ALL-WEATHER JOB Linemen
of the Benguet Electric Cooperative (Beneco) work through heavy rain to repair
a power line and restore the supply of electricity in a section of Baguio City.
Local officials invited the Beneco general manager to the city council session
this week to explain the increase in power rates. —Neil Clark Ongchangco
The power utility serving Baguio and Benguet is renegotiating its supply contract after spiraling coal prices led to a sharp increase in electric bills in August, Beneco general manager Melchor Licoben said during the Baguio City council session.
The Beneco buys electricity from independent power producer Team Energy, which raised the cost of power generation this year when world coal prices hovered between $149 (P7,470) and $173 (P8,6730) per metric ton, he added.
Before the pandemic struck, coal prices averaged $66 (P3,308) per MT, he said. But prices dropped lower than $66 when economies closed at the start of the global Covid-19 outbreak and recently shot up as world economies rebound from the 2020 recession, Licoben said.
Around 60 percent of fees paid by consumers are “pass-thru” generation charges, referring to the cost of producing electricity that is shouldered by consumers.
Citing fluctuating coal prices, Licoben said Beneco expected steep generation costs to last until the first quarter of 2022, which was why it began to seek new terms with the supplier.
Team Energy’s contract with Beneco will expire in 2024.
The council invited Licoben to the session to explain why Baguio consumers paid P9.4 per kilowatt hour, or a P940 fee for consuming 100 kWh, in current bills.
They were reportedly charged P8.6 per kWh in July and P8.5 per kWh in June, due to an average of 22 centavos monthly increase starting in February.
Generation cost refers to the component of the electric bill that is used to pay TeaM Energy for the purchase of power.
In the past months, consumers have seen a spike in their electricity bills due to the increase in the generation charge.
This, according to Licoben, was the effect of the price increase of coal in the global market due to the high demand for electricity.
“As the economy gradually reopens, the prices of coal continue to increase. This tremendously affects the computation of generation cost which is very much felt by the consumers, especially so that the generation charge makes up around 50 to 60 percent of the electric bill,” Licoben said.
According to a report by the International Energy Agency, global electricity demand which is closely linked to coal is set to grow by close to 5% in 2021 and 4% in 2022.
Licoben said one measure to mitigate the effects of the upward trend in coal prices to the consumers is to set a fixed generation charge.
Beneco and TeaM Energy have yet to agree on a fixed generation charge that is acceptable to both parties, he added.
Earlier, the city council sent an invitation addressed to the general manager of Beneco to shed light on the surge of power rates experienced by the consumers in the past months in aid of legislation.
Licoben, whom the Beneco Board of Directors appointed as General Manager, appeared before the local legislative body during its regular session to explain the current power rate adjustments.
The bilateral contract between Beneco and TeaM Energy requires consumers to pay a generation charge of P3.85/kWh from January to June and P3.80/kWh from July to December for as long as the price of coal is within the bandwidth ranging from 66 USD per metric ton (MT) to 125 USD per MT.
However, the price of coal reached 173.48 USD/MT in August 2021, pushing the generation charge up to P5.00/kWh.
This month, the price of coal hit a record high of 179 USD/MT, forcing consumers to pay a soaring P5.25/kWh generation charge.
The breach in the bandwidth has rendered the computation of the generation charge volatile, the general manager stressed.
Alarmed by the uptrend in coal prices, the council members expressed their support to Beneco in its move to negotiate with TeaM Energy for the setting of a fixed generation charge.
Licoben said that apart from generation cost, the transmission charges for the month of August have also been increased by P0.1138/kWh due to the increase in the ancillary service charges that are remitted to the National Grid Corporation of the Philippines (NGCP).
Another factor contributing to the power rate hike is the implementation of the Incremental Currency Exchange Rate Adjustment (ICERA) which covers adjustments relating to Foreign Exchange and the Generation charge Adjustment Mechanism (GRAM) which covers adjustments for fuel costs. ICERA and GRAM are now added as items in the billing pursuant to the mandate of the Energy Regulatory Commission (ERC).
Based on Licoben’s report that was submitted to the council, these additional charges affect only the consumers during the test period from July 2009 to April 2010 for the 15th to 16th ICERA and consumers during the test period from January 2007 to April 2010 for the 10th to 17th GRAM.
Despite the power rate adjustments, Licoben said Beneco remains one of the electric cooperatives in the country with the lowest power rates.
Hence, it was bestowed the prestigious Ace of Tariff Award for its commitment to provide the cheapest electricity on-grid rate to its consumers. – With a report from Jordan G. Habbiling
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