ERC to consult public on preliminary WACC calculation
The Energy
Regulatory Commission (ERC) will submit the preliminary calculation of the regulatory
Weighted Average Cost of Capital (WACC) for the distribution utilities (DUs)
to a public consultation on July 10, 2006 at the ERC Hearing Room located at
the 15th Floor of the the Pacific Center Building, San Miguel Avenue, Ortigas
Business District, Pasig City. The WACC will apply during the second regulatory
period.
The regulatory WACC is an important input in setting a revenue cap that will
allow a reasonable return on the DU’s capital.
The preliminary calculation of the regulatory WACC is designed: 1) to assist
the DUs in understanding the WACC methodology to be used by the ERC as part
of its Draft and Final Determinations on the price-caps that will apply to the
DUs under the Performance Based Regulation (PBR); and 2) to give the DUs an
indicative figure which they can use for purposes of their rate applications
under the PBR due on August 31, 2006.
“This preliminary figure will not be used in any statutory or rate-setting
decision,” ERC Chairman Rodolfo B. Albano Jr. stressed.
Following its final determination of the regulatory WACC for the National Transmission
Corporation (TransCo), the ERC adopted a similar approach in setting the WACC
for the DUs. Modifications were made, where appropriate, to reflect different
asset beta figures and the requirements of the Distribution Wheeling Rates Guidelines
(DWRG).
“The ERC urges stakeholders to actively participate in the public consultation
to help the ERC determine a just and reasonable rate,” Chairman Albano
said.
July 7, 2006