ERC allows slight hike in Cepalco power rate

The Energy Regulatory Commission (ERC), the country’s power sector watchdog, has allowed Cagayan Electric Power and Light Co. Inc. (Cepalco) to slightly increase its basic distribution rate starting 2008.

Cepalco applied for the performance-based rate (PBR) rate setting scheme, an internationally-accepted rate setting methodology which allows distribution utilities to adjust their rates based on their performance.

A similar PBR application was earlier approved by the ERC for Manila Electric Co. (Meralco), the country’s largest privately-owned power distribution firm.

Cepalco operates electricity distribution services in the city of Cagayan de Oro and the municipalities of Tagoloan, Villanueva, Jasaan, all in the province of Misamis Oriental in Mindanao under an exclusive franchise awarded in 1961. The legislative franchise has been extended for another 25 years starting in 2011.

Cepalco is the fourth largest private distribution company in the Philippines. A closely held company, where the Abaya family is the founding and the major shareholder, the other top shareholders are Fullmax Philippine Development, Abaya Investments Corp., and Breavel Inc.

Based on the ERC’s approved rate, Cepalco can adjust its distribution rate six to seven centavos higher for 2008 to P1.163 per kilowatt hour (kwh).

By 2009, the distribution charge, on the other hand, will go down to P1.151 per kwh.

For 2010 and 2011, the rates are expected to go up modestly to P1.220 per kwh and P1.294 per kwh, respectively.

According to the ERC ruling, a so-called additional correction factor of P0.077 per kwh will be added to Cepalco’s opening maximum annual price (MAP) for year 2008.

The approved annual revenue requirement for Cepalco in 2008 is set at P794.9 million; P833.4 million for 2009; P851.5 million for 2010 and P900.1 million for 2011.