The National Grid Corporation of the Philippines (NGCP) yesterday branded as unfair the decision of the Energy Regulatory Commission’s (ERC) disallowing some of its expenses, putting instead the blame to the agency for not conducting the needed regulatory reset.
NGCP said the ERC itself has admitted its failure to conduct a regulatory reset which should be done every five years.
The ERC said on Wednesday it determined a lower maximum allowable revenue (MAR) for the NGCP for the years 2016 to 2020 that may warrant a refund.
ERC’s initial studies showed that NGCP should only have a MAR of P183.49 billion, which is 52.7 percent lower than the applied P387.8 billion revenue of the company for the period.
MAR is the maximum amount that NGCP is allowed to earn to recover its operational expense and capital expenditures, as approved by the ERC.
Cynthia Alabanza, NCGP assistant vice president, said in a briefing yesterday the issue stemmed from ERC’s failure to address its two requests for a regulatory reset.
“Before you play, you should know the rules, so to apply this retroactively, we think that decision … lacks fairness,” Alabanza said, adding that rules should be forward looking to establish a level playing field.
Previous leaderships of the ERC were not able to conduct a rate reset for NGCP since the lapse of the third regulatory period covering years 2011 to 2015.
NGCP said ERC’s current actions will have a long-term impact not only on the company, but also on consumers and other businesses.
“At the end of the day, what must be balanced here is the consumer’s concerns and his right to good…service at the right price… It is also necessary to weigh the concern of a businessman or investor to get proper returns on his investment,” Alabanza added.
NGCP said expenses noted by the ERC are legitimate business costs under the same rules applied to the National Transmission Corp. (TransCo), the government entity that used to operate the country’s transmission services.
NGCP took over the operations and management of the national transmission system from TransCo in 2009 with the privatization of the power grid operations and maintenance.
“When you say that it was passed on to the people, but it is a legitimate business expense, that should not be bad, especially if that is contained in the policy that was laid down when we entered the business,” Alabanza said.
NGCP also said its employees’ bonuses are legitimate business expenses as they are part of operational expenses that are usually included in the cost being charged by a business for a particular service or a product.
The company said this was also practised by TransCo but was not questioned.
Alabanza said public relations and advertising expenses are not marketing initiatives but cover information campaigns, including safety and right-of-way clearance.
She added corporate social responsibility efforts to give back to the communities affected by the transmission lines and towers are also important.
Meanwhile, Monalisa Dimalanta, ERC chairperson, said in a separate briefing yesterday the agency’s current determination of NGCP’s MAR for 2016 to 2020 is preliminary and therefore does not automatically mean a refund or lower charges for electricity customers.
Dimalanta said it is “too early to tell” if NGCP has committed a violation.
“What if we found out that they collected more than what was allowed? We will then ask them to refund or adjust rates. Now, if they will not do that, that is the only time that a violation will be made,” Dimalanta said.
ERC added NGCP and its stakeholders could submit comments on the partial initial determination for validation, which will be considered if meritorious in the final determination for the fourth regulatory period that will also include the years 2021 and 2022.
This is targeted for completion before the end of the year.
