A new Philippine energy blog I’ve started following is Head, Wind, Canoe. The writer focuses on distribution issues – so it’s a welcome addition to my reading.
Today he compiles some publicly available EC data (from 2006) into a chart which shows a correlation between the total sales volume of an EC and it’s “distribution costs” or “non-power costs” or “DSM (Distribution – Suppy – Metering) Costs.” These all generally refer to the same thing.
I’ve taken his chart:
and added a red line to it:
This line is referred to as the “efficiency frontier.” The ECs that are on or near it are those that are the most productive at delivering distribution services for their given size (in MWh Sales).
But productivity or efficiency in tariffs is not just a function of the MWh sales of an EC. The ERC has hired a group from the U.P. School of Business Administration (headed up by Dr. Helen Valderama) to conduct reams of statistical analyses of the ECs in order to set benchmarking standards for ratemaking. Also, foreign consultants funded by USAID have been heavily involved in the analysis.
I was at a May 27, 2008 Public Consultation with U.P. and ERC on this issue. Some of the factors the consultants considered included total EC sales volume (as in charts above), weather (frequency of typhoon exposure), oil price, line length, and number of customers.
After all the U.P. analyses, they seem to be settling on three indicators of rate efficiency: (1) Average Sales Volume per Customer, (2) Number of Customers and (3) Peak kW Demand.
In any event, as Dr. Valderama candidly pointed out, efficiency benchmarking is a contentious process.
At last week’s annual convention of the Philippine Rural Electric Cooperative Association (PhilRECA), ERC Commissioner Tan gave an update. His target for implementing a new benchmark-based tariff methodology for the ECs is now March 2009, at the earliest, and July 1, 2009 at the latest.