BENECO talks with energy supplier to counter increase in generation cost

BAGUIO CITY – (September 24, 2021) – Engr. Melchor Licoben informed the Baguio City Council last Monday that the Benguet Electric Cooperative, Inc. (BENECO) is working with TeaM Energy Power Corporation, the electric cooperative’s power supplier, to put into place a measure that will counter the increase of generation cost.

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 explained.

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 underscored that BENECO remains to be 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.

Licoben assured the council that the distribution, supply and metering (DSM) charges and other pass-on charges have not been adjusted since 2012.

Pass-on charges are those imposed by an electric cooperative and approved by the ERC to finance the electric cooperative’s operations, fund its capital expenditures, and pay the salaries of its employees.

Licoben likewise clarified the change in the schedule of payment collection.

During the implementation of the Enhanced Community Quarantine (ECQ), the ten-day grace period for the collection of payment was extended to 30 days for the billing period March 15, 2020 to April 15, 2020.

Pursuant to the ERC advisory, the grace period was further extended covering the billing period until April 20, 2020. The advisory allowed the consumers to pay their bills in four equal monthly installments. For the consumers who have availed of this payment scheme, the payment should have been completed in August 2020.

The ten-day grace period should have been restored in September 2020. However, it was only in August 2021 when BENECO decided to fully restore the ten-day grace period, thereby affecting the payment collection schedule for the month of August. –Jordan G. Habbiling