NGCP blames ERC on delayed rate-setting; claims legitimacy of all 'cost claims'

Transmission firm National Grid Corporation of the Philippines (NGCP) has tossed the blame on the Energy Regulatory Commission (ERC) on its delayed rate-setting; while forthrightly claiming that all of its incurred costs and expenses are ‘legitimate’ and according to the regulatory principles set forth for the industry.

The company primarily rapped the ERC decision on its extremely reduced allowable revenues as “unfair”- primarily the disallowances relating to expenses on public relations, corporate social responsibility (CSR) programs, representation and entertainment, advertising, donation for Covid-19 preventive drive; charitable contributions as well as miscellaneous expenses.

“The agency should be blamed for its failure to conduct the needed regulatory reset,” NGCP noted, referencing on the delayed review and updating of its rate by the ERC which had already lagged since 2016.

According to NGCP Assistant Vice President Cynthia Alabanza, “the matter stemmed from the ERC’s failure to address its (NGCP’s) two requests for a regulatory reset.”

The company executive insisted that the principle of performance-based regulation (PBR) governing the operations of NGCP should have been forward-looking with a five-year rolling period on projected annual revenue requirement (ARR) that should have been accorded on the company.

However, in the decision rendered by the ERC this week, it had to resort to historical review of data and calculation covering the periods 2016-2020 because that was already the extent of delay  impairing regulatory dynamics in the restructured power sector.

In fact, that was just an initial ruling issued by the Commission, it will still need to flesh out data and historical figures to look at the allowable revenues for NGCP on years 2021 to 2022.

“Before you would play the game, you’re supposed to know the rules. And for this to be applied retroactively, we’re thinking that there’s lack of fairness in the decision,” Alabanza stressed.

On the disallowed costs and expenses, ERC Chairperson Monalisa C. Dimalanta indicated that NGCP still have that recourse to appeal and justify if these expenses had been incurred relative to its function of servicing the consumers.

Alabanza expounded “the rules should be forward looking to have a level playing field. The ERC’s pronouncement will have a long-term impact not only on NGCP but on the consumers and other businesses as well.”

She further emphasized “there is also a need to balance the concern of business or investor so he/she can get reasonable return on investment.”

On the disallowed expenses, Alabanza argued “these are legitimate business costs under the same rules applied to the National Transmission Corporation (TransCo),” in reference to the spinoff state-run entity which owns and had operated the country’s power transmission assets prior to its turnover to NGCP in 2009 via a concession deal.

She cited, in particular, that “employees’ bonuses are legitimate business expenses as they are part of operational expenses that are usually included in the cost of a product being charged by a business for a particular service or product.”