This is contrary to the liquidation company’s prior pronouncements that they are pursuing privatization next year; with the bidding schedule set around April; after the issuance of a ruling by the Energy Regulatory Commission on the transmission firm’s application for new maximum allowable revenue (MAR).
Given such targetted time frame, it appears that the schedule for the spinoff transmission firm’s transfer into private hands may again take a little longer.
With the delays being incurred, the worrisome scenario would be that much-needed private capital infusion to improve the transmission network would not be coming as early as expected; and just to pursue some projects, the government may be forced to borrow again.
Osorio has noted that the new MAR would provide the prospective bidders a better forecasting insight on revenue stream from the assets’ operation.
"This will be valuable information for investors in preparing their bids as RAB (regulatory asset base) will determine TransCo’s maximum allowable revenue, or MAR. The MAR, in turn, will be the basis for computing the transmission rates that can be charged to electricity users," the PSALM chief executive has constantly been saying.
The ERC has already committed that it will target approval of the TransCo’s second regulatory reset by April next year; so that TransCo’s privatization can also move ahead.
PSALM will be bidding out the power transmission business through a 25-year concession contract; and renewable for another 25 years depending on the result on assessment of its performance.
The transmission wheeling rates are the main revenue source for the private concessionaire of the electricity transmission operations.
Transco’s transmission charges were first set by the ERC in 2003, the start of the first regulatory period. The second regulatory period was originally set on January 1, 2006, but was moved to April next year. Thereafter, the wheeling rates will be reset every five years.
Osorio pointed out that at the start of each five-year regulatory period, the ERC would determine the concessionaire’s annual revenue requirement based on its operating and maintenance expenses, estimated tax payments, depreciation charges on assets used, and investors’ return on capital.
"These factors will be the basis for computing the concessionaire’s MAR for the regulatory period," she said.
At the end of each year, the revenue cap will be compared with the actual revenue collection of the concessionaire, the difference of which will be the basis for adjusting the following year’s revenue cap.
She has further explained that the revenue cap would assure electricity consumers that fair electricity rates would be charged even after the privatization of TransCo.
"We would like to assure consumers that the capital and operating expenditures as well as taxes are pass-through costs that would not be a source of windfall profits for the concessionaire who would be assured of a reasonable return for their investments," Osorio has emphasized.
