ERC readies CAPEX Guidelines for DUs
The Energy Regulatory Commission (ERC) is set to finalize the Guidelines to govern the submission, evaluation, and approval of electric distribution capital projects after a series of consultations were conducted and comments from the industry participants were considered. The Guidelines will provide Distribution Utilities (DUs) who have not yet applied for Performance-Based Regulation (PBR) with a uniform system for filing applications for the approval of capital projects. However, capital projects which have already been included in the DUs’ approved rate base are not anymore covered by said Guidelines.
“This Guidelines aims to ensure orderly procedures in the approval of DUs’ capital projects in line with the Philippine Grid and Distribution Codes,” ERC Chairman Rodolfo B. Albano, Jr. stressed.
Under the said Guidelines, any plan for expansion or improvement of distribution facilities is subject to the review and approval of the ERC. This is to ensure that all capital projects are being optimized and that procurement of equipment, assets, and services go through transparent bidding and purchasing processes to protect public interest.
The Guidelines classified capital projects into major, minor, and emergency.
Major capital projects are electric or non-electric projects with costs
that are substantial in terms of the nature and scope of work. In this
connection, splitting of major projects, by way of division, separation
or partition of one project into several phases, or stages in order
to classify it as minor project, is prohibited under the Guidelines
unless there is a prior authority from the ERC. Connection assets covered
by the Distribution Services and Open Access Rules (DSOAR) are excluded
from this classification.
For every approved major capital project, the ERC requires DUs to report
their actual project costs after completion. Any substantial change
from the original design or project cost beyond the allowable percentage
cumulative variation order on top of the allocated contingency, has
to be approved by the ERC prior to its implementation.
Major projects that are in progress or completed and have not yet been
included in the rate base and have not been covered by any application
must be submitted to the ERC for approval within three (3) months from
the date of effectivity of said Guidelines.
Minor capital projects are procedurally less burdensome because no formal
application for approval is required. The DUs should only notify the
ERC in advance before the start of project implementation. However,
these projects are subject to verification by the ERC in order to determine
significant discrepancies or deviations from the submitted documents.
Emergency capital projects are deemed provisionally approved by the ERC upon their implementation owing to the urgency in maintaining a continuous supply of electricity during calamities. In case of emergency capital projects classified as major projects, a formal application is necessary within sixty (60) days after the start of construction.
This Guidelines applies to Electric Cooperatives, Privately-owned DUs, Local Government Unit owned-and-operated distribution systems, entities duly authorized to operate within the Economic Zones, and Qualified Third Parties operating in waived areas of a franchised DU.
“The
ERC safeguards the interests of the paying consumers while encouraging
the DUs to optimize their resources in a transparent manner for an efficient
and reliable distribution of electricity,” Chairman Albano emphasized.
February 20, 2006