ERC approves power sales agreement

Sunstar Bacolod

THE Energy Regulatory Commission (ERC) has approved the power sales agreement (PSA) entered into between the VMC Rural Electric Services Cooperative Inc. (VRESCO) and First Farmers Holding Corporation (FFHC) for a three megawatt supply of electricity on an ‘as available basis’ arrangement.

"After a thorough evaluation...the Commission finds that the PSA...between VRESCO and FFHC will redound to the benefit of VRESCO's member-consumers in terms of continuous, reliable, efficient and affordable power supply as mandated by the Electric Power Industry Reform Act (Epira)," the ERC ruled in its 29-page decision docketed under case #2010-006 RC.

It also noted that the PSA conforms to the national government's program to promote the use of renewable energy to address various environmental concerns such as garbage disposals, greenhouse gas emissions and global warming.

VRESCO franchise area covers the cities of Cadiz, San Carlos, Sagay, Escalante and Victorias as well as the towns of Calatrava, E.B. Magalona, Manapla and Toboso.

With the scheduled privatization of the National Power Corporation's generating assets in the Visayas Grid and the lapse of the NPC-VRESCO power sales contract (PSC) last December 25, 2010, the distribution utility started looking for independent power producers (IPPs) that can supply its annual energy requirement of 145,250,754kilowatt-hour.

VRESCO signed a PSC with Kepco SPC Power Corporation for a 61,320,000kWh base load requirement for 10 years starting Feb. 28, 2011. It also entered into another PSA with the San Carlos BioEnergy Inc. (SCBI) for a contract quantity of 21,024,000kWh for 30 years pending ERC approval.

"VRESCO further prioritized negotiations with IPPs that are within its franchise area...one of these is FFHC that also operates a co-generation, bagasse fueled system (which is) a renewable energy system like SCBI," the ERC said.

The final PSA dated September 1, 2009 was signed by VRESCO president Armando Federico Valmayor and general manager Eduardo Parrocho as well as FFHC president Jose Ma. Villanueva and general manager Ricardo Leon Echaus as per authority granted by their respective board of directors.

The agreement was filed for ERC approval on January 14, 2010. In March that year, the Commission issued an order provisionally authorizing VRESCO and FFHC to implement the PSA with regard to the 3MW non-firm (as available basis) power supply.

The PSA is for 10 years starting Sept. 1, 2009. During milling operations, the daily contract quantity shall be on 'as available basis' with the best effort on FFHC's part to maintain the minimum quantity of 3.0 - 3.5 MW.

“Purchased power rate from January 1, 2011 to August 31, 2019 shall be P4.1920/kWh while provisional rate or the price per kilowatt-hour of electricity delivered by FFHC from Sept. 1, 2009 to December 31, 2010 shall be one percent lower than the weighted average discounted generation charges before the application of the prompt payment discount paid by VRESCO to the NPC,” ERC noted in its perusal of the PSA salient features.

In finally approving the VRESCO-FFHC power sales agreement, the Commission however ruled that as per its computation of the various cost components, the tariff rate shall be P2.8978/kWh as against FFHC's P4.1920/kWh or a difference of P1.2942/kWh and directed the two parties to submit a scheme for the refund of the difference between the provisionally and final approved rate for its sanction.

“Should the parties rescind the contract, the final rate…shall be the price that VRESCO should pay FFHC for the energy purchased,” it added. (CGC)

Published in the Sun.Star Bacolod newspaper on April 27, 2011.