Ibaba ng P3 Movement Basis No. 2: Controlling the Transmission Wheeling Charges (No.2 item in Meralco’s bill)

Transmission wheeling charges to Meralco’s captive residential and commercial customers is php0.933 per kwh, P0.36 of which is for ancillary charges (voltage regulation and reserve capacities).

The Transmission wheeling charges of concessionaire National Grid Corp. of the Philippines in turn is determined by a Maximum Allowable Revenue, which is computed by the Energy Regulatory Commission under a Performance Based Rate Setting (PBR) methodology. It is basically determined by the value of assets NGCP supposedly owns to provide its transmission services. The more assets it has in its transmission services territory, the more money it will make.

1. NGCP as both System Operator and Transmission Services Provider

NGCP currently makes the rules and transmission development policy making and strategy for the country. It benefits from those rules from the investments and tariff revenue it is able to justify from those investments as the concessionaire.

This is clearly a conflict of interest and an anomalous situation because policy making is not something that a country sells even in privatization. The Epira law of 2001, despite its many faults, was clear under Section 9 that systems operation should be a role of the government owned Transco and Section 21 defined the role of the transmission service concessionaire and it did not include being systems operator.

The powerful people behind the privatization of the Transmission Services and award to a consortium that included the State Grid of China, the Razon Group, Coyiuto interests, and SM Group, caused the passing of a Transmission Concessionaire Law, RA 9511 which effectively superseded RA 9136, the Epira Law and its Sections 9 and 21. (The Razon Group was eventually bought out by SM and a reported mystery investor).

NGCP is observed to be making transmission and connection rules (as System Operator) that are evidently made not for systems efficiency and true promotion of competition but to protect and expand the revenue base of NGCP, the concessionaire.

Obviously, this will result to higher transmission charges to the electricity consumers. If this conflict of interest is eliminated then the countrys transmission services will be more sensible and made truly essential.
It is battling several Power Generators on the takeover of the power substation of these companies as part of its service territory. If they are successful, these expanded territorial definition will add to the rate base of NGCP resulting to higher transmission charges. Currently, these power substations and dedicated grid connection facilities are already included in the generation rates of the power generators.

2. NGCP’s charges for ancillary services

NGCP had been negotiating ancillary services supposedly to support the stability of the grid. In addition to the rate, we don’t know whether the consumers are really getting the services from these ASPA (ancillary services purchase agreements). We only know that in the system breakdown months of November and December 2013, It is still a mystery where the supposed “reserve capacities”, that NGCP has been charging for, when the consumers and system needed them?

P0.36 per kwh charge to the national electric consumers is a big amount for ancillary services.

We believe the mechanics, rules, and transactions must be made more transparent and rational with accountability. The public needs to know the charges and whether it is really getting the ancillary services.

3. PBR Rate Setting

NGCP also benefits from the PBR rate setting where it is allowed to profit not only on investments incurred but also projected investments. There is more on this issue when we tackle the Meralco distribution rates.

For more input on the transmission services issue, kindly see MSK articles on “Grid Systems Operation” in September archive, the “Locational Strategy” November 5.

We believe that this reform will eliminate at least P0.20 per kwh from NGCP’s current transmission wheeling charges. More importantly it is prevent unnecessary rate increases in transmission charges in the future.