ERC allows NGCP to recover P28.29 billion from consumers
By Sheldeen Joy Talavera, Reporter
Transmission charges are expected to increase as the Energy Regulatory Commission (ERC) authorized the National Grid Corp. of the Philippines (NGCP) to collect P28.29 billion in under-recoveries from consumers.
The ERC said in a statement that it has completed NGCP’s fourth regulatory period (4th RP) rate reset spanning 2016 to 2022 following its commission meetings.
In a decision by the majority composed of Commissioners Alexis M. Lumbatan, Floresinda G. Baldo-Digal, and Marko Romeo L. Fuentes, the ERC approved a maximum allowable revenue (MAR) of P335.78 billion for NGCP for the said period.
MAR is the maximum amount that NGCP is allowed to take in annually to recover its operational expenses.
ERC Chairperson and Chief Executive Officer Monalisa C. Dimalanta and Commissioner Catherine P. Maced dissented from the resolutions adopted by the majority.
The majority used the “As spent” approach and adopted a weighted average cost of capital (WACC) of 11.33%.
“‘As spent’ approach, in simple terms, allows NGCP’s capital expenses to form part of the asset base regardless of if the project is completed or not. The asset base or RAB (regulatory asset base) is the basis against which the WACC rate is applied,” Ms. Dimalanta said in a Viber message.
Following the decision, the majority gave its go signal to NGCP to collect under-recoveries, which will result in an increase in transmission charges by the grid operator.
“These arose because the MAR approved by the Majority is higher than what NGCP has been using for most of the years within the 4RP,” Ms. Dimalanta said, referring to the under-recoveries.
Under the seven-year recovery period set by the majority, the NGCP is allowed to collect an additional P0.1013 per kilowatt-hour (kWh) in transmission charges to be collected over the next 84 months from issuance of the decision.
The amount covers the P0.0629 per kWh average increase in the basic transmission charge and additional P0.0384 per kWh corresponding to the under-recovered portion of the increased MAR.
The ruling, as well as the dissenting opinions of Ms. Dimalanta and Ms. Maceda, will be “issued in due course,” the ERC said.
Under the Electric Power Industry Reform Act, the ERC is mandated to establish methodology for setting transmission and distribution wheeling rates. The rates must be set in a way that allows the recovery of “just and reasonable costs and a reasonable return on rate base” to enable the entity to operate viably.
The rate reset process is usually a “forward-looking” exercise that requires the regulated entity to submit forecast expenditures and proposed projects over a five-year regulatory period. The ERC assesses the actual performance of the entity and adjusts rates as needed.
According to the ERC, the company’s 4th RP is “distinct and unique because it covers a past period, thus requiring evaluation of historical data on NGCP’s expenditures and performance.”
Meanwhile, the majority also approved to make permanent the NGCP’s MAR for 2015 amounting to P43 million. It also greenlit the company’s claim for a net performance incentive scheme reward for 2014 amounting to P783.06 million.
NGCP has yet to release a statement on the matter as of press time.
