Transcript Slide 1

Connection Assets
• The definition of connection assets needs
to match the following documents
–
–
–
–
–
OATS
TWRG
Connection Charging Policy
TRANSCO/PSALM Application
Draft Determination
• The ERC has a significant concern that the
provisions under these documents shall be
consistent
• As defined in the following slides
Connection Assets: TWRG
• Regulated Transmission Services…
– (d) until the commencement of the Second Regulatory Period,
Transmission Connection Services;
• Transmission Connection Services
– (a) the provision of capability at a Connection Point to deliver electricity
to or take electricity from the Connection Point;
– (b) the conveyance of electricity:
• (i)
from the User System or Equipment of a Customer to the
Connection Point; or
• (ii)
from the Connection Point to the User System or Equipment of a
Customer;
• Transmission Connection Assets
– The components of the Grid used to provide Transmission Connection
Services
• Connection Point
– The point of connection of a User System or Equipment to the Grid.
• User System
– User System as defined in the Grid Code. (from TWRG)
– Refers to a System owned and operated by a User of the Grid or
Distribution System (from Grid Code)
Connection Assets: OATS Rules
•
Connected Transmission Customer
– Any Transmission Customer with Facilities directly connected to the Grid at one
or more Points of Connection. For the avoidance of doubt, this includes
Generation Customers and Load Customers.
•
Connection Definition Method
– The method used by the Transmission Provider to distinguish Connection Assets
from Grid Assets.
•
Connection Facilities
– The Transmission Provider’s Connection Facilities and the Connected
Transmission Customer’s Connection Facilities.
•
Connection Point
– See Point of Connection.
•
Grid
– As defined in the Grid Code.
•
Point of Connection
– A point where Electricity may flow into or out of the Grid.
– Also known as Connection Point.
•
Point of Delivery
– A Point of Connection on the Grid where Electricity may flow out of the Grid.
•
Point of Receipt
– A Point of Connection on the Grid where Electricity may flow into the Grid.
Connection Assets:
Connection Charging Policy (Aug 2005)
• Connection Assets are those assets that are put in place
for the primary purpose of connecting a customer. These
assets may be bypassed or removed from the network
without affecting any customer except those that are
directly connected to it. Even though transmission power
flows on portions of these assets, that is just the
consequence of connecting the customer to the Grid.
• TransCo will also consider the inclusion of those assets
defined as Subtransmission Assets by the ERC in its
Order of 17 October 2003. To the extent possible,
TransCo shall treat all Subtransmission Assets covered
by the ERC Order as Connection Assets until such time
that the assets are sold.
Connection Assets:
TRANSCO/PSALM Application
• TRANSCO/PSALM – claims that it is
consistent with its proposed Connection
Charging Policy dated August 2005
• TRANSCO/PSALM claim that these assets
either directly benefit a particular user or “a
specified group of users”
• SKM et al – appears to have implemented
“shallow connection” and “unshared” assets
following its classification in the RAB
Connection Assets – Draft Determination
• To use SKM definition as implicitly
provided in its spreadsheet on substation
assets.
