This was the presentations made by my college classmates in BSEE. Enjoy Reading!!!

1. PREPARED BY:
NOMAR G. VILLENA
BRYAN G. MONTIVEROS
BSEE-5B

2. 1. Unrestricted competition
2. Monopolistic control
3. Government ownership and control

3. In order to determine the yearly
fixed charges on a particular property,
it is first necessary that its “fair value”
be known. The determination of the
fair value of an established business is
not such an easy problem as might be
expected.

4. 1. Original cost of the property.
2. Reproduction cost or replacement cost.
3. Amount and market value of its securities.
4. Probable earning capacity of the utility
under a rate prescribed by statute.
5. Operating expenses.
6. Value of service to the customer.

5. Two distinctly different
fundamental principles upon
which have been based the rates
for service as charged by different
utilities:
- Value of service theory
- Cost of service

6. It is the outcome of the old belief
that a utility is entitled to as much
income as the traffic will bear. It is
applicable to all business enterprises
that are conducted under unrestricted
competition where the law of supply
and demand controls.

7. Includes the yearly charges upon
the initial investment and also the
yearly operating costs. There are good
many classifications that can be given
these two items, but fixed charges
and operating costs seem to be
simple and also clear.

8. FIXED CHARGES
INSURANCE
TAXES
DEPRECIATION
INTEREST
PHYSICAL
FUNCTIONAL
FIRE
PROPERTY DAMAGE
LIABILITY
OPERATING COSTS
ADMINISTRATION
SUPERINTENDENCE
OPERATION MAINTENANCE
AND REPAIRS
PROMOTION
LEGAL
ENGINEERING
ACCOUNTING

9. These are the charges necessary
to carry the investment and to replace
the equipment when it is worn out or
destroyed. Interest and taxes carry the
investment, while insurance and
accumulated depreciation funds cover
retirements of physical property.

10. Taxes – proportionately more variable than
interest.
Insurance – common types of insurance
carried by electric utilities are: fire,
boiler, accident, employers, liability,
automobile, hurricane, tornado, etc.
Depreciation – property and equipment takes
place continually and at some time
most equipment will reach a condition
at which it has only a small value or no
value at all.

11. Involves the amount that should
be earned in addition to operating
expenses, taxes, insurance, retirement
provisions, and surplus.
The proper gross income after all
the above costs have been provide
for.

12. - Physical depreciation
- Functional depreciation

13. Is the result of deterioration due to
some physical action, such as wear and
tear, decay, or corrosion.
This type of depreciation begins at
the time the equipment is installed, and
its continual presence causes a gradual
decrease in value.

14. Is the result of lack of
adaptation to function,
caused by obsolescence and
inadequacy.

15. Salvage or scrap value – is the value of equipment
at the time it is removed from service in
any given location, either to be installed
elsewhere or to be sold as junk.
Removal costs – covers all items of cost that are
incurred in the removal of any equipment,
at the time it is taken out of service.
Net depreciation value – is the original cost plus
removal cost, less the salvage value. It is
the net amount which must be provided in
order that the property may be maintained
on as sound a financial basis as at the time
of its inception.
Forecasting depreciation

16. In this method all depreciation is taken
care of through maintenance accounts
covering repairs and renewals. This method is
applicable to very large companies, in which
the replacement of its largest single element
would be but a small percentage of the total
investment. For smaller industries this method
would be likely to produce too much
irregularity in the maintenance expense and
corresponding fluctuation in net income.

17. The original book cost, plus the cost of
removal, less salvage, divided by the
years of expected life, gives the annual
depreciation rate.
Amortization or sinking fund method
Assumes that the accumulated
depreciation fund is invested and bears
interest.

18. Method of accumulating the
necessary reserve to take care of
depreciation be left somewhat flexible
and subject to the judgment of the
management in order to meet the
varying conditions of the business
including fluctuations of revenue
which are caused by cycles in business
prosperity.

19. The interconnection of systems
tends to produce higher load factors on
the generating plants, thereby causing a
decrease in the unit cost of fixed charges
and production cost. Interconnection
requires high voltage transmission, the
cost of which must be taken into
account in the final analysis of
production costs.

20. In developing any system of rates for
electric service, there are three very
important factors that must be kept in
mind:
1. Fairness to the utility.
2. Fairness to the consumers collectively.
3. Fairness among consumers.

21. a) connected load;
b)demand;
c) demand factor;
d)diversity factor;
e) load factor;
f) power factor.

22. 1. Residence lighting
2. Heating or cooking
3. Commercial
lighting
4. Street lighting
5. Commercial power
6. Mine power
7. Railway power
8. Wholesale power

23. 1. Customers’ cost
2. Demand cost
3. Energy cost

24. In general, rate schedules may be of
any of the following forms:
1. Flat rates
2. Energy rates
3. Demand rates
Straight-line rates
Step rates
Block rates

25. Flat rates
Consist of a fixed rate per month or
year for each energy-consuming device. It
is often used in street-lighting contracts
where a flat rate per lamp per month or
year is charged.
Energy rates
As the name implies, represents any
system of rates in which charge is made for
the actual energy used by the customer.

26. Straight line is a constant-unit
charge independent of the amount of
electricity used.
Step is applied to all energy rates
in which the unit charge decreases
with an increase of consumption of
energy.

27. Include any system in which
charges are based upon the
maximum demand.

28. Apportioning of the cost of service can be
obtained by using combination rate schedules,
which are generally as follows:

30. 1990 – the Philippines was confronted with a crisis
of insufficient electrical generating capacity.
Metro Manila and 33 provinces in Luzon power grid
experienced brownouts of up to 4 hours a day.
The root of the problem was the decision of Marcos
regime to build a 620 MW nuclear power plant on
the Bataan peninsula.

