Ceneco, Kepco power deal hearing on April 5

Sunstar Bacolod

THE Energy Regulatory Commission (ERC) will hold a public hearing on April 5 on the application for the approval of the commissioning power sales contract (PSC) between the Central Negros Electric Cooperative (Ceneco) and Kepco SPC Power Corporation.

Power industry stakeholders and officials of local government units like Bacolod, Silay, Talisay, Bago, Murcia and Don Salvador Benedicto or Ceneco’s franchise area are expected to attend the hearing which will start 9 a.m. at Ceneco’s main office along Mabini-Gonzaga Streets.

The PSC, which was approved with modification by the ERC last February 16, 2009, involves the 10-year, 40 megawatts (MW) contract that was supposed to take effect last month with the start of Kepco’s Cebu Power Plant commercial operations.

Ceneco general manager Sulpicio Lagarde Jr. earlier told Sun.Star Bacolod that Kepco’s contracted power cost is P4.78 per kilowatt-hour (kWh), inclusive of the 12 percent expanded value added tax (eVAT).

In its 55-page decision, ERC noted that KSPC base price of P4.2798/kWh as of the January 2008 rate is "subject to adjustments based on fuel cost, foreign exchange and local and foreign price indices. The expected increase in the cost of generation from 2008 to 2011 must be considered."

In approving the amended PSC that was signed between Ceneco and Kepco in 2008 from the original contract entered into last July 16, 2007, ERC also ruled that Kepco's base price should be P4.2511/kWh subject to fuel cost, foreign and local operation and maintenance fee exchange fluctuations as well as capital recover adjustments, among others.

“On the issue that Ceneco should buy from the Palinpinon Geothermal Plant as this is less expensive than the coal power plant, aside from the fact that it is environment-friendly, the same should be better left to the discretion of (Ceneco)," ERC stressed although it noted that Palinpinon is being operated by NPC and the steam is being supplied by the Philippine National Oil Company-Energy Development Corporation (PNOC-EDC, now Green Core Geothermal Inc.) under a steam sales agreement (SSA).

"The production cost is being recovered all throughout the Visayas Grid while the adjustment is being recovered through the Generation Rate Adjustment Mechanism (GRAM) application of NPC. As manifested by NPC, Palinpinon's current production cost is at more than P3/kWh. When it is privatized under the current scenario, the SSA will be replaced by a geothermal resources sales contract (GRSC), which means that the price of steam will be indexed by coal indices. It is projected the steam price under the GRSC will be at P2.80/kWh for variable cost only,” it added.

With regard the environmental concerns, coal technology now has undergone significant development thru the newly designed circulating fluidized bed of which an environmental compliance certificate has already been issued by the Department of Environment and Natural Resources to Kepco, the decision said.

"The PSC and its amendments entered into by Ceneco and KSPC (Kepco) will somehow address the looming power shortage in the Visayas by 2011 as certified by NPC. It will redound to the benefit of Ceneco's consumers in terms of continuous, reliable and efficient power supply," ERC stressed, adding that the PSC is also consistent with the government's policy to "encourage private sector investments in the power generation, including the put up of new generation plants" as per the Electric Power Industry Reform Act of 2001. (CGC)

Published in the Sun.Star Bacolod newspaper on April 04, 2011.