Ro RB PBR Public Hearing on MSK Petition
Ro. RB & PBR Public Hearing on MSK Petition
Performance Based Regulation (PBR) • Legal Basis. Section 43(f) of Republic Act No. 9136, otherwise known as the Electric Power Industry Reform Act of 2001, and Rule 15, Section 5(a) of the Implementing Rules and Regulations: The ERC may adopt alternative forms of internationally-accepted rate-setting methodology as it may deem appropriate. December 20, 2004 April 16, 2006 December 13, 2006 December 5, 2008 June 22, 2009 December 1, 2009 ERC promulgated the Distribution Wheeling Rates Guidelines (DWRG) Through ERC Resolution No. 16, Series of 2006, entry to PBR was made mandatory for private distribution utilities ERC revised and re-issued the guidelines as the Rules for Setting Distribution Wheeling Rates for Privately-Owned Distribution Utilities Entering Performance Based Regulation [Second and Later Entry Points], now referred to as the RDWR Updated for the Third Entry Point (or Group C) Updated for the Fourth Entry Point (or Group D) Updated for the Third Regulatory Period (Group A)
Comparative Features of Ro. RB & PBR Ro. RB Expenditures (Op. Ex & Cap. Ex) Based on a historical test period, e. g. , previous year PBR Projected for each regulatory year of the regulatory period; Efficiency mechanism; Benchmark between DUs as reset is a mandatory rule for each group
Comparative Features of Ro. RB & PBR Return on & Return of Capital: Regulatory Asset Base Ro. RB PBR Sound value of assets based on an appraisal report and ocular inspection by ERC staff • Preparation of valuation asset register • Asset values prescribed in the valuation manual • Standard asset lives more pronounced due to to asset manual, e. g. , 12 years as against some assets extending to 30 -35; Recovery on depreciation more reasonable • Optimization according to asset utilization and planning horizons • Field work of ERC staff and its regulatory reset experts • Review of yearly capex
Comparative Features of Ro. RB & PBR Ro. RB PBR Working Capital 60 days Billing lag study Returns 12% Regulatory WACC using industry standards Rate Impact Resulting from cost of service but allows regulatory intervention, smoothing and side constraints to address large increases Rewards (Penalty) System None; Customers suffer due to Quality of service rewards or a DU’s inefficiency penalties; Efficiency gains
Comparative Features of Ro. RB & PBR Ro. RB Regulation Originally for the entire rate (generation, transmission & distribution); A private distribution utility will file a case on its own PBR Distribution-related rates only ERC sets the schedules of reset process; Constant update with DUs due to the yearly rate translation Filing of Application 1 rate case for the approval 5 rate applications in an RP: of revenue requirements and • 1 for the approval of rate translation annual revenue requirements and performance incentive scheme • 4 for the yearly translation of rates per customer class
Comparative Features of Ro. RB & PBR Ro. RB Review Process Public hearings and case evaluation by staff PBR • Solicitation of comments and public consultation on Rules & Issues Paper entry point • Solicitation of comments and public consultation on valuation handbook • Clarificatory meetings on top of the public hearings open to interested parties • Draft Determination that is also published & open to comments and public consultation • Public hearings on the rate translation cases
Comparative Features of Ro. RB & PBR Ro. RB PBR Rate Review No lookback if final approval ? Potential Rule Change Nonmoving or stagnant Adapts to change; Issues unique per DU are addressed in every reset per group
- End of Presentation - THANK YOU
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