The Energy Regulatory Commission (ERC) is adopting the Rationalized Rules for Setting Distribution Wheeling Rates (RRDWR) to determine the revenue requirements, capital and operating expenditures, performance incentive mechanisms, and annual rate adjustments of privately owned electric distribution utilities (PDUs).
‘After more than a decade of delays, the rate reset process for all private distribution utilities will soon happen after the Energy Regulatory Commission approved on Thursday the Rationalized Rules for Setting Distribution Wheeling Rates [RRDWR] for privately owned electric distribution utilities [PDUs] operating under the Performance-Based Regulation [PBR] framework,’ the agency said over the weekend.
The ERC’s approval of the RRDWR also marks a departure from the previous Regulatory Periods established for the PDUs, which were not adhered to due to the suspension or delays in the rate reset process.
The RRDWR embodies the methodology and process for setting the maximum allowable distribution, supply, and metering (DSM) rates of private DUs. It supersedes previous regulatory issuances governing the rate-setting process and incorporates internationally recognized practices to balance consumer protection with fair returns for utilities.
Under the RRDWR, the ERC uses a price-cap regulation methodology that sets a maximum allowable rate based on efficient costs, service quality targets, and measurable performance indicators. This approach encourages distribution utilities to improve efficiency and reliability while maintaining affordability for consumers.
‘The RRDWR also addresses the more than 10 years of delays in the reset of the PDUs’ distribution rates and serves as the framework for the upcoming Regulatory Reset for the First Regulatory Period [1st RP] of the First Entry Group, which includes the Manila Electric Co. [Meralco], Dagupan Electric Corporation [DECORP], Cagayan Electric Power and Light Company [CEPALCO], and Cotabato Light and Power Company [CLPC],’ it said.
The 1st RP of the First Entry Group covers the period from 1 July 2026 to June 30, 2030.
ERC said taking this decisive step ‘demonstrates its resolve’ to fulfill its legal mandate as the rate regulator for the power industry. It also underscores its commitment to a fair, transparent, and accountable regulatory process that ensures reasonable electricity rates, promotes operational efficiency, and supports the ongoing modernization of the country’s power distribution sector.