ERC raises NGCP revenue cap to P380B through 2027

THE Energy Regulatory Commission (ERC) raised the revenue ceiling for the National Grid Corp. of the Philippines (NGCP) to P380.45 billion through 2027 after approving a higher regulated return on capital for the country’s transmission operator.

In an order dated May 15, the regulator modified portions of its Jan. 29 decision and granted parts of NGCP’s motion for reconsideration under the fifth regulatory period (5RP) rate reset covering 2023 to 2027.

The revised ruling increased NGCP’s maximum allowable revenue (MAR) by P4.04 billion to P380.45 billion from the previously approved P376.42 billion. The ERC also raised the grid operator’s adjusted annual revenue requirement (ARR) to P378.71 billion from P374.98 billion.

The adjustment followed the ERC’s recalibration of the weighted average cost of capital (WACC) to 11.92% from 11.74%. The WACC serves as the benchmark used by regulators to determine the return a utility may earn on its investments.

“This WACC is intended to establish a fair and reasonable opportunity for NGCP to recover its efficient costs of capital contemporaneously with the RP (regulatory period) to which the rates ought to apply,” the ERC said in its order.

NGCP operates, maintains, and develops the country’s state-owned power grid under a 50-year franchise granted by Congress. The company began operations in 2009 after taking over transmission functions and related facilities nationwide.

The transmission network delivers electricity from power generators to distribution utilities and directly connected customers through an interconnected system spanning more than 21,000 circuit kilometers of transmission lines, about 20,000 transmission towers, and 140 substations across Luzon, Visayas, and Mindanao.

Based on company data, the Luzon grid accounts for about 74% of the country’s total electricity demand, while the Visayas and Mindanao grids represent 14% and 12%, respectively.

Under its franchise, NGCP is authorized to operate and maintain transmission facilities and undertake the construction and expansion of transmission infrastructure, including the exercise of eminent domain when necessary for transmission projects.

As a regulated public utility, NGCP’s recoverable revenues and allowable returns are subject to periodic ERC rate reset exercises conducted every five years. Under the process, regulated entities submit forecast expenditures, operating costs, and proposed capital projects for evaluation.

The ERC then determines the MAR, or the maximum revenue NGCP may recover from consumers for transmission services, and the ARR, or the amount needed to cover operating and capital-related expenses during the regulatory period.

The regulator also moved the implementation of the 2023 MAR adjustments to October 2026 from the earlier August 2026 schedule to align with NGCP’s billing cycle. — Sheldeen Joy Talavera