Starting in a couple of weeks, the ERC will be holding regional public consultations on the adoption of an alternative regulatory framework for electric cooperatives. You can find the schedule and a link to the draft Issues Paper at the ERC site here.
Update: The ERC links are dead. Here’s the Issues Paper. Part 1. Part 2.
I’m slogging through the Issues Paper at the moment.
I’m only seven pages into a thirty-five page document, but so far I’d like to take issue with the first paragraph in Section 3.6 that begins:
The reinvestment fund appears to be the single revenue requirement component that is exclusively provided to the ECs. There is no such counterpart in the Revenue Requirement derived for the private distribution utilities under a rate of return regulation…
But, as I said in an August 2000 white paper I published with the wonky title “A Theoretical Basis for Potential Price Reductions In Transition to Private Ownership of Philippine Electric Generation”:
The Energy Regulatory Board (ERB) sets electric prices in the Philippines using a return on rate base methodology. In this methodology, consumers pay an annual depreciation (the return of capital) plus a return on rate base (return on capital). Rate base is essentially the un-recovered (that is, not yet recovered through depreciation) investment. However, the Philippines employs a concept sometimes referred to as price level depreciation. In this method, the rate base, instead of being tracked at original cost, is revalued each year to current price levels. It is a revalued rate base.
Price level accounting is commonly employed by electric utilities in developing countries, particularly where there are relatively high rates of local currency inflation. Under price level accounting, the utility will recover, through depreciation, an amount not equal to its original investment but rather an amount equal to the original investment adjusted for inflation. Part of the rationale for this is that it provides enough funds to replace the asset after it is retired.
So there. There is the counterpart, IMHO.