Visayas electric coops find GCGI’s power rate too high
Seven electric cooperatives (ECs) in Leyte, Cebu and Negros Occidental are disputing the price of electricity sold by Green Core Geothermal Inc. (GCGI).
The ECs, through the Association of Electric Cooperatives (AVEC), have filed a petition for arbitration with the Energy Regulatory Commission (ERC) to settle the disagreement.
The Power Sector Assets and Liabilities Management Corp. (PSALM) has bid out energy supply contracts to generators in compliance with the Electricity and Power Industry Reform Act. In the case of the ECs concerned, they were assigned to the Tongonan and Palimpinon plants that are owned and operated by GCGI.
However, the ECs – Leyte Electric Cooperatives IV and V, and Don Orestes Romualdez Electric Coop in Leyte; Negros Occidental Electric Coop and VMC Rural Electric Coop in Negros; as well as Cebu II Electric Coop – refuse to sign a power supply agreement with GCGI due to pricing issues.
GCGI sells its electricity at P4.7859 per kWh, claiming it is the lowest rate among all other generators in the Visayas like Panay Energy Development Corp. which sells at P8; Cebu Energy Development Corp., P6; and Kepco-SPC Power Corp., P5.50. But AVEC said it believes GCGI’s offer is still overpriced.
In its petition to ERC, Avec disputes GCGI’s computation in arriving at its offered price based on the following price components: steam cost, plant capacity/capability and cost, annual generated energy, purchase orders (PO), plant refurbishment, weighted average cost of capital (WACC), and operating life.
AVEC’s biggest argument is steam price. GCGI buys steam from Energy Development Corp. (EDC) at P2.8328 per kWh which Avec sees as too expensive. In contrast, the current steam price for other Leyte geothermal plants ranges from P1.7 to 1.9 per kWh.
AVEC also cites the Geothermal Resource Sales Contract of Palinpinon I and II facilities between PSALM and Philippine National Oil Co.-EDC covering the period Aug. 10, 2006 to Oct. 31, 2031 which pegged the base price of steam at P1.50 per kWh. It believes GCGI can haggle a lower price of steam with EDC being a sister company.
On plant capacity/capability and cost, Avec avers that while the Tongonan and Palinpinon plants have a combined capacity of 305MW, their current dependable capacity is only 210MW. “It appears that GCGI…over-computed the plant cost to be recovered at P10,080,790,425 since it factored in the 95MW unused capacity,” the petition reads.
As such, the relevant base for the calculation of the Capital Recovery Fee (CRF) is at 210MW and its pro-rated cost should be P6,940,872,096 based on the fundamental rule of rate-making that consumers are not made to pay for costs that are not useful to the delivery of the service, which is 95MW in the instant case, the petition continues.
On plant refurbishment, GCGI placed the cost at P2,565,200,000 to increase the plants’ capacity by 50MW and prolong their life from 10 to 22 years. But Avec insists the inclusion of the refurbishment cost in the CRF is premature considering the expected capacity increase is not yet in place.
During negotiations with the ECs, GCGI presented POs amounting to P321,828,462 under operating and maintenance as well as general and administrative expenses. Avec agrees GCGI can recover the amount but this should have been included in the cost of refurbishment. It also wants the amount deducted from the CRF to avoid double counting.
AVEC further disagrees with GCGI’s computation of its 18-percent WACC based on market risk from a prospective increase in the grid’s generation capacity. Avec wonders how come other plants that face a higher risk than GCGI due to their reliance on imported fuel peg their WACC at only 14 percent in determining their CRF.
Still another issue not related to pricing but important nonetheless is the alleged non-assurance by GCGI of energy supply during the annual 60-day preventive maintenance shutdown of its plants. The ECs will agree to buy electricity from GCGI for only P3 per kWh. The ERC has set a pre-trial conference and evidentiary hearing on the petition on December 1.*PNA
