ERC to entertain TRANSCO force majeure events pass through applications

The Energy Regulatory Commission said that it will entertain applications from the National Transmission Corporation (TRANSCO) for recovery from the electricity consumers of costs incurred to repair and restore power service in case of a force majeure (FM) event. This amount is referred to in the Guidelines on the Methodology for Setting Transmission Wheeling Rates as the FM Pass Through Amount. This will be in addition to the ERC-approved Maximum Allowable Revenue (MAR).

TRANSCO reported its intention of recovering the cost of repairs and restoration works on its transmission infrastructure damaged by tropical storm “Reming”. “Events such as typhoons, earthquakes and other natural calamities are ‘acts of God’ that cannot be controlled by anyone. It is not possible for TRANSCO to predict such events and incorporate the costs associated with these events in its rate proposal, hence, the ERC may allow such amounts to be recovered on top of the approved MAR,” ERC Chairman Rodolfo B. Albano, Jr. explained.

In order to get ERC’s approval for the recovery of an FM Pass Through Amount, TRANSCO must submit to the ERC an FM Event Notice within three (3) months of the relevant force majeure event that occurred, specifying the details of the said event. In addition, TRANSCO must also provide the ERC with an FM Event Claim within twelve (12) months of the relevant event detailing the: i) costs incurred for the force majeure; ii) the extent (if any) to which TRANSCO has the benefit of any insurance against the consequences of the force majeure event; iii) the FM Pass Through Amount TRANSCO proposes; and iv) the basis on which TRANSCO proposes to apply the FM Pass Through Amount to customers, including the amount TRANSCO proposes to apply to customers in each Regulatory Year.

The ERC emphasized that TRANSCO’s proposal for FM Pass Through Amount must be published in a newspaper of general circulation that will reach the end-users affected by the said FM Event Pass Through Application.

The Transmission Wheeling Rates Guidelines (TWRG) prescribes that the ERC must decide on TRANSCO’s application within ninety (90) business days, otherwise, the application is deemed approved if no Decision is rendered by the ERC after that period. However, the ERC is afforded a longer period in which to decide on TRANSCO’s application if the former convenes a public consultation for the purpose of taking submissions in response to a notice published by the ERC. In which case, the ERC must notify TRANSCO of that longer period within five (5) business days after the public consultation.

The ERC may require TRANSCO to retain an independent expert or experts pursuant to Article XIV of the aforementioned Guidelines for the purpose of preparing a written report in respect of any of the matters that the ERC is required to decide pursuant to the Force Majeure Event Pass Through application.

December 12, 2006