RAB Outcome
• Table 5.8
ERC Draft Determination
Rolled Forward Asset Base
2004
RABo
RegDepnt
Capext
Capex RegDepnt
Disposalst
RABc
Real
Real
Real
Real
Real
Real
Peso Millions
Peso Millions
Peso Millions
Peso Millions
Peso Millions
Peso Millions
110,277
2005
110,277
(4,595)
778
0
(1,526)
104,934
2006
104,934
(4,530)
2,999
(24)
(998)
102,381
2007
102,381
(4,391)
3,715
(94)
(693)
100,918
2008
100,918
(4,279)
3,602
(187)
(642)
99,412
2009
99,412
(4,155)
2,367
(280)
(374)
96,970
2010
96,970
(4,065)
1,105
(347)
(574)
93,091
• Table 5.9
2004
2005
2006
2007
2008
2009
2010
1.00
1.05
1.10
1.15
1.20
1.26
1.31
4,595.2
4,811.2
4,554.0
4,996.9
4,485.0
5,157.4
4,465.7
5,371.4
4,434.5
5,568.6
4,411.7
5,772.7
Inflation Index
Index from Inflation assumption
Return of Capital (Depreciation) - Real
Return of Capital (Depreciation) - Nominal
Peso Millions
Peso Millions
Weighted Average
Cost of Capital
David Dawson
ERC Regulatory Expert
WACC (a)
• Follow TWRG
• Recognize differences between
TRANSCO Independent Expert and
TWRG
• Review values for parameters
separately
• Summary follows mid-point analysis
WACC (vanilla)
• WACC = Re x E / V + Rd x D / V
• WACC = Re x E / (D + E) +
Rd x D / (D + E)
• WACC = 0.1832 x 0.5 + 0. 1256 x 0.5
• WACC = 0.1544 of 15.4%
Return on Equity & Debt
• Re = Rf + Be x MRP
• Re = 0.1131 + 1.17 x 0.0600
• Re = 0.1832 or 18.3%
• Rd = Rf + DM
• Rd = 0.1131 + 0.0125
• Rd = 0.1256 or 12.6%
Risk Free Rate (a)
• Two measures explored:
– Internal measure using Philippine
Treasury Bonds
– External measure using US Treasury
Bonds
• Internal:
• Use Philippines 10y Treasury Bond for
August 2005
• Rf = 0.1173 or 11.7%
Risk Free Rate (b)
• External:
• Use average 6 USA ~ 10y Treasury
Bond for August 2005
• Rf = (1+RfUSA) x (1+iUSA) / (1+iPhil)
x (1+CRP) – 1
• Rf = (1+0.0461) x (1+0.0710) /
(1+0.0469) x (1+0.04)
• Rf = 0.1131 or 11.3%
• Both measures close, but took 11.3%
Inflation Rates
• Spread for “long-term” average versus
“spot” average is similar
CPI Measure
Average Spot (5 Days)
Long –term Average
Philippines CPI
7.10%
4.71%
USA CPI
4.69%
2.40%
2.41%
2.31%
Delta
USA)
(Philippines
less
Table 6.1 : Inflation Differences between the Philippines and the USA (% pa)
• Spot data better matches bond data
which is average spot as well
CRP (a)
• Two measures explored:
– Philippine vs USA US$ bond yields
– CRP statistical method using Country
Ratings
• US$ Bond yields, ~ 20 year bonds
• CRP = 8.2% - 4.8% = 3.4%
CRP (b)
• Statistical on Country Rating = 4.0%
Philippines Country Risk Premium
7.0%
6.0%
4.0%
3.0%
2.0%
1.0%
End of Quarter (Commencing Q1 2000)
05
20
05
Q
3
20
Q
1
20
04
04
Q
3
20
Q
1
20
03
03
Q
3
20
Q
1
20
02
02
Q
3
20
Q
1
20
01
01
Q
3
20
Q
1
20
Q
3
20
00
00
0.0%
Q
1
CRP (%pa)
5.0%
Return on Equity & Debt
• Re = Rf + Be x MRP
• Re = 0.1131 + 1.17 x 0.0600
• Re = 0.1832 or 18.3%
• Rd = Rf + DM
• Rd = 0.1131 + 0.0125
• Rd = 0.1256 or 12.6%
Beta
• Followed TWRG
• Equity Beta average of 5 transcos and
5 distribution businesses
•
•
•
•
Ba = Be / [1+(1-Te) x D/E] for Market
Ba = 0.58
Be = Ba x (1+D/E) for TRANSCO
Be = 1.17
Return on Equity & Debt
• Re = Rf + Be x MRP
• Re = 0.1131 + 1.17 x 0.0600
• Re = 0.1832 or 18.3%
• Rd = Rf + DM
• Rd = 0.1131 + 0.0125
• Rd = 0.1256 or 12.6%
WACC (vanilla)
• WACC = Re x E / V + Rd x D / V
• WACC = Re x E / (D + E) +
Rd x D / (D + E)
• WACC = 0.1832 x 0.5 + 0.1256 x 0.5
• WACC = 0.1544 of 15.4%
Return on & of Capital
• Table 7.2
2004
2005
2006
2007
2008
2009
2010
1.00
1.05
1.10
1.15
1.20
1.26
1.31
15.44%
15.44%
15.44%
15.44%
15.44%
15.44%
220.7
107,605.7
107,826.4
16,647.3
165.5
103,657.6
103,823.1
16,029.3
141.8
101,649.4
101,791.2
15,715.5
113.2
100,164.8
100,278.0
15,481.9
100.1
98,190.8
98,290.9
15,175.1
84.4
95,030.5
95,114.9
14,684.8
Inflation Index
Index from Inflation assumption
Regulatory Period WACC
WACC
(% pa)
Regulatory Building Block (nominal)
Working Capital (Approved)
RAB (Average of Opening & Closing)
Capital for Return
Return on RAB (ie WACC* [ODRC+WC])
Peso Millions
Peso Millions
Peso Millions
Peso Millions
Performance Incentive Scheme
Lawrence Luczon
Engineer II
Proposed Performance Indices
No.
