LAST week, I outlined the historical background which affects our electricity costs today.
This is to apply the data from last week’s article to describe an unhappy situation which should be addressed by the relevant government instrumentality, the Energy Regulatory Commission (ERC). Unfortunately, the ERC is partly responsible for the unsatisfactory state of affairs which applies particularly to the Central Negros Electric Cooperative (Ceneco).
Ceneco serves the cities of Bacolod, Bago, Talisay, and Silay, and the towns of Murcia and Salvador Benedicto. Its costs depend substantially on bilateral contracts. In 2007, it signed, with the approval of ERC, a bilateral contract with Cebu-based Kepco-Salcon. This Korean-owned company supplies electricity generated from coal, predominantly from Indonesia.
Between 2011 and 2014, Ceneco, again with ERC approval, engaged in a flurry of activity which resulted in more bilateral contracts. The first of these contracts was also with Kepco-Salcon and was signed in 2011. My concern is that an onerous clause in the contract penalized Ceneco, and therefore its customers, in that if Ceneco purchased less than a specified amount of electricity it would have to pay Kepco-Salcon a penalty. Ceneco did fail, on occasions, to fulfil its contractual obligations. Kepco invoked the penalty clause. ERC eventually, in June 2017, upheld Kepco’s claim and Ceneco’s customers are still paying P232 million for electricity it did not receive.
Many electric cooperative purchases much of their electricity from the Wholesale Electricity Spot Market (WESM) which is significantly less expensive than the typical bilateral contracts signed by Ceneco.
This means that Ceneco consumers pay, in June 2020, P11.1923 per kWh whereas adjacent Negros Occidental Electric Cooperative (Noceco) consumers pay P8.5426 per kWh.
A consumer uses, typically, 300 kWh per month. At P11.1923 per kWh, this results in a monthly bill of P3,358 payable to Ceneco. The equivalent Noceco consumer paying P8.5426 per kWh has a monthly bill of P2,563. This is a P795 saving over his hapless Ceneco counterpart.
The price we pay per kWh is substantially dependent on past contracts, together with current WESM prices. This means that Ceneco has made demonstrably inferior decisions compared to Noceco.
Ceneco’s propensity to sign disadvantageous bilateral contracts, particularly during 2011 to 2014 may have caused internal dissension between former Ceneco president Atty. Arnel Lapore and former General Manager Sulplicio Lagarde.
Lapore, with the support of a majority of Ceneco’s Board members, fired Lagarde in c. 2014. Lagarde immediately made representations to the National Electrification Administration (NEA). Lapore claimed that Lagarde was fired due to his inability to reduce systems losses whereas Lagarde said that he was fired because he refused to sign yet another bilateral contract.
NEA sided with Lagarde who was reinstated. Board members who voted for Lagarde’s sacking reportedly had to pay, between them, P2.2 million (around P320,000 each).
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It is good that Bacolod City councillors Simplicia Distrito and Wilson Gamboa Jr are taking an active interest on behalf of Ceneco’s consumers. I hope they can make representations which ensure fairness to consumers who are victims of Ceneco’s bad decision-making./PN
