Review sought on ERC’s rate-setting method

MANILA, Philippines - The government is being urged to review the Energy Regulatory Commission (ERC)’s methodology of rate-setting.

One of the proposed amendments to the Electric Power Industry Reform Act of 2001 (EPIRA) calls for a review of the return-on-rate base (RORB) rate setting methodology from the current performance-based regulation.

In a report on proposed EPIRA amendments released this month, the Congressional Policy and Budget Research Department (CPBRD) said: “There are doubts on the present rate-setting methodology implemented by the ERC, especially with the spike in the prices in the Wholesale Electricity Spot Market (WESM), thus there were calls for the review of the present system in determining the transmission, distribution and retail rates. There were suggestions to revert to the return-on-rate-base rate setting methodology from the current performance-based regulation (PBR).”

In the Visayas, some sectors see the need for adequate infrastructure.

The CPBRD report said: “Given the archipelagic nature of the Visayas region, transmission lines are deemed very important. It has been pointed out that line rentals are very high since these are imbedded in the cost of generators in connecting to these transmission lines and it follows that generation charges are also high. Participants suggested that penalties should be imposed on the National Grid Corp. of the Philippines or its franchise be revoked if targets in the Grid Code and the Transmission Development Plan were not met.”

Another proposed amendment is on market clearing price: “There is a need to amend the WESM rule that allows power prices to be determined by the highest priced offer that is accepted (which) becomes the spot market’s price for the hour. This is contrary to the objective of EPIRA of setting rates to allow the recovery of just and reasonable cost and a reasonable return.” 

Energy industry stakeholders proposed the need to have replacement power in bilateral contracts between distribution utilities and insurance for power generators to prevent spikes in times of force majeure.

Power supply agreements with replacement power must be mandatory for power producers, according to the proposed amendments.

In Mindanao, energy stakeholders opposed the privatization of the Agus-Pulangi hydroelectric power plant and urged government to rehabilitate the plants to ensure full capacity operation.

The CPBRD report of Elsie Gutierrez and Ricardo Mira said: “Currently, these plants are experiencing dispatch limitations, with Agus plants experiencing frequent flooding, while Pulangui plants experiencing low water levels during certain periods of the year.”

It summarized outputs of a consultative meeting conducted by the energy department in the Visayas and Mindanao from Feb. 6 to 7.

Civil society groups, academe, business groups, generation and distribution utilities, and the transmission sub-sector attended the meeting.

Bello hits Ducut

Akbayan Rep. Walden Bello said yesterday the ERC’s order to recalculate electricity spot market prices only confirmed “two massive failures” leading to the unprecedented power rate hike.

Despite ERC chairman Zenaida Ducut’s order to recall the rate hike sought by the Manila Electric Co. (Meralco), she still has to vacate her post, he added.

Ducut is facing two administrative complaints both accusing her of “gross neglect of duty.”

Bello said the order exposed the stupendous recklessness and negligence of Ducut’s previous conduct on Meralco’s petition for the record-high power rate hike.

“We welcome the order as it factually points to the failure of both the Electric Power Industry Reform Act (EPIRA) to create a competitive market free from unreasonable market prices, and Ducut to protect power consumers by exercising ample leadership in ensuring that the regulatory body carries out its regulatory functions,” he said.

Bello said it also exposed her “spineless leadership” of the regulatory body since she failed to investigate the dubious bases of the petition and even granted the rate hike.     – With Paolo Romero