Metro Cebu customers of Visayan Electric Co., Inc. should brace for an increase in their electricity bills for the June to July billing period because of higher generation rates caused by high coal and fuel prices in the world market.
An option is for consumers to minimize electricity consumption to avoid bill shock, said Visayan Electric president and COO Raul C. Lucero.
In a statement, Lucero said the high prices of coal and fuel as well as the soaring prices in the electricity market drove the generation rate for residential consumers by P0.61 per kilowatt-hour (kWh) to P11.83/kWh for the June 13 to July 12 billing period from P11.22/kWh for the May 13 to June 12 billing period.
This latest rate is higher than the generation rates from January to March, but lower than the P11.96/kWh rate for the April 13 to May 12 billing period.
In December 2020, Visayan Electric’s residential rate was only P10.75/kWh.
Lucero said Visayan Electric’s suppliers are “greatly affected by the increase in prices of coal and fuel in the world market.”
“The price of power in WESM is also high since most of the generators that supply power in WESM are also affected by coal and fuel prices,” he said.
WESM refers to the Wholesale Electricity Spot Market, the market for trading of electricity as a commodity.
For the month of June, the Visayan Electric website showed that the average generation cost of electricity sourced from WESM is P9.9672/kWh, more than double the P4.2686/kWh generation cost for May.
Visayan Electric reduced its procurement through WESM to 5.4% in June from 10.6% in May because of the high prices.
In the first four months of 2021, however, WESM supplied up to 22.48% of Visayan Electric’s requirements and the average generation cost was as low as P1.8429/kWh.
Prices per kWh in WESM gradually increased from this low rate in January 2021 to P2.5402 in February, P4.1248 in March and P5.2456 in April, when demand was high due to summer.
The average generation cost for Visayan Electric’s contracted supply, on the other hand, ranged from P4.7744 to P6.7660 per kWh in the first half of the year.
For June, Visayan Electric sourced 30.9% of its requirement from the Cebu Energy Development Corp., 45.53% from Therma Visayas, Inc., 12.9% from Green Core Geothermal, Inc., and 5.72% from Cebu Private Power Corp. (CPPC).
Cebu Energy and Therma Visayas both generate power from coal-fired plants. They are also subsidiaries of Aboitiz Power Corp., which is Visayan Electric’s parent company.
CPPC, which operates a diesel-fired facility, is also a subsidiary of Aboitiz Power but serves only as a peaking plant, which means that it runs only when market prices are high.
For June, the Visayan Electric website showed that CPPC’s contribution to total generation rate is P0.77/kWh. In May, it contributed only 1.85% to Visayan Electric’s requirement.
The bulk of Visayan Electric’s power supply traditionally comes from Cebu Energy and Therma Visayas, which provided around 60% to 75% of the utility’s monthly requirements in the first half of 2021.
The high cost of electricity has been identified by the Cebu Chamber of Commerce and Industry (CCCI) as the second top obstacle to the ease of doing business in Cebu.
“For the longest time, the Cebuano have been complaining of Cebu’s high electricity rates. We hope that ERC’s probe on Visayan Electric’s rates will eventually result in cheap power that will propel Cebu to be more competitive,” CCCI president Felix Taguiam said in a statement.
He said lowering the cost of electricity would be Visayan Electric’s “greatest legacy” to Cebu.
Citing a press statement by the Energy Regulatory Commission (ERC) in December 2020, Taguiam noted that distribution utilities in Luzon and the Visayas charged a generation rate ranging from P3.9513/kWh to P5.0985/kWh in November 2020, with the highest coming from Visayan Electric.
ERC chairperson Agnes Devanadera, in a letter dated Jan. 4, 2021, asked Visayan Electric to explain its high electricity rates and its perceived violation of Section 45 (b) of Republic Act 9136, or the Electric Power Industry Reform Act (EPIRA).
CCCI had welcomed the ERC’s move as the group, which is the biggest business organization in the Visayas, first pointed out Visayan Electric’s perceived violation in a study conducted in December 2019.
In that study, the chamber highlighted the fact that Visayan Electric procures more than 50% of its requirements from affiliate companies under Aboitiz Power, in violation of EPIRA.
The study claimed that Visayan Electric’s contracts with its affiliated generation companies is “anti-competitive and goes against the policy on promoting efficiency of market competition.” (Ventures Cebu)