The capital expenditures (capex) allocation for transmission operator National Grid Corporation of the Philippines (NGCP) has been slashed to P13.189 billion for next year from the P18.871 billion outlay programmed for 2010.

While the company sought for a higher capex of P30.656 billion in its filing with the Energy Regulatory Commission (ERC) on account of system improvement and network expansion in anticipation of forward demand growth, it was noted that NGCP’s bid for increased outlay has not been supported with firm data as to when capacity addition will be in place to support its forecast infrastructure investment.

Although the ERC considered projections in power demand expansion, it noted that the reduction in NGCP’s capex was anchored on assumptions that projects are getting deferred because there are also no new investments coming in on the generation side.

“The ERC believes that it would be potentially inefficient to accelerate transmission grid development to supply demand that cannot be met by available generation,” the draft determination issued for NGCP’s third regulatory reset under performance-based regulation has emphasized.

It added that in a situation wherein there would be over-investment in transmission without generation facilities utilizing them, the consumers are correspondingly punished as these costs are going to be passed on to them via the electricity rates.

Given such dilemma, the ERC directed NGCP to monitor the situation and it will be more prudent for it to file instead supplemental application for capex as it deems necessary.

“Should it become apparent that the forecast capex allowed in this draft determination is inadequate to support planned investment in efficient new generation, the regulated entity (in this case NGCP), with the support of the proponents of generation investment, should file for the early approval of any additional capex that might be needed to allow the proposed generation project to proceed,” the ERC has emphasized.

Onward, the capex allocation set for NGCP would be P12.626 billion (2012); P9.319 billion (2013); P5.884 billion (2014); and P3.196 billion (2015) or an aggregate P44.214 billion for the duration of its third regulatory reset. All have been lower than its applied capex of: P19.721 billion (2012); P15.2 billion (2013); P8.964 billion (2014); and P6.235 billion or a total of P80.779 billion for the entire period.

The regulator further opined that at this point “it would be more efficient to adopt a ‘wait and see approach’ and to ask customers to fund the augmentation of the grid in a way that is known will support planned new generation investment.”

It can be gleaned from forecasts that electricity demand will continuously grow from 2011 at 10,193 megawatts to 10,533 MW in 2012. By 2013, system demand is seen higher at 10,901 MW and will climb to 11,277MW and 11,656MW by 2014 and 2015, respectively.