ERC sets revenue cap for TransCo

The Energy Regulatory Commission (ERC) has set at P30.672 billion the maximum annual revenue (MAR) cap of the National Transmission Corp. (TransCo).

In an order signed last March 3, ERC directed TransCo to implement the change of rates in its immediately succeeding billing cycle. 

The approved MAR is slightly lower than the P30.673 billion applied for by the transmission firm last Nov.5.

ERC said this is the initial revenue cap to be implemented for the first part of 2006. It will be good up to the time the ERC makes its final decision on the regulatory reset for TransCo for the second regulatory period which should occur by April 30 this year. 

"The updated rate adjustment shall occur between the period from May 1, 2006 to July 31, 2006," ERC said. 

Pursuant to Sec. 43 of Republic Act 9136 otherwise known as the Electric Power Industry Reform Act (EPIRA), the ERC adopted the Transmission Wheeling Rates Guidelines (TWRG) on May 29, 2003. 

The TWRG prescribes a new methodology for setting the transmission wheeling rates of TransCo under the MAR cap.

Article VI of the TWRG requires TransCo to file for the commission’s approval on annual verification of its charges to its customers. The TWRG prescribes the formula for determining the maximum transmission revenue that TransCo may apply for the provision of regulated transmission services during a certain regulatory period.

The energy secretary said the final determination of the revenue cap will be made by ERC next month after the holding of public consultations in the preceding months. 

The approval of the MAR, energy officials said, signals the start of talks for TransCo’s privatization.

In Sept. 22, 2005, the ERC received the application of TransCo and the Power Sector Assets and Liabilities Management Corp. (PSALM) for revenue reset for TransCo and any of its future concessionaire on the second regulatory period covering the years 2006 to 2010. 

The rate application of TransCo and PSALM is based on the Transmission Wheeling Rates Guidelines (TWRG), a performance-based rate-setting (PBR) methodology promulgated by the ERC. 

The TWRG sets the tone for predictability and stability of ERC’s regulatory policies.  The paradigm shift in rate making is well-timed as the government is now focusing on the privatization of the transmission sector.  

A stable regulatory environment will encourage more investments into this sector and accelerate the modernization of the transmission and distribution sectors. 

The regulatory reset will pave the way to revised rates that TransCo will be authorized to charge its customers.