Issues Paper
TRANSCO Proposal/
ERC’s Adopted PIs
Quality
Reliability
1.
Number of interruption events (NIE)
OK
2.
Average Sustained Interruption Frequency
Index (ASIFI)
OK
3.
Momentary Average Interruption
Frequency Index (MAIFI)
OK
4.
Average Sustained Interruption Duration
Index (ASIDI)
OK
5.
System Interruption Severity Index (SISI)
System Interruption
Severity Index (SISI)
6.
Number of Frequency Limit Violations
(FLV)
Frequency Limit
Compliance (FLC)
OK
7.
Number of Voltage Limit Violations (VLV)
Voltage Limit Compliance
(VLC)
OK
8.
System Losses
OK
9.
Frequency of Trippings per
100ckt-km (FOT/100ckt-km)
OK
10.
System Availability (SA)
OK
TransCo Proposed Weightings
Performance Indices
%
1.
System Interruption Severity Index
(SISI)
30
2.
Frequency of Tripping per 100 cktkm (FOT/100ckt-km)
25
3.
System Availability (SA)
25
4.
Frequency Limit Compliance (FLC)
10
5.
Voltage Limit Compliance (VLC)
10
ERC Proposed Weightings
PI
Weightings by Grid
Weightings
Luzon
Visayas
Mindanao
Total
SISI
45%
20%
50%
30%
100%
FOT
25%
32%
29%
39%
100%
SA
10%
34%
33%
33%
100%
FLC
10%
34%
33%
33%
100%
VLC
10%
29%
36%
35%
100%
Total
100%
Note: Weightings by Grid - based on proportional average performance
from 2000-2004 with higher proportion given to a bad performing grid
TransCo Proposed Bandwidth
ERC Proposed Bandwidth
PI
Deadband
Collar
(Penalty)
Low
Target
High
-3%
0%
0%
0%
Cap (Reward)
Max.
Measure
3%
Luzon
SISI
18.441
13.667
11.280
6.506
1.732
0 min.
FOT
7.515
5.838
5.000
2.485
0.809
0 min.
SA
99.002
99.127
99.190
99.440
99.565
100%
FLC
99.893
99.941
99.965
99.988
100.00
100%
VLC
64.615
75.579
81.060
86.542
97.506
100%
SISI
553.756
366.453
272.802
179.151
0.00
0 min.
FOT
10.215
8.074
7.004
2.723
0.582
0 min.
SA
98.877
99.026
99.100
99.397
99.546
100%
FLC
96.865
98.110
98.732
99.354
100.00
100%
VLC
98.028
99.041
99.547
100.00
SISI
116.766
79.983
61.592
43.201
6.418
0 min.
FOT
14.711
11.273
9.554
4.397
0.959
0 min.
