ERC approves DLPC’s supply contract

Manila Bulletin 
By Myrna M. Velasco 
Published: August 26, 2013 
A regulatory approval was bestowed on the off-take agreement between Aboitiz Power’s wholly-owned subsidiary Therma South Inc. (TSI) and affiliate Davao Light and Power Company Inc. (DLPC) for the latter’s procurement of 100-megawatt capacity from the forthcoming 300MW coal-fired plant in Davao.
In a filing with the Energy Regulatory Commission (ERC), the electricity supply agreement (ESA) for the 100MW will replace the capacity that the Davao utility has contracted with Therma Marine Inc. (TMI) -- which will expire in 2014. It will similarly plug the portended shortfall of supply that can be provided by the Power Sector Assets and Liabilities Management Corporation.
“The completion of the TSI power plant will be able to promptly address the expiration of the CSEE and shortage of power supply in (DLPC’s) franchise area,” the utility firm said. The Davao coal plant will be on stream by 2015.
A contract for the supply of electric energy (CSEE) with PSALM meets part of DLPC’s power supply, but the state-owned power firm already advanced word that the volume it can offer in the coming years will be on a declining rate.
DLPC added “if there is no replacement supply from TSI, upon expiration of the TMI contract and reduction of NPC/PSALM supply, power outages of at least 3 hours and up to 9 hours may result.”
From DLPC’s estimated requirement of 311.61MW this 2013, the volume is seen going up to 336.022MW in 2015. By year 2021, that required supply will climb by almost 100MW to 410.226MW. 
In the scenario-calculations provided by DLPC in the ERC application, it showed that its rates will go down if it trims by 30-percent its supply procurement from PSALM; and the 30MW currently being supplied by the TMI barges will be taken out from its supply portfolio.
In the ERC’s approval of the TSI-DLPC supply pact, it prescribed modifications on the level of capital recovery fee (CRF) as well as on the fixed and variable operation & maintenance (O&M) fees that must be lumped into DLPC’s pass-on rates.
The regulator-approved CRF rate stood at P1,936.60/kilowatt/month which is lower by P103.40 from the proposed rate of P2,040.00/kW/month.
For the fixed O&M, the ERC gave go-signal for a pass on rate of P387.35/kW/month, down by P12.65 from what was proposed at P400/kW/month. The variable O&M was sustained at P0.2908 per kilowatt hour; while fuel cost was mandated to be “a pass-through but subject to efficiency caps.”
The ERC stipulated that “the approved rates shall be adjusted by the Commission upon submission of the actual costs incurred by TSI in the construction of the plant.”   source