Consumers will still feel the deepest financial pain triggered by surging electricity rates due to simultaneous plant outages in the past two weeks, but the Department of Energy (DOE) is urging the distribution utilities (DUs) to tap palliative interest-bearing loan from the Land Bank of the Philippines so they have a way to delay or stretch the pass-on of full rate hikes in the electric bills of their customers.

Dubbed as Land Bank’s ‘anti-bill shock’ lending portfolio, information provided by the DOE showed that the loans to be extended to the DUs – including the electric cooperatives (ECs) will have interest rate of 6.5 to 7.0% fixed per annum, subject to repricing based on BVAL (Bloomberg Valuation Service) plus spread based on credit rating.

As packaged, the Land Bank anti-bill shock facility will provide “financing to distribution utilities at concessional rates, enabling them to spread out the incremental increases in their customer’s billing by up to nine months without passing the borrowing cost to consumers who cannot afford to pay at full cost.”

However, since there is a provision for non-pass on of the power utilities’ borrowing costs, the industry players are raising questions how they will absorb that component because that will entail cost of money on their part.

According to Energy Secretary Raphael Lotilla, “we are working closely with other government agencies to ease the burden of Filipino households from the expected surge of electricity costs.”

The government forthrightly admitted that it will be the consumers that will be punished with high electricity rates arising from the impact of simultaneous shutdowns of power plants in the past two weeks, which prompted the declaration of series of red and yellow alerts for Luzon and Visayas grids by the system operator.

The Energy Regulatory Commission (ERC) is also taking a very ‘soft approach’ in determining any culpability that the power generation firms might have committed, purportedly due to the deregulated state of the country’s power generation sector.

The unscheduled shutdown of power plants had been a recurring scenario during summer months since 10 years ago, but instead of getting penalized, the GenCos can even look forward to  legally-upheld cost recovery incentives for their simultaneous forced outages in 2013.

On the financing offer, Land Bank President and CEO Lynette V. Ortiz emphasized that the loan to DUs is part of their “commitment to advancing the country’s energy sector by making more accessible to power distribution companies and other players in the industry.”

She added that with the dangled credit facility, “we are poised to forge deeper collaborations within the sector, advocating for the interests of both energy providers and consumers.”

Land Bank specified that the qualified power utilities “may loan up to 80% of the incremental increase on their power generation and transmission charges, but not to exceed the repayment capacity of the distribution utilities or three times the average billings of its power suppliers.”

The Bank expounded that the borrowers “are required to implement their own ‘anti-bill shock program’ to protect their respective clients from the expected increase in electricity bills.”