SA
98.450
98.869
99.078
99.496
99.915
100%
FLC
99.684
99.788
99.840
99.892
99.997
100%
VLC
96.936
97.926
98.421
98.915
99.905
100%
Visayas
no reward
100%
Mindanao
ERC’s Approach:
1st Step – Set the Target based on “whichever is better
between the mean (i.e. from 2000 to 2004) and the
last year’s (i.e. 2004) measure of the PI”;
2nd Step – Set the Deadband to minus one-half (-1/2) STDEV
and plus two (+2) STDEV;
3rd Step – Change the Target to mean value (or last year’s
measure) if Cap value is falling beyond the Maximum
Measure;
4th Step – Reduce the +2 STDEV to a lower STDEV (i.e. +1½, +1
or +1/2) until such time that Cap will not fall beyond
the maximum measure;
Adjustment on the Reward
(ERC’s Approach)
On the Proposed Targets
PI
Mean
(2000-2004)
2004 Actual
Measure
Approach to
Target
Target
SISI
17.08
11.28
Lowest
11.28
FOT
7.58
5.00
Lowest
5.00
SA
99.19
99.17
Highest
99.19
FLC
99.95
99.96
Highest
99.96
VLC
81.06
90.77
Highest
90.77
SISI
272.80
591.04
Lowest
272.80
FOT
7.00
4.94
Lowest
4.94
SA
99.05
99.10
Highest
99.10
FLC
98.73
97.44
Highest
98.73
VLC
99.55
97.73
Highest
99.55
SISI
61.59
36.01
Lowest
36.01
FOT
9.86
8.13
Lowest
8.13
SA
99.08
98.88
Highest
99.08
FLC
99.84
99.74
Highest
99.84
VLC
98.42
99.58
Highest
99.58
Luzon
Visayas
Mindanao
(ERC’s Approach)
On the Deadband
Cap
Bonus / Penalty
+3%
0%
Deadband
1σ
½σ
2σ
Target
-3%
Collar
Performance
1σ
ERC’s Proposed Standard Deviation:
Deadband
Cap
(Rewar
d)
Collar
(Penalty)
Low
Target
High
-3%
0%
0%
0%
3%
SISI
1 STDEV
1/2 STDEV
Target
1 STDEV
1 STDEV
0 min.
FOT
1 STDEV
1/2 STDEV
Target
1½ STDEV
1 STDEV
0 min.
SA
1 STDEV
1/2 STDEV
Target
2 STDEV
1 STDEV
100%
FLC
1 STDEV
1/2 STDEV
Target
1/2 STDEV
<1 STDEV
100%
VLC
1 STDEV
1/2 STDEV
Mean
1/2 STDEV
1 STDEV
100%
SISI
1 STDEV
1/2 STDEV
Target
1/2 STDEV
<1 STDEV
0 min.
FOT
1 STDEV
1/2 STDEV
Mean
2 STDEV
1 STDEV
0 min.
SA
1 STDEV
1/2 STDEV
Target
2 STDEV
1 STDEV
100%
FLC
1 STDEV
1/2 STDEV
Target
1/2 STDEV
<1 STDEV
100%
VLC
1 STDEV
1/2 STDEV
Target
<1/2 STDEV
no reward
100%
SISI
1 STDEV
1/2 STDEV
Mean
1/2 STDEV
1 STDEV
0 min.
FOT
1 STDEV
1/2 STDEV
Mean
1½ STDEV
1 STDEV
0 min.
SA
1 STDEV
1/2 STDEV
Target
1 STDEV
1 STDEV
100%
FLC
1 STDEV
1/2 STDEV
Target
1/2 STDEV
1 STDEV
100%
VLC
1 STDEV
1/2 STDEV
Mean
1/2 STDEV
1 STDEV
100%
PI
Max.
Measure
Luzon
Visayas
Mindanao
(ERC’s Approach)
Bonus / Penalty
Adjustment on the Reward
Cap
+3%
Deadband
X%
0%
1σ
1/2 σ
1/2 σ
<1 σ
Target
a
-3%
b
Collar
Max. Measure
Performance
X% = 3%
a
b
(ERC’s Approach)
Adjustment on the Reward
Cap
+3%
Bonus / Penalty
Deadband
1σ
½σ
<½ σ
0%
No reward
Target
-3%
Collar
Max. Measure
Performance
END OF
PRESENTATION