Cane Points: Temporary Relief on P232 Million

Consumers heaved a sigh of relief after Ceneco suspended the implementation of the additional P0.0817 / kwh arising from the Energy Regulatory Commission decision allowing Ceneco to collect the P232 million differential billing it owes to Kepco.

Where did this P232 million figure come from? Do consumers have to pay for it?

In 2007, Ceneco entered into a contract with Kepco for the delivery of 40MW base load. In 2009, ERC approved the contract at a base price of P4.2511/kWh.

In anticipation of the continued increase in its number of consumers and their corresponding demand for more power, Ceneco entered into a supplemental agreement for the supply of another 24MW from Kepco for 10 years.

Both parties agreed that part of the 24MW would be used as base load, while the balance would be delivered as intermediate load.

The base load represents the minimum consumption of all Ceneco consumers for the entire day, or for 24 hours every day of the week. The intermediate load refers to the consumption above the base load but below the peak load.

The peak load is the highest registered consumption of all Ceneco consumers during peak hours of about 5pm to 11pm.

In a 24-hour cycle, the base load is constant while the intermediate load and the peak load are variable.

The peak load varies only within the peak hours, while the intermediate load varies, particularly after the peak hours, when consumers put off their lights and appliances to go to sleep until they wake up in the morning, or from 11pm to 7am (off-peak hours).

Ceneco and Kepco agreed that part of the 24MW would be used as base load, while the balance would be delivered as intermediate load, until such time that Ceneco could utilize the entire 24MW as base load.

Since the intermediate load is variable, both parties recognize that, in the early part of the 10-year contract, there would be times within the 24-hour cycle (from 11pm to 7am) that the intermediate load would not reach 24MW.

Because Kepco had to keep its power plants running and ready to supply the 24MW at any time needed by Ceneco, Kepco had to be compensated so that Kepco can recover its operating and maintenance expenses for keeping the power plants running.

Ceneco and Kepco agreed that the intermediate load would be based on Kepco’s adjusted base price of PhP4.2511/kWh on a load factor-based pricing scheme. Load factor refers to the percentage of utilization of the 24MW in a 24-hour cycle. The higher the percentage of utilization of the 24MW, the lower will be the applicable rate.

For instance, if Ceneco uses 100% of the 24MW, the adjusted base price applies. If Ceneco uses 80%, the applicable rate will be higher than the base price. If Ceneco uses only 70%, the applicable rate will be higher than the applicable rate for 80% utilization.

On November 28, 2011, ERC confirmed that the reconciliation and billing of the 24MW may be implemented without further ERC approval, as the additional 24MW and the formula (load factor-based pricing scheme)) used in computing the applicable rate were considered part of the ERC approval for the original 40MW contract.

However, ERC said that its approval for the implementation of the reconciliation (computation of the actual load factor or percentage utilization of the 24MW) and the collection of the applicable rate was for an ANNUAL, not monthly basis.

Thus, Ceneco and Kepco jointly filed with ERC an application for the approval of the formula (load factor-based pricing scheme) to be reconciled, computed and billed on a MONTHLY, instead of yearly basis.

Pending result of the joint application, both parties agreed that Ceneco would pay for the 24MW computed at its base price, with the understanding that Ceneco will pay the differential billing when ERC approves the application.

The differential billing represents the difference between the base price (computed at 100% utilization) and the applicable rate (based on Ceneco’s actual load factor).

ERC granted provisional authority for the implementation and collection of the 24MW, based on the said formula, on a monthly basis. This was implemented starting November 26, 2013 billing period onwards.

From the time that Kepco started supplying 24MW to Ceneco until the time ERC granted provisional authority to implement the 24MW supplemental agreement (July 26, 2011 to November 25, 2013), the differential billing accumulated to P232 million.

Kepco could have pushed for the collection of the P232 million back in 2013 but it also understands that the single collection of such amount would be hard on Ceneco consumers.

Again, Ceneco and Kepco agreed to have the P232 differential billing reviewed and approved by ERC, to ensure that the computation of the amount is consistent with the ERC-approved formula.

On June 27, 2017, ERC gave its imprimatur to the collection of the P232 million as the correct amount and as a valid, legitimate differential billing which Ceneco has to collect from its consumers at P0.0817 / kwh for 50 months, or until the amount is fully paid.

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