Another investor complained that the ERC is contemplating allowing the recovery of a power plant's connection asset only when the National Grid Corporation of the Philippines ultimately purchases the transmission line.
This proposed move will be a massive disincentive to investments in the generation sector.
Meanwhile, a former ERC commissioner is suing the agency for not following rules in rate setting.
Many consumer groups complain that the commission is perennially delayed in answering their complaints and petitions.
All of this is happening while experts are pointing to more yellow and red alerts in the coming months.
We may be temporarily "saved" by La Niña, but that natural intervention speaks volumes of how much our regulatory framework is failing the country.
One investor points to a severe shortage in the Visayas in two to three years, and no one is building new plants. The DOE may have to reverse its policy on coal plants to address this problem.
If everyone in the power sector points to the ERC's failure to address their concerns, the proverbial smoke suggests there must be a fire somewhere.
The ERC uses a rate-setting methodology that has yet to work for the country. It has erroneously been using the Capital Asset Pricing Model (CAPM) to set the required return on equity for investments in the sector.
The weakness of the CAPM is exacerbated by the use of performance-based regulation (PBR), which is the methodology used by transmission and distribution companies.
The PBR is a highly complex methodology that consumers and businesses will likely need help understanding.
Defining the "x" in the final PBR formula is difficult, even for those who know how. This "efficiency" factor relies heavily on the ERC's ability to monitor the efficiency factors independent of the utilities.
When I asked a former ERC commissioner how the agency would monitor and determine the "x," I was told it would just be an "adjusting factor. " I took it to mean that the "x" will be adjusted to what the utility will need for future years.
My point here is this: the regulatory framework in the power sector is now so complicated that it seems the industry has stopped moving.
There's the occasional press release of companies bleating out their investments in renewable energies.
I pity these foreign investors who are naive and think that their investment will be a walk in the park.
One foreign company that has been here for decades and invested billions of dollars approached me recently, complaining that it cannot navigate the complex regulatory hurdles.
If the President and the administration want to solve the problems besetting the power industry today, one area that will give them the highest return is addressing the regulatory risk that everyone is facing today.
Maybe the government should bear this risk this time.
A power industry expert with over 40 years in experience as chief executive officer in firms ranging from banking, power, and advisory services.
