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Manila Bulletin devider Business devider NGCP may eventually recover 'disallowed capex' items - ERC

NGCP may eventually recover 'disallowed capex' items - ERC

Published Nov 9, 2023 11:35 pm

At A Glance

  • In ERC's view, the non-inclusion of ongoing projects into the partial rate reset of NGCP will not delay these transmission infrastructure buildout because these cost items can still be recovered in the company's next regulatory rate-setting.

The Energy Regulatory Commission (ERC) has indicated that transmission firm National Grid Corporation of the Philippines (NGCP) will still be allowed eventually to recoup costs relating to programmed capital expenditure (capex) projects that were disallowed in the partial rate-setting rendered by the Commission because these have not reached 80% completion yet.

According to ERC Chairperson Monalisa C. Dimalanta, there were only 12 transmission projects classified as ‘energy projects of national significance’ that had been included in the capex calculation for the allowable revenue requirement of NGCP for the years 2016-2020.

These are the Calaca-Dasmarinas 230-kilovolt transmission line project; the 230kV Cebu-Negros-Panay backbone project (stage 1); Western Luzon 500 kV backbone project (stage 1: Castillejos-Hermosa 500kV transmission line project); Tuguegarao-Lal-lo (Magapit) 230 kV transmission line project; Cebu-Negros-Panay 230kV backbone project stage 2 (Cebu Substation 230kV upgrading); and Pagbilao extra high voltage (EHV) substation project.

The others are: the Bataan 230kV grid reinforcement project; Clark-Mabiga 69kV transmission line project; Hermosa-San Jose 500kV transmission line project; Negros-Panay interconnection uprating project; Northern Panay backbone transmission project; and the PCB replacement project in Mindanao.

The implementation of the specified projects had been spread from 2016 until 2020 with more than 80-percent completion; and the total capital outlay had been placed at P64.405 billion.

The ERC qualified that at least 81 projects worth P49.955 billion had likewise been categorized as ‘construction work in progress’ (CWIP); and were factored in into the capex calculation for the 2016-2020 regulatory reset timeframe.

The regulatory body noted that “the CWIP factor is calculated by applying a compounding monthly interest rate based on the regulatory WACC (weighted average cost of capital) to each of the project outlays incurred during the construction period.”

It added that “the result of incorporating the CWIP factor is that the nominal value of the assets is grossed up by the future value of the required return on outlays incurred during the construction period.”

Dimalanta, however, acknowledged that beyond these, there are other ongoing projects not accounted for yet in the review of the capex component for NGCP’s rate-setting.

“These capex projects may be recovered in the next regulatory reset, as the ERC will also continue deliberating on the forward tariff regulation for NGCP, including its fifth regulatory period covering 2023 to 2028,” the ERC chief said.

She expounded that the non-inclusion of some cost recoveries in the partial reset “will not delay these projects because these are already under construction; and their costs can be recovered in the next reset.”

In NGCP’s original filing, it batted for P145.75 billion worth of capex; with additional bid of P3.5 billion worth of asset acquisitions.

By far, the substantially slashed cost recoveries on its capex application somehow contributed to the resulting low allowable revenues accorded to NGCP in the partial rate reset rendered by the regulatory body. 

 

 

 

Related Tags

electricity rates Energy Regulatory Commission Capex National Grid Corp. of the Philippines (NGCP) Transmission projects
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