2007, Ceneco and KSPC entered into a contract for the supply of 40MW. The contract, with a rate of P4.2511 per KWh, was approved by ERC on February 26, 2009.

At this time, the government was privatizing its power generation assets, resulting to the reduction in the capacity of Ceneco’s main power supplier from 109MW to 44MW, and compelling Ceneco to look for available power plants that offer the lowest rate.

Ceneco explored the available options, leading it to a choice between KSPC and Panay Energy Development Corporation. Because KSPC’s rate was lower than PEDC and other diesel power plants, Ceneco decided to source an additional 24MW from KSPC.

KSPC and Ceneco entered into a supplemental agreement for the additional 24MW on July 29, 2011, with a proviso that Ceneco has the option to treat the 24MW as base load or intermediate load, in accordance with a “load factor-based pricing table” for each billing month.

Load factor-based pricing refers to the variable rate which depends on the “percentage of utilization” by Ceneco of the 24MW contracted with KSPC. The higher the percentage of use of the 24MW, the lower the rate which Ceneco has to pay KSPC.

On November 28, 2011, ERC confirmed that the additional 24MW did not need further ERC approval, because it was considered by ERC as part of the approved contract for the initial 40MW. However, the monthly reconciliation of the load-factor based pricing to be used for the 24MW, which is different from the rate used in the 40MW, still needed ERC review and approval.

On September 9, 2013, Ceneco and KSPC obtained provisional approval for the load factor-based pricing on a monthly reconciliation of Ceneco’s actual use of the 24MW. The order was implemented, but the approval was not retroactive from the time Ceneco started utilizing the 24MW, or the period from July 26, 2011 to November 25, 2013.

Pending the ERC provisional authority, KSPC and Ceneco used the rate for the 40MW as the basis for computing Ceneco’s power consumption. The 40MW rate is lower than the load factor-based pricing, giving rise to a differential payable to KSPS when ERC finally approves the load factor-based pricing on a monthly reconciliation basis.

On its order dated June 27, 2017, ERC finally approved the load-factor based pricing on a monthly reconciliation basis and ordered Ceneco to pay the P232 million differential to KSPC and to collect the same from its consumers, explained Tambanillo.*(Butch Bacaoco)