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Veco seeks power rate hike in Cebu


May 16, 2009, 8:40pm [ manilabulletin online ]

CEBU CITY – Cebu-based power distribution utility firm, Visayan Electric Company (Veco) announced Friday its application with the Energy Regulatory Commission (ERC) seeking for a 41-percent increase of its current distribution rate in Cebu.

Veco is eyeing 35 centavos per kilowatt hour (kwh) increase in distribution rate from the current 85 centavos per kwh to R1.20 per kwh.

“The company is applying for an update of its existing rates primarily to reflect the true cost of service and the changes in customer mix,” said

Veco vice president for administration and customer services Sebastian Lacson.

The request for realignment and adjustment of Veco distribution rate was filed with the ERC last April 15.

Veco’s last rate application with the ERC was in December, 2001 using the cost figures in 2000 as the base year but the petition was approved and implemented towards the end of 2004. Back in 2000, Veco’s asset rate base was at R2.56 billion.

Asset rate base refers to the appraised value of the assets a distribution utility employs in delivering its services to customers. But according to the provisions of the ERC, the inclusion of assets into the rate base is subject to regulatory review in order to ensure that these are necessary and fairly valued.

Lacson said that in Veco’s application this year, the company’s asset rate base has increased to R6.41 billion, which is why he believes Veco should merit the 41 percent hike in distribution rate.

“Veco deserves the increase. The company spends an average of R500,000 year-on-year to maintain the business but the operating cost goes up with time,”

Lacson explained, adding that the company’s return on rate base (RORB) in 2008 registered only 2.3 percent instead of the 12 percent it could have maximized under the law.

Of the 35 centavos per kWh that Veco is petitioning as rate adjustment, only 18 centavos of this is for the RORB. The other 17 centavos will cover for the increases in operations and maintenance cost brought about by the increase in prices since 2000, among others.

Lacson cited major improvements by the distribution utility firm 2004 that includes faster response to emergency calls; reduction in planned interruption frequency and duration from 119 in 2004 down to only 9 last year; unplanned interruptions decreased to 215 in 2008 from 1,066 four years back; increase in transformation capacity; unification of primary voltage; and reduction in systems loss last February to only 9.5 percent.


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