Reduction in transmission charge line item in the electric bills is the end-goal eyed from the completion of the rate reset review for system operator National Grid Corporation of the Philippines (NGCP), according to Senate Committee on Energy Vice Chairman Sherwin T. Gatchalian.

The lawmaker is anchoring his expectation on the lower weighted average cost of capital (WACC) that had been allowed by the Energy Regulatory Commission (ERC) on its partial ruling on the fourth regulatory reset of the country’s transmission system operator.

“The ERC adopted a weighted average cost of capital (WACC) of 10.71%, significantly lower than the existing WACC of 15.04%,” Gatchalian indicated.

WACC is a major input in determining the maximum allowable revenue (MAR) that shall be bestowed on NGCP for investments as well as on its costs of operating the country’s power transmission network.

The initial ruling of the ERC covered regulatory reset from 2016 to 2020; but the Commission noted it has yet to complete its review on the allowable revenues for NGCP for years 2021 to 2022 and that shall comprise the second phase of its tariff review under the company’s fourth regulatory reset.

The ERC verdict on the significantly trimmed allowable revenues for NGCP had been based on historical review of data and figures on the building blocks being factored into the calculation of its pass on tariff under performance-based regulation (PBR) system of rate-setting for the restructured electricity sector.

There had been a lag of 10 years in the adjustment of rates for NGCP; hence, that review process undertaken by the regulatory body had been a diversion from the conventional forward-looking approach of PBR tariff setting.

Once the final outcome of the rate review is rendered, Gatchalian asserted optimism that “consumers will enjoy lower power transmission fees,” that will eventually be reflected in the electric bills of all ratepayers.

“The ERC’s adoption of a lower WACC is a welcome development. I am hopeful that this development would translate to lower transmission rates passed on to consumers,” he stressed.

The solon cited, in particular, the cap on NGCP revenues which had been set at P36.7 billion annually – drawn following the imposition of disallowances on array of cost items as well as expenses incurred by the transmission firm.

“The most anticipated completion of review of transmission rates and the ensuing rate reset after more than 10 years of delay would hopefully provide some respite to consumers amid continuing high levels of fossil fuel prices in the global market,” Gatchalian said.