ERC to decide on NGCP refund after cut on allowable revenues

The Energy Regulatory Commission (ERC) might compel the National Grid Corporation of the Philippines (NGCP) to refund customers after it slashed the grid operator’s allowable revenues by more than half than what the company applied for under a review of power transmission rates.

In a statement on Wednesday, the ERC, citing a partial determination on its ongoing review of the performance and operations of NGCP for the regulatory period 2016-2022, said that it “determined the total allowable revenues for Phase 1 of the fourth regulatory period to be P183.491 billion, or an average of P36.7 billion annually.”

The allowable revenues cover the years 2016-2020 or Phase 1 of the fourth regulatory period covering 2016-2022.

“This amount is significantly lower than NGCP’s claims of P387.803 billion for Phase 1, or an annual average of P77.56 billion – which was higher than the interim Maximum Annual Revenue (iMAR) of P51.47 billion for 2020 initially granted by ERC to NGCP in a previous March 2022 issuance.”

Maximum Allowable Revenue (MAR) refers to the maximum amount that NGCP is allowed to earn annually to recover its operational expenses like OPEX (operating expenditures) and CAPEX (capital expenditures), as approved by the ERC in accordance with the rules.

The determined allowable revenue for NGCP, however, is not yet final as it will still be subjected to public and stakeholder comments.

For her part, ERC chairman Monalisa Dimalanta said that “once the commission finalizes the determination, after NGCP and the public give comments on the findings, we will finalize the allowable revenues and revise the rates.”

“If there are no revisions to the amounts under the initial determination, then refunds will be due. We are targeting to complete the process within the year,” Dimalanta said.

GMA News Online reached out to NGCP for comment, but no response yet has been received as of posting.

In determining the partial allowable revenues of NGCP, the ERC excluded employees' benefits that were sought to be recovered from consumers.

Moreover, the regulator disallowed the recovery from consumers of advertising expenses or COVID-19 donations “that were not proven to redound to the benefit of consumers.”

Nevertheless, the ERC said it will allow NGCP and stakeholders to submit comments “in the observance of due process.”

The regulator said that the fourth regulatory period is “distinct” and “unique” because it covers a past period, thus requiring evaluation of historical data on NGCP’s expenditures and performance.

The regular rate-reset process is usually a forward-looking exercise that requires the regulated entity to submit forecasted expenditures and proposed projects over a five-year regulatory period.

“Considering, however, the non-occurrence of the rate-reset for NGCP since the lapse of the third regulatory period 2011-2015, the current ERC is constrained to evaluate for the fourth regulatory period whether the costs already incurred by NGCP for the previous years were prudent, reasonable, and economically efficient,” it said.

“Recognizing the urgent need to conduct the regulatory reset without further delay in order to revert to the forward-looking reset exercise for the fifth regulatory period 2023-2028, the ERC adopted a phased-in approach in its review of the fourth regulatory period: Phase 1 covering January 1, 2016 to December 31, 2020 based on NGCP’s Revenue Application, while Phase 2 will cover January 1, 2021 to December 31, 2022 based on additional documents obtained by ERC from NGCP,” it added.—LDF, GMA Integrated News