ERC sets public hearings on NGCP’s rate adjustment
By Myrna M. Velasco – January 17, 2023, 3:26 PM
from Manila Bulletin
The Energy Regulatory Commission (ERC) has scheduled series of public hearings on the tariff adjustment of transmission system operator National Grid Corporation of the Philippines (NGCP) for its fourth regulatory reset covering the periods 2016-2020.
The rate reset is a regulatory lag in the rates being reflected in the pass-on rate of NGCP. The lag created a mismatch that the ERC would want to address via a tariff adjustment process to be administered for the transmission firm.
The rate adjustment is anticipated to result in cost refund, which the ERC expects to be eventually reflected in lower consumers’ electricity bills.
The regulatory body announced that the initial phase of the public hearings will be held at its Exquadra Tower headquarters in Pasig City on January 27 this year. Topics at the hearing shall cover the “determination of compliance with jurisdictional requirements and expository presentation for Luzon stakeholders.”
For relevant industry players in the Visayas grid, the public hearing will be on January 31, while this same proceeding will be held in Mindanao on February 3.
The pre-trial conference and presentation of evidence will be carried out successively on February 10 and 14, according to a notice issued by the ERC to relevant stakeholders.
As emphasized by the ERC, it will “evaluate the actual expenditure of the regulated entity for the 4th RP (regulatory period)” – and that shall warrant comprehensive examination on the necessity and efficiency of the projects implemented; of which costs had been subsequently integrated into the regulated firm’s annual revenue requirement (ARR).
“This review will take into consideration all applicable provisions of the rules, using the actual data previously submitted and to be submitted by the regulated entity to ERC, as well as the results of the studies relevant to the reset process,” the Commission noted.
In determining the regulatory asset base (RAB) which in turn will serve as the basis in calculating tariffs to be passed on by NGCP to consumers, the building blocks that will be dissected by the ERC will include those on: capital expenditures (capex); right-of-way (ROW); operating expenditures (OPEX); working capital; and taxes.
The ERC qualified early on that since the period covered for the rate reset process already lapsed, its approach in evaluating the application of NGCP shall be based on actual numbers, instead of applying figures that had been anchored on “forecasts”, being the main precept of the purported roll forward, performance-base rate setting (PBR) methodology.
“The regulated entity has provided to the ERC such forecasts of capital expenditure and operating and maintenance expenditure, for each regulatory year occurring during that subsequent regulatory period, as the ERC requires for the purposes of the regulatory reset process,” the Commission stressed.