31. Continuation…..
The Aquino government decided not to use the
facility mainly because it was located in a seismic
fault.
As a result, a badly needed expansion of generating
capacity in Luzon, which accounted for 75% of
national electric consumption, did not come on line.
President Fidel V. Ramos acted upon the situation and
addresses the congress to enact the law that would
create an energy department that would plan and
manage the Philippines’ energy demand.

32. Continuation…..
The congress responded by not only creating the
Department of Energy (DOE) but also giving president
F.V. Ramos emergency powers to resolve the energy crisis
President Ramos eventually issued licenses to Independent Power
Producers (IPP) to construct power plants in 24 months. He also
supplied contracts that guaranteed that the government would buy
whatever power the IPPs produced under the contract in US dollars
to entice investments in power plants.
This solved the power crisis and created a stable supply
of electricity in a growing and developing economy of
the Philippines.

33. Continuation…..
1997 – the Asian Financial Crisis affected the
Philippines and other countries in Southeast Asia.
This has led to some of closing some companies
which created a surplus in electricity.
Philippine Peso devaluated rapidly leaving a great
concern for the contracts of IPPs.

34.  An entity which is not a public
utility, which owns facilities
that generate electric power for
sale to utilities and end users.
 The National Power
Corporation secured the
accreditation of more than 40
IPPs and IPP contracts.
 IPPs were largely petroleum
based, with lower installation
costs but higher fuel costs.

35.  The government and consumers also assumed
the market risks through generous take or pay
guarantees.
 In addition to the high initial costs of the IPPs,
the Asian Crisis also dramatically upset all the
economic growth of the country and foreign
exchange assumptions of the IPPs.
 This meant much higher fuel costs and
oversupply of electricity capacity.

36. Power purchased adjustment or PPA
represents the increase in the cost of power
purchased from the National Power
Corporation (NPC) and other suppliers or
IPPs. The PPA is a cost adjustment
mechanism approved by Energy Regulatory
Commission (ERC) to reflect changes in the
cost of power bought from NPC and IPPs.

37. Currency exchange rate adjustment or
CERA is another type of cost adjustment
mechanism approved by ERC. This aims to
recover the change in foreign denominated
operating costs and principal debts
repayment due to exchange rate movements.

38.  PPA and CERA are additional monthly cost being
shoulder over and above the daily consumption of
electricity and expenses to meet the needs of every
consumer.
 Generally electricity rates in the Philippines, with
PPA included, are higher compared neighboring
nation.
This makes investment in the Philippines hard to
materialize.

39. The supreme court of the Philippines
ruled to compel distribution utilities like
MERALCO to refund its customers billions
of Pesos perceived to be PPA payments of its
consumers and to abide by the Court’s
decision with respect to payment of taxes
which formed part of the company’s
operating expenses.

40.  As the Philippines experience power outages enough to be
regarded as a national crisis, Ramos administration turned
to private sectors for solutions.
 Using the 1987 Executive Order that allowed the private
sector to generate electricity, and by enacting a Build-
Operate-Transfer (BOT) law in infrastructure projects, the
government opened the floodgates for contracts with
private generation companies or IPPs.
 After the onslaught of the Asian Financial Crisis, in 2001
Republic Act 9136 or the Electric Power Industry Reform
Act was signed in to law.

41.  To ensure and accelerate the total electrification of the
country.
 To ensure the quality, reliability, security and affordability of
the supply of electric power.
 To ensure transparent and reasonable prices of electricity in a
regime of free and fair competition and full public
accountability to achieve greater operational and economic
efficiency and enhance the competitiveness of Philippine
products in the global market.
To enhance the inflow of private capital and broaden the
ownership base of power generation, transmission and
distribution sectors.
 To ensure fair and non discriminatory treatment of public
and private sector entities in the process of restructuring the
electric power industry.

42.  To protect the public interest as it is affected by the rates
and services of electric utilities and other providers of
electric power.
 To assure socially and environmentally compatible energy
sources and infrastructure.
 To promote the utilization of indigenous and new and
renewable energy resources in power generation in order to
reduce dependence on imported energy.
 To provide for an orderly and transparent privatization of
the assets and liabilities of the National Power Corporation
(NPC).
 To establish strong and purely independent regulatory body
and system to ensure consumer protection and enhance the
competitive operation of the electricity market.
 To encourage the efficient use of energy and other
modalities of demand side management.

43. Before the EPIRA, distribution utilities’ franchise was a
monopoly of both distribution of services and supply
NPC
Plants Transmission
NPC
IPPs
IPPs of
distribution
utilities
Distribution
(Cooperatives
& IOUs)
Industrial
Commercial
Residential
Others

44. Under the EPIRA, supply is no longer a franchise obligation but a business decision.
Privatized
Gencos
New
Gencos
IPPs
Own
Generation
Spot Market
Retail
Suppliers
Distribution
Wires
1 MW and
up
750 kW
< 750 kW
Lifeline
Customers

45.  NPC’s generation and transmission functions were
unbundled.
 National Transmission Corporation (TRANSCO) was
created to own and operate the transmission assets and
perform the transmission functions previously under NPC.
 A fully privatized corporation which is National Grid
Corporation of the Philippines took over TRANSCO’s
responsibilities.
 The missionary electrification program is undertaken by
NPC through the Small Power Utilities Group (SPUG).
 PSALM Power Sector Assets and Liabilities Management
Corp. was created to liquidate the assets and liabilities of
NPC.

46. Build-Operate-
Transfer (BOT)
contracts
Divestiture
(full
privatization)
through asset
sale
Corporatization
of electric
cooperatives
Concession
agreement
Management
Contract

47. Transparency
Vested
Interest
Institutional
Intervention
Consumer
Representation
Regulatory
Issues
Competition
Policy

48. THANK YOU!!!