Asian Energy Advisors

The ERC, like a huge steamship powered by grants, seems to be inexorably moving toward it’s revamped tariff methodology for the electric cooperatives (ECs).

I missed the first two expository, public consultation cum workshops on this issue but attended the third one today. Although I actually liked the analytical work I saw that is being done on Philippine ECs - it is good data and interesting analysis that has not yet existed, at least to the extent that is being prepared now - it’s not at all apparent to me, yet, that it is, at this stage, an adequate methodology for regulating tariffs of the ECs.

Observation No. 1 - NEA seems to be disengaged from this process altogether.

Observation No. 2 - The process doesn’t seem structured to get adequate feedback from the EC sector. The ERC has grants from USAID to hire groups of professors from the UP School of Business Administration and long-term, on-site foreign consulting experts to work on these issues. Today, I saw some very sophisticated concepts and techniques thrown at a room full (almost 100) of long-time EC staffers that came in from all over Luzon. Concepts like 1-way and 2-way statistical analysis, means testing, efficiency frontier, Malmquist productivity indexing. And then they are requested to have their comments, objections, recommended alternatives in to the ERC in just a few weeks or so. The ECs have to battle through this stuff on their own time with their own personnel the best they can.

The ERC plans to place each EC in one of seven Groups, for rate-setting purposes. The EC Rate will be split into two components:

• Distribution, Supply & Metering (DSM)
• Capex Component.

The analysis and methodology is not final. In fact, some of it is quite tentative. But the following table shows where they are at the moment on Benchmarks for DSM Costs. They have developed a preliminary 2009 benchmark DSM cost level for each Group which is, for the time being, set at the 70th percentile level of the cost characteristics of the Group’s members. They have not set the Capex cost level yet.

Note: The ERC should post the full slide deck that was handed out at the public consultation, so I could point to it. I know that my pulling a few data points, out of context from the full presentation, does a disservice to what was presented. But I have little choice.

On this day..

• Forum on "The Future of Power Industry Reforms" - 2006