Tariff scheme for EC guarantees pushed

Manila Bulletin 
By Myrna M. Velasco 
Published: July 2, 2013 
A tariff mechanism via pass-on rate to electricity consumers is being proposed so the country’s electric cooperatives can address cash flow dilemmas on their security deposits for supply agreements or prudential requirements with the Wholesale Electricity Spot Market.
The estimated pass-on impact of such guarantees will be P0.20 per kilowatt hour (kWh) into the bills of the EC’s customers.
It was further proposed that “the charge for payment guarantees shall appear as a separate line item in the EC’s monthly bill to its member-consumers.”
The other key requirement for ECs will be a security deposit that they must post with the National Grid Corporation of the Philippines (NGCP) upon sealing transmission service agreement (TSA) with the system operator.
This has been based on the petition of the Philippine Rural Electric Cooperatives Association, Inc.  (Philreca); wherein it sought that rules be laid down for “the collection from consumers of the cost of payment guarantees for the power supply contracts and transmission service agreements entered into by the ECs.”
The application will be subject to public hearings in various areas nationwide – starting this August 20 until October 15 this year.
It has been emphasized that “the purpose of the prudential requirements is to ensure the effective operation of the spot market by providing a level of comfort that the WESM members will be able to meet their respective obligations for the payments as required under the WESM Rules.”
To date, around 26 ECs from Luzon and 22 from Visayas are direct trading participants at the electricity spot market. About 35 of them posted cash bond; while 13 others submitted irrevocable standby letters of credit (SLC) as prudential guarantees.
It must be recalled that power generators are complaining about the non-compliance of WESM-participating ECs on prudential requirements – hence, negating a buffer fund that could have been the recourse of power suppliers if the ECs cannot settle their financial obligations on time.
Philreca stressed that “the existing tariff of the ECs does not provide for surplus funds by way of or in the form of a return on rate base and depreciation,” hence, they cannot correspondingly allot additional cash for their prudential requirements.
The EC group added that “the cost and expenses (relating to security deposits) are not incorporated in the existing tariff”, thus, it is batting for “an urgent need to adopt and implement a tariff mechanism to sustain the ECs’ operational efficiency and financial viability.”   source