ERC eyes adjusted transmission charge

By Myrna M. Velasco – October 14, 2022, 3:32 PM
from Manila Bulletin

The Energy Regulatory Commission (ERC) is eyeing that an adjusted transmission charge can already reflected in the electricity bills of consumers by next year.

This developed following the regulation process being carried out for the performance-based rate setting (PBR) of system operator National Grid Corporation of the Philippines.

“For the fourth regulatory period, we are targeting to complete the process by the end of the year so we can start 2023 with a new transmission rate,” ERC Chairperson Monalisa C. Dimalanta noted.

When asked if there is a possibility that the adjusted tariffs will result in reduction, the ERC chief hinted that a ‘downtrend in transmission rates’ would be highly likely.

She qualified though that there will be some sort of diversion on the calculation of values to be factored in into the tariff adjustment – primarily on the delayed period of the transmission firm’s rate-setting within years 2016 to 2020.

“We are proceeding on this with actual figures for 2016 to 2022 — because 2022 is almost over, so we proceed with the same paradigm for 2016 to 2022,” she said.

Typically, the methodology of calculating tariffs for regulated entities under the PBR scheme would be forward-looking approach; hence, the values are generally set based on forecasts of a five-year rolling cycle.

However, Dimalanta stated that in the case of the delayed fourth regulatory reset for the transmission charges being passed on by NGCP, it is necessary to apply the actual figures and values because the period covered already lapsed.

She opined that “the long delay in the reset has not been fair in many respects…consumers and grid users, on one hand, have become increasingly skeptical of the reasonableness of the rates that continue to be charged. Investments and new generation capacities have been stalled because, among others, of the uncertainty in funding for transmission projects.”

Parallel to that, the ERC chief indicated that they will also start with the fifth regulatory reset that will determine NGCP’s maximum allowable revenue (MAR) for 2023 to 2027 – the resulting figures of which will in turn be applied as reference in calculating the transmission charges to be reflected in the electric bills moving forward.

“Over the course of 2023, we’ll proceed with the fifth regulatory period and the rates for the fifth regulatory period will commence by the third quarter of 2023. Hopefully, the process will now be regularized, rather than there is a mismatch from historical figure,” Dimalanta emphasized.

In the reset process, the ERC further said it will thoroughly examine the other components in tariff-setting – primarily the weighted average cost of capital (WACC) and the valuation of the transmission firm’s regulatory asset base (RAB).

As laid down in the amended rules for the setting of transmission wheeling rates (RTWR), the reset process shall be able to: eliminate over-recoveries and double compensation; as well as get rid of the redundant inflationary considerations.

Additionally, the ERC conveyed that there must be: enhanced criteria for the performance incentive scheme (PIS) – including the ability of NGCP to comply with all the regulatory requirements and to ensure cyber and network security; and there must be clarity on rules on reportorial requirements and penalties for non-compliance.