ERC to restore ‘balance’ in transmission regulation with rates reset

Filipino consumers may feel the impact of lower transmission rates as early as January next year as the Energy Regulatory Commission (ERC) kicked off the reset process for these rates.

The Amended Rules for Setting Transmission Wheeling Rates recently issued by the regulatory agency aimed at restoring balance in transmission regulation.

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

The latest policy outlines the rules for this rate process for the fifth regulatory period, covering the years 2023 to 2027 and the succeeding regulatory periods. It also involves the review of the fourth regulatory period from 2016 and 2022.

“We are trying very, very hard to complete this within the year so that the rate impact will be felt by January 2023,” said ERC Chair Monalisa Dimalanta in a virtual briefing, adding the new rates for the 2023-2027 period would be issued by the third quarter of next year.

“NGCP (National Grid Corp. of the Philippines) has been furnished a copy and we are proceeding on a very tight timeline so that we can make sure that we proceed with the reset,” said Dimalanta in a press briefing.

The last time that the ERC carried out the transmission reset process was for the period 2010 to 2015.

“Hopefully, the process will now be regularized rather than [having] a mismatch on historical forecast because the regulatory period is supposed to contain forecast periods,” she added.

Dimalanta explained the ERC was exploring the best option for consumers, whether to lower transmission rates or give refunds.

The ERC chair, however, did not categorically say whether this exercise would eventually translate to lower rates as the figures used by the NGCP would need to be evaluated.

She earlier said, “in the interest of fairness in the review process for the fourth regulatory period, all determinations shall be based on actual expenditures and actual performance by NGCP during the said period.”

It will also take into consideration experts’ studies on the components of the reset, including the weighted average cost of capital and valuation of regulatory asset base.

The revised rules include:
– elimination of over-recoveries and double compensations
– elimination of redundant inflationary considerations
– enhancement of criteria for the performance incentive scheme, including the NGCP’s ability to comply with all the regulatory requirements and to ensure cyber and network security
– clarification of rules on reportorial requirements and penalties for noncompliance.

Republic Act No. 9136, or the Electric Power Industry Reform Act of 2001, mandates the ERC to establish and enforce a methodology for setting transmission and distribution wheeling rates and retail rates for customers of distribution utilities.