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REGULATORY ASSET BASE VALUATION USING ODRC Meralco Experience.

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Presentation on theme: "REGULATORY ASSET BASE VALUATION USING ODRC Meralco Experience."— Presentation transcript:

1 REGULATORY ASSET BASE VALUATION USING ODRC Meralco Experience

2 Presentation Outline I.ODRC Background II.Asset Accounting III.Replacement Costs IV.Optimization V.Depreciation VI.Results of Meralcos ODRC Valuation

3 Optimized Depreciated Replacement Cost (ODRC) is calculated based on the gross current replacement cost of assets that are adjusted for over-design, over-capacity and/or redundancy, less an allowance for depreciation. Conceptual Framework

4 Typical Entries in the ODRC Register

5 Asset Accounting

6 1.Fixed Asset Register (FAR) 2.Automated Mapping/Facilities Management (AM/FM) 3.Field Verification/Sampling Asset Accounting Tools

7 Asset information was stored in several databases so asset tracker counts and other sources such as Mapguide & AM/FM, Meter Device Management System (MDMS), Transformer Inventory (TRINV), OTMS, CMS and SCADA have discrepancies. Asset Tracker provided the historic costs, count, age AM/FM system provided the physical location for verification ERC used the Asset Tracker after comparison and verification with other asset database Challenges Encountered by Meralco

8 For Substation Assets Asset accounting was done using 100% field survey of all Meralco substations (79 major substations and 44 minor substations) Installation date was captured during site inspections from name plate ratings Count of equipment was determined using single line diagrams Extensive photographic records were taken Challenges Encountered by Meralco

9 Sample Meralco Substations Survey Schedule Major Substations: From March 15 – April 7, 2006 D Minor Substations: From June 1 – June 8, 2006

10 Actual Field Verification Pre-survey Meeting

11 Actual Field Verification Verification of Single-line diagrams and nameplate ratings

12 Actual Field Verification Verification of switchgear and control room equipment

13 1.There should only be one facility manager per item who tracks the total count & other relevant information (installed, for test, under repair, available in stock, for disposal, monthly usage and if possible forecast requirements). 2.Revive the pole monitoring system. 3.Assign company numbers to all major equipment upon acceptance. Learnings on Asset Accounting

14 Replacement Cost (RC)

15 Replacement Cost can be established by: a.Reference to historical costs, adjusted for inflationary increases since construction (indexation) b.Comparison with recent costs of similar assets (replacement cost method) c.Reference to technologically advanced assets in use elsewhere (modern equivalent asset) Aside from material and labor costs, RC includes design and engineering costs, transport, freight, duty, local delivery, interest during construction, etc. Replacement Cost

16 1. There were differences between the estimated and actual costs because of the following: a.Average material costs were used instead of last purchase cost. b.Overtime and night differential cost not considered as relevant cost. 2. Actual and estimated labor cost do not match perfectly. Challenges Encountered by Meralco Cost Estimating Methods

17 1.Incorporate overtime and night differential pay in the cost estimates. 2.Review manhours requirement per constructive unit. 3.Implementing offices to explain if there are wide discrepancies between estimated and actual costs. LearningsReplacement Cost Learnings on Replacement Cost

18 OptimizationOptimization

19 a.Exclude stranded assets. b.Optimize the configuration of the network – system is reconfigured resulting in a lower value network. c.Optimize the capacity of elements in the network. d.Optimize network engineering – components of the network are replaced with components with lower value. e.Optimize stores and spares. OptimizationOptimization In practice, optimization is carried out in accordance with the following principles:

20 Planning Horizon Network ComponentsPlanning Horizon Subtransmission lines 15 years (2022) Substations (excluding transformers) Primary distribution circuits Points of connection to transmission network Substation transformers10 years (2017) Distribution Line Transformers Secondary distribution circuits5 years Low voltage network(2012) Other distribution assets

21 1.Loading of delivery point power transformers or grid exit points 2.Loading of subtransmission lines 3.Subtransmission System Configuration (number and size of transformers and feeders per substation) 4.Loading of substation power transformers 5.Substation topology (breaker-and-a-half bus configuration against single bus scheme) 6.Substation engineering (AIS or GIS 34.5 kV switchgear, spare GIS breakers, OLTC vs. AVRs) Factors Considered in the Optimization

22 7. Loading of distribution lines 8. Loading of distribution line transformers 9. Circuit breaker interrupting current ratings 10. Power conditioning equipment 11. Low voltage service 12. Spares – meters, DTs, poles and wires 13. Load Forecast Factors Considered in the Optimization

23 Asset Sub- Category Description Count Substation I kV GIS cost to AIS cost 30 II. Breakers for future use on GIS Substations a. CBP1A 3 b. Hillcrest 2 c. Legazpi 2 d. Zapote 3 III. Optimisation due to CB Fault level Optimisation * a. 40 kA to 31.5 kA 22 b. 40 kA to 25 kA 44 * Optimization of circuit breakers was not included in the final valuation report but included in the optimization report. SUMMARY OF PROPOSED OPTIMIZATION OF PBA OF MERALCO DISTRIBUTION ASSETS

24 Loading Of Distribution Transformers (2012) SECTOR TOTAL DT CAPACITY IN 2006 ENERGY DELIVERY APRIL, 2012UTILIZATION (KVA)(KWH)LF=1.0LF=0.4 ALABANG 899, ,535, %62.4% BALINTAWAK 735, ,700, %55.1% DASMARINAS 770, ,218, %46.5% MANILA 1,551, ,179, %55.5% PASIG 2,490, ,887, %53.2% PLARIDEL 654, ,302, %54.8% RIZAL 642, ,988, %64.3% SAN PABLO 419, ,890, %52.1% STA. ROSA 722, ,500, %55.0% VALENZUELA 1,322, ,614, %51.6% TOTAL 10,210, ,607,819, %54.7%

25 SUMMARY OF PBAs PROPOSED OPTIMIZATION OF MERALCO DISTRIBUTION ASSETS Asset % Optimized 1Substation6.72% 2Line Transformers *0.16% 3Meters40.41% * PBA found the optimization of line transformers not significant and thus was not included in the final valuation report.

26 1.Review policies on GIS modules and circuit breaker fault ratings. 2.Improve the process of DT monitoring (existence, SIN to DT connectivity, kWH to kW computation). 3.Review policies on DT sizing to increase the loading of the DTs (minimum capacity, initial kVA size). 4.Review asset data on meters. Learnings on Optimization

27 DepreciationDepreciation

28 Straight line depreciation is adopted. Factors to consider: 1.Effective lives – estimated life, assuming continued use in its present function as part of a continuing business. 2.Age of equipment DepreciationDepreciation

29 1.Manufacturers recommendations 2.Maintenance levels and life extension policies 3.Environment in which the assets reside 4.External factors such as supply/demand characteristics 5.Physical, technological, functional and economic obsolescence 6.Survivor data – failure rates Factors in assessing effective lives

30 Insufficient validated failure rate records and asset life of equipment - Power Transformers, Breakers, Distribution Transformers, Meters, Poles and Wires - Not all asset data were available or easy to gather Aside from depreciation, this data is used to justify spare units Challenges Encountered by Meralco

31 Finalize failure rates for power transformers, distribution transformers and meters. PBA used a 10% annual DT failure rate (of the total DT population) Learnings on Asset Lives

32 Results of Meralcos ODRC Valuation

33 Results of Valuation

34

35

36 As of June 30, 2006

37 THANK YOU!


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