Published
By Myrna M. Velasco
The Energy Regulatory
Commission (ERC) is extending until this week the submission of comments by
affected stakeholders on the proposed modification in the setting of
electricity rates of regulated power utilities like the Manila Electric Company
(Meralco) and other distribution utilities.
In a notice issued by
the regulatory body, it stated that all interested parties nationwide are given
until today, July 15, to submit their respective comments on the rule-making
process in determining the distribution wheeling rates under the precept of
performance-based rate-setting (PBR) methodology being employed in the
restructured electricity sector.
Through the PBR, the ERC will determine the annual revenue requirement (ARR) of
a power utility like Meralco, then that will be the basis of calculation of the
distribution charges that will be reflected in the electric bills of consumers.
There is already delay
in the reset process of many regulated DUs, including Meralco, hence the plea
to ERC is to fast-track their process of instituting the new or modified PBR
scheme or formula so they can prudently assess impact on their revenue stream
and to prevent cost mismatch also on the pass-on of tariffs to consumers.
As culled from the
“issues paper” released by the ERC, the regulatory period will still be over
four-year rolling period with annual adjustment on the ARR of the DUs; hence,
that will also entail changes or movements in the charges they will pass on to
ratepayers.
The ERC stated that the ARR “must be based on a forward-looking analysis of
forecast cash flow requirements and must represent the optimal forecast revenue
requirement,” of the regulated utility within the covered regulatory years.
The Commission further
noted that the ARR “must reasonably compensate the regulated entity for the
economically efficient costs and risks it incurs in providing regulated
distribution services.”
The primary building
blocks in the calculation of the regulated tariffs of power utilities include
operating and maintenance expenditures; taxes other than corporate income tax;
regulatory depreciation; return on capital; and corporate income tax.
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