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					DRAFT DETERMINATION
Regulatory Reset for the
National Transmission Corporation
For 2006 to 2010
Luzon, Visayas & Mindanao
Public Consultation
Program
•   House Rules
•   Annual Revenue Requirement
•   Forecast of CPI, Forex & Demand
•   Capital Expenditure Forecasts
•   Operating & Maintenance Expenditure
    Forecasts
•   Regulatory Asset Base & Valuation
•   Weighted Average Cost of Capital
•   Taxes
•   Performance Incentive Scheme
•   Other Issues
Annual Revenue Requirement

Commissioner Rauf A. Tan
  Regulatory Reset Process
            Regulatory Year                   Regulatory
                                              Reset Process


 YEAR -1     YEAR 1    YEAR 2     YEAR 3    YEAR 4    YEAR 5




                              Regulatory Period
 Determine the annual revenue requirement (ARR) for each of the 5
  regulatory years in the regulatory period.
 The initial revenue cap for the first regulatory year and the revenue
  path for the rest of the years in the regulatory period are then
  determined by a process called “revenue smoothing”.
    Given last year’s revenue cap and the forecasted annual revenue
     requirements,
    Determine the initial adjustment to last year’s revenue cap which
     will be the initial revenue cap; and
    Determine the “X-factor” that will govern the revenue path for the
     succeeding years in the regulatory period.
How is the Annual Revenue Requirement (ARR)
determined?

ARRt  Opext  Taxm,t  RegDepnt  [( RABt  WC t )  WACC ]  Tax p ,t t




                Return of             Return on
                capital               capital


      Efficient             Other                  Corporate
      operating             taxes                  income
      costs                                        tax
Annual Revenue Requirement

              80000


              60000
Million PhP




              40000


              20000

                    0
                         2005     2006     2007          2008     2009     2010

              TRANSCO   27,086   47,363   52,305        59,152   65,163   70,766
              ERC       27,086   24,337   24,418        24,627   29,953   30,618

                                            Regulatory Year

				
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posted:10/13/2011
language:English
pages:6