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More questions for Devanadera

Those privy to NGCP’s operations are asking ERC that considering there is still no regulatory reset, what is the current status of NGCP’s performance indices and if they are still relevant.

John Henry Dodson

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Energy Regulatory Commission (ERC) chairperson and CEO Agnes VST Devanadera has blamed budgetary and staffing limitations that purportedly forced her office to hold “in abeyance” an audit of the National Grid Corporation of the Philippines (NGCP).

Reacting by way of a letter to Daily Tribune’s 16 and 18 June stories entitled “ERC colludes with NGCP” and “Osmeña: Probe ERC, grid graft,” respectively, Devanadera defended herself and ERC from accusations of falling into a “regulatory capture” by NGCP.

A Tribune source, however, claimed Devanadera has “opened a Pandora’s box of questions” relating to ERC’s “seeming unwillingness to address the complaints against NGCP”.

On Devanadera citing obstacles to ERC in the implementation of the regulatory reset of NGCP due to “internal supervening events” and “budgetary concerns,” the source who is privy to NGCP’s and ERC’s operations, took note of the following:

• That in May 2003, ERC approved and adopted the transmission wheeling rates guidelines, which prescribes the Performance Based Regulation (PBR) as its new methodology for the transmission sector;

• That in March 2006, ERC issued the final determination of TransCo’s Maximum Allowable Revenue (MAR) at P30.672 billion; while Transco and PSALM filed the regulatory reset application (for the second regulatory period 2006-2010) in Sept 2005;

• That in December 2009, the application for the third regulatory period was filed with ERC, and in Dec 2010, the final determination of the MAR was issued by ERC; and

• The ERC, the source said, has made the rate-setting process complex and expensive so they can point to the lack of funds for expensive consultants as an excuse to sit on the regulatory reset aimed at reducing rates because the WACC can only go down from 15 percent to less than 8 percent because the country and market risks have gone down from above 10 percent to a low level below 5 percent.

This narration should show that budgetary constraints have not prevented the ERC from performing its duties during the aforementioned regulatory periods, the source said.

He added that, from 2003 to 2010, the ERC has approved a new methodology and two regulatory resets, raising questions from energy players and consumers, alike such as:

1) Why has the NGCP already missed two regulatory resets — 2016 to 2020 and 2021-2025?

2) What is the difference between the application process of TransCo (National Transmission Corporation) and PSALM that enabled them to successfully go through the process and secured ERC approval?

3) What separates NGCP’s regulatory reset application from TransCo and PSALM?
Devanadera also highlighted in her letter ERC’s alleged track record of protecting the consuming public and for penalizing erring electric power stakeholders.

Still, those privy to NGCP’s operations are asking ERC that considering there is still no regulatory reset, “what is the current status of NGCP’s performance indices and if they are still relevant”?

“Has NGCP been penalized and how effectively can they be penalized without updated performance indices?” another Daily Tribune source asked.

Devanadera trumpeting ERC’s grant to NGCP interim relief that allegedly reduced transmission charges from P0.5144/kwh to P0.4701/kWh also elicited a barrage of questions.

“What’s important to note is that what was approved was the Interim MAR (IMAR), meaning it is the annual revenue requirement that is approved by the ERC.”

“So, what was actually approved by ERC? The ERC approved an IMAR for NGCP of P47 billion for 2020.

This is an increase from the P43 billion annual revenue from 2016 to 2019. The increase in IMAR was despite the Covid-19 situation in the country,” the source pointed out.

Likewise, the source emphasized that the reduction in transmission charges which Devanadera cited was irrelevant because “the rates would have been lower if the IMAR was maintained at P43 billion in the first place”.

“The rates (peso/kilowatt hour) decreased because of the increase in demand; and the actual billing of NGCP is P/kW-month and not P/kWh.”

“Lastly, on the various transmission projects of NGCP, we will be glad to hear what has been NGCP’s response to the ERC directives. Was NGCP penalized for the delay?” the source asked Devanadera.

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