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.