Higher power rate expected in Cebu

Sunstar Cebu

CEBU CITY -- An official of a power generating firm advised Cebuanos on Tuesday to prepare for an increase in power rates once the contracts between the National Power Corp. (NPC) and power distributors and cooperatives expire by the end of the year.

Speaking at the 888 News Forum, Edecio Satina, Cebu Energy Development Corp. (CEDC) assistant vice president for commercial operations, said the current power rate of P3.90 per kilowatt hour (kwh) is still subsidized by the NPC.

Once NPC’s contracts expire by the end of the year, the Aquino administration will have to choose whether to continue the subsidy or to implement full privatization and impose the real cost of electricity, said Satina.

He estimated the true cost of power, without the subsidy, to be around P5 per kwh. This year, NPC’s rate has gone up from P3.8 per kwh in January to P4.01 per kwh as of September.

Director Antonio Labios of the Department of Energy (DOE), who also attended the forum, confirmed NPC contracts will expire by the end of 2010. But he refused to comment on the power rates because that falls under the Energy Regulatory Commission’s (ERC) jurisdiction.

Lawyer Joel Bontuyan, officer-in-charge of ERC Visayas, confirmed all NPC contracts with power distributors will expire by the end of December.

Under the Electric Power Industry Reform Act (Epira), NPC assets must be privatized. The disposal of NPC assets was supposed to be realized in 2008, but was extended to 2010.

Bontuyan said once the private power producers operate independently the plants they’ve bought from NPC, the true cost of power generation, plus profits, will naturally lead to higher rates.

The law, he explained, mandates that at least 70 percent of NPC’s assets must be privatized. Granting that 30 percent of NPC’s assets will not be disposed to private takers, NPC’s contracts with power distributors will still expire by the end of the year.

During contract renewals, there will most likely be an adjustment of the power rates, he said.

The contracts that will be entered into by private power generators and distributors will be subject to ERC approval.

This means, Bontuyan said, the ERC will review the contracts to see to it that any increase in power rates is reasonable.

Because the contracts between NPC and distributors will soon expire, Energy Secretary Rene Almendras has encouraged power distribution utilities and cooperatives to enter into contracts with NPC or independent power producers. (EOB of Sun.Star Cebu)

Published in the Sun.Star Cebu newspaper on October 13, 2010.