The Energy Regulatory Commission (ERC) has flagged Central Negros Electric Cooperative Inc. (CENECO) on pass-on of charges to its customers even if these were anchored on contracts or power supply agreements (PSAs) that already lapsed.
In particular, the ERC has condemned the act of CENECO for reflecting in its billing the generation charges which had been based on two PSAs that already expired as of May 30 this year.
As emphasized by ERC Chairperson Agnes T. Devanadera, “upon evaluation of the submissions of CENECO for the month of July 2021, the Commission found that CENECO included in its generation rates billed to its customers for the billing period May 26 to June 2021 onwards, charges emanating from PSAs or contracts that are already expired.”
The ERC chief explained that “under our existing policy, generation costs from ineligible or unapproved supply contracts should be pegged at the NPC’s (National Power Corp.) time-of-use rates or the actual rate as billed by the generation company, whichever is lower.”
Given CENECO’s unwarranted pass-on of charges from expired power supply deals then, the regulatory body rendered that the Negros power utility had violated Section 2 Article 2 of ERC Resolution No. 16 series of 2019, which prescribes the rules on “automatic cost adjustment and true-up mechanisms and corresponding confirmation process for distribution utilities.”
The generation charge, accounts for the bulk percentage of pass-on cost in the electric bills, and this is usually the charges of power generation companies supplying electricity to the servicing distribution utilities (DUs) or electric cooperatives.
The supply of power capacity to a DU is bound by a PSA or contract, and the pass-on of costs or charges to consumers must only be done upon ERC’s approval of the contract.
The ERC added that “CENECO’s inclusion of the ineligible costs due to the expiration of the relevant PSAs also breached Article VI of the guidelines for the recovery of cost for the generation component of the distribution utilities’ rates.”
The regulatory body qualified though that there were already "expressed consent" by the relevant generation companies (GenCos) to extend their PSAs with CENECO, but as it is, the supply contracts were still not approved, therefore, the apprehended pass-on of the generation charges were still tagged as violation of the Negros power utility.
“The term or duration of power supply contracts may not be renewed or extended by mere agreement between the seller and buyer. After the expiration of the period, the contract ceases to be binding between the parties,” the ERC decreed.
For prudence and in the interest of safeguarding consumer welfare, Devanadera thus urged CENECO and similarly situated power utilities “to strictly abide by our rules to avoid unauthorized collection of electricity charges and consequently, any sanctions by the Commission due to the expiration of relevant contracts.”
She indicated “the ERC will always adhere to its mandate of protecting and promoting consumer’s interests by continuously monitoring the propriety of charges billed by the distribution utilities.”