By Danessa Rivera (The
Philippine Star) | Updated April 22, 2016 - 12:00am
MANILA, Philippines - The Energy
Regulatory Commission (ERC) is seeking inputs from industry players for new
rules that determine the distribution and transmission rates charged to
customers.
The ERC posted on its website the
draft “Rules for Setting Distribution Wheeling Rates for Privately Owned
Distribution Utilities Operating under Performance Based Regulation, First
Entry Group: Fourth Regulatory Period.”
The ERC said the draft rules aim to
iron out regulatory issues in the Performance Based Regulation (PBR) relating
to distribution utilities (DU), specifically in the calculation of the weighted
average cost of capital (WACC) and an appropriate asset valuation methodology.
The PBR is the rate-setting
methodology employed by the ERC in determining the distribution and
transmission rates.
WACC is a measure of power
utilities’ cost of capital. It is the return a firm must earn on existing
assets to keep its stock price constant and satisfy its creditors and owners.
ERC spokesperson Floresinda Digal
said “the proposed changes are aimed at making the PBR less complicated and
more responsive to the evolving electricity industry.”
She said the change in the
parameters to be used in calculating the WACC will lead to prices that are more
reflective of the economic environment.
“The major changes concern how ERC
will value the DU’s assets and the corresponding return that DUs are entitled
through the calculation of its weighted average cost of capital, both of which
will have a major impact on the rates that will be passed on to the consumers,”
Digal said.
ERC gave the industry stakeholders
until May 13 to submit their respective comments on the draft rules.
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