ERC rejects NGCP’s plea to defer rate reset

Consumers will continue to pay the existing rates for electricity transmission after the Energy Regulatory Commission (ERC) denied National Grid Corporation of the Philippines’ (NGCP) petition to delay the periodic reassessment of the latter’s performance, expenses and cost of capital as part of the so-called “rate reset” process.

In a statement, the ERC said it rejected the omnibus motion filed by NGCP, which operates the country’s transmission backbone, seeking the deferral of the rate setting process until further public consultations have been conducted.

Under the rate reset process, the ERC evaluates the actual expenditures and performance of NGCP for a specific period. It will also consider experts’ studies on the components of the reset, including the weighted average cost of capital and valuation of regulatory asset base.

NGCP also wants to clarify certain provisions of the Amended Rules for Setting Transmission Wheeling Rates (Amended RTWR) issued by the regulator in a bid to restore balance in transmission regulation.

In rejecting the motion, the ERC pointed out the rate setting exercise commenced in 2014 upon NGCP’s initiative with corresponding public consultations that resumed in 2018.

According to the regulator, NGCP actively participated in the process.

“The evaluation of NGCP’s actual expenditure for the fourth regulatory period, therefore, as provided in Article IV, is necessary and an integral part of the rolled-forward approach as extensively discussed in the draft resolution on the issues paper,” it said.

“Simply put, there is nothing to roll forward from one regulatory period into the next regulatory period if no such evaluation of actual expenditures were to be undertaken for the fourth regulatory period,” it added.

NGCP confirmed receiving the ERC’s order.

“Offhand, there seems to be a few points of disagreement which will have a substantive impact on proceedings. We are still exploring our options,” NGCP spokesperson Cynthia Alabanza said. “We are optimistic that the ERC will be fair in its treatment of all energy industry players.”

The ERC has given NGCP a nonextendable period of 15 calendar days from the receipt of the order to file its reset application for the fourth regulatory period.

It also said NGCP is “not precluded from preparing and filing its application before the commission on the basis of its understanding” of the revised rules and such application “shall then be subjected to another round of ventilation and due process once the commission holds public hearings thereon.”

The transmission wheeling rate—among the line items seen in the monthly bills of electricity end-users—represents the amount paid for the use of transmission facilities necessary for the delivery of electricity to households, industries and commercial establishments.

In September this year, the agency promulgated the amended rules on setting transmission rates which triggers the reset process of NGCP. This covers the fifth regulatory period for years 2023 to 2027 and the succeeding regulatory periods and the review of the fourth regulatory period from 2016 to 2022.

It determines the rate that the transmission concessionaire, in this case, NGCP, is allowed to levy to electricity end-users.

The last time the ERC undertook this procedure was for the regulatory period covering the years 2011 to 2015. NGCP was directed to lodge its application no later than Oct. 28.

However, a day before the deadline or on Oct. 27, NGCP filed the omnibus motion which claims that the provisions of the Amended RTWR for the fourth regulatory period were included in haste and without public consultation, thus, violating due process requirements.

Yet, throughout consultations with stakeholders, the ERC made it clear the fourth regulatory period would be treated differently as the costs to be applied for are based on actual expenditures and not on forecasts.

ERC chair Monalisa Dimalanta previously said it was scrambling to complete the reset process within this year so that the rate impact would be felt by January 2023.

—Jordeene B. Lagare

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