March 7, 2019 | 12:06 am By Victor V. Saulon, Sub-Editor
SOLAR Philippines Tarlac Corp. has
secured the regulator’s approval to raise by 2% annually the P2.999 per
kilowatt-hour (kWh) electricity rate it signed with distribution utility Manila
Electric Co. (Meralco).
In an order promulgated on March 4,
2019, the Energy Regulatory Commission (ERC) has reversed its initial ruling
that disallowed the annual price escalation after Solar Philippines presented
evidence proving that even on the 20th year of the power supply
agreement (PSA), the rate at P4.4577/kWh will still be the lowest among the
previously approved applications for solar power plants.
“The Commission likewise took note
that under [Solar Philippines’] proposal, the rate of return over the project’s
20-year term is only 0.05% which is much lower than the rate of return allowed
by [it] in other applications,” the ERC said.
The regulator also noted that the
project is not foreseen to earn any profit until several years from the start
of operation. Denying the 2% annual escalation, which is part of the rate
agreed by the contracting parties will deny Solar Philippines the opportunity
to recover its investments in the project, the ERC said.
The ERC said a denial is deemed
inconsistent with Republic Act No. 9136 or the Electric Power Industry Reform
Act of 2001 (EPIRA), which mandates the commission to “fix rates that will
allow the recovery of just and reasonable costs and a reasonable return on rate
base” for investors to operate viably.
The commission also said that its
current policy in evaluating PSA applications is to arrive at the generation
rate after employing the cost-based methodology. It said Solar Philippines’
proposed rate of P2.999/kWh “was found to be significantly lower” than the
calculated generation rate computed by the ERC using the said methodology.
The ERC ruling comes after the
regulator issued an order on Feb. 20, 2018 provisionally authorizing Meralco
and Solar Philippines to implement their PSA at the agreed rate but without the
annual adjustment or escalation.
Solar Philippines is the price challenger
to an offer made by Citicore Power, Inc. to Meralco for solar power at a price
of P3.7144/kWh and a 2% annual price escalation. Citicore did not match Solar
Philippines’ offer of P2.999/kWh.
On June 29, 2018 Meralco filed a
manifestation wherein it informed the ERC of Solar Philippines’ refusal to
accept the February order because of the disallowed 2% annual escalation rate.
On July 3, 2018, Solar Philippines
filed a motion for partial reconsideration wherein it said, among others, that
even with the application of the annual escalation, the PSA rate is still
significantly lower than the prevailing feed-in-tariff rate for solar energy at
P8.69/kWh and the approved rates for other solar power plants.
Solar Philippines had said should
the price escalation still be rejected, the company should instead be allowed
to charge the levelized average rate of P3.7144/kWh, a price Meralco objected
because it was not the one agreed during the price challenge process.
Solar Philippines also sought to
move the timeline for the performance of its obligation under the PSA from
December 2017 to February 2018. It also said that for the first 10 years of the
PSA, and based on the ERC’s simulation, the rates range from P2.999/kWh to
P3.6569/kWh — all of which are lower than the 20-year average of the PSA
amounting to P3.7144/kWh.
The company said without the
escalation, the agreement will be financially unviable to the prejudice of
Solar Philippines and the consuming public.
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