ERC to hear power distributors on revising regulation rules

MANILA, Philippines – The Energy Regulatory Commission (ERC) will conduct a public hearing at 2 pm on Tuesday, January 14, on the implementation of performance-based regulation (PBR) among power distribution utilities (DUs).

The PBR, an internationally-accepted methodology for setting electricity rates, uses incentives to make distributors cut costs and make services more efficient, all leading to cheapter electricity for the consumers.

“The public conference provides an avenue to the affected DUs and its consumers to articulate their comments and concerns prior to the ERC’s finalization of its Position Paper and Amended RDWR (Rules for Setting Distribution Wheeling Rates),” said the ERC.

“Inputs from the electric power industry stakeholders will ensure a robust rate-setting methodology that is both cost and operationally efficient,” ERC Chairperson Zenaida Cruz-Ducut said.

“The review of the PBR implementation is aimed at making the rate-setting mechanism simpler, less complicated, and more responsive to the evolving electric power industry,”  she said.

The regulator has identified provisions in the RDWR that need revisions:

• over or under recovery formula
• primary building blocks
• working capital proportion
• asset valuation
• weighted average cost of capital (WACC) determination
• reasonable bad debt levels
• parameters in setting the initial price and efficiency factors
• side constraints
• addressing the impact of the recovery of regulatory intervention
• annual verification and adjustment of distribution tariffs
• engagement of experts and consultants

Under the Electric Power Industry Reform Act (EPIRA), retail rates charged by DUs for the supply of electricity in their captive market are subject to regulation by the ERC.

The EPIRA also authorizes the regulator to establish and enforce a methodology for setting transmission and distribution wheeling rates and retail rates for the DU, taking into  consideration efficiency or inefficiency of the regulated entities. 

The act also allows the ERC to implement alternative forms of rate setting methodology as it sees appropriate. – Rappler.com