ERC issues Draft Determination for TransCo’s wheeling rates

The Energy Regulatory Commission (ERC) recently released its Draft Determination on the National Transmission Corporation’s (TransCo’s) application for a revenue reset for the second regulatory period. The said draft determination embodies the ERC’s initial position on the price control arrangements that will apply to the customers during the second regulatory period.

The Draft Determination also describes the ERC’s initial evaluation of TransCo’s application for its revenue reset that is based on its merits, as well as on the evidence presented in support thereof during the public hearings held prior to this issuance. “The Draft Determination is not a final determination or resolution of the application. It was released to afford other stakeholders an opportunity to comment on the ERC’s views before a final determination is made. As such, the said Draft Determination will have no effect on the rates charged by TransCo to its customers,” ERC Chairman Rodolfo B. Albano, Jr. emphasized.

The Final Determination will be issued by the ERC after the termination of the presentation of documentary evidence and testimonies by all parties during the public hearings and only after the ERC has conducted a complete evaluation thereof.

“The ERC assures all stakeholders that it is fairly and equitably handling TransCo’s application. The ERC will always remain in the middle, balancing the interests of all stakeholders during the course of evaluation to determine the true cost of service provided by TransCo,” the chief regulator said.

It will be recalled that on September 22, 2005, the ERC received the application of TransCo and the Power Sector Assets and Liabilities Management Corporation (PSALM) for revenue reset for TransCo and any of its future concessionaire on the second regulatory period covering the years 2006 to 2010. The rate application of TransCo and PSALM is based on the Transmission Wheeling Rates Guidelines (TWRG), a performance-based rate-setting (PBR) methodology promulgated by the ERC.

The TWRG sets the tone for predictability and stability of ERC’s regulatory policies. The paradigm shift in rate making is well-timed as the government is now focusing on the privatization of the transmission sector. A stable regulatory environment will encourage more investments into this sector and accelerate the modernization of the transmission and distribution sectors.

The said application seeks, among others, the approval of TransCo’s proposed Revenue Asset Base (RAB), Capital Expenditure (CAPEX), Operating Expenditures (OPEX), and Weighted Average Cost of Capital (WACC). The regulatory reset will pave the way to revised rates that TransCo will be authorized to charge its customers.

The ERC has set public consultations on the Draft Determination on the following dates and venues:

1. January 30 & 31, 2006 (9:30 A.M. – 12:00 P.M. & 2:00 P.M. – 5:00 P.M.)
Department of Trade and Industry (DTI) Conference Room, 2nd Floor, Mintrade Bldg., Monteverde Ave. cor Sales St., Davao City;

2. February 6 & 7, 2006 (9:30 A.M. – 12:00 P.M. & 2:00 P.M. – 5:00 P.M.)
ERC Visayas Field Office, Ground Floor, Machay Building. Gorordo Ave., Cebu City; and

3. February 9 & 10, 2006 (9:30 A.M. – 12:00 P.M. & 2:00 P.M. – 5:00 P.M.)
ERC Hearing Room, 15th Floor, Pacific Center Bldg., San Miguel Avenue, Ortigas Center, Pasig City.

The ERC has given interested parties until January 20, 2006 to comment on the Draft Determination.

February 8, 2006

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