Adoption of Valuation Handbook for Distribution Utilities

The resolution is issued by the Energy Regulatory Commission (ERC).
The resolution is grounded on the ERC’s earlier distribution wheeling rate frameworks, including ERC Resolution No. 12-02, Series of 2004.
The resolution relies on the regulatory requirement that, before the Third Regulatory Period, each Regulated Distribution System must undergo asset re-valuation.
The resolution states that, for the Third Regulatory Period, asset re-valuation shall be undertaken by each Regulated Entity, subject to ERC review.

The resolution states that ERC Resolution No. 12-02, Series of 2004 was entitled “A Resolution Adopting a Methodology for Setting Distribution Wheeling Rates,” also known as the Distribution Wheeling Rates Guidelines (DWRG), which was renamed as the Rules for Setting Distribution Wheeling Rates for Privately-Owned Distribution Utilities (RDWR).
The resolution identifies the RDWR’s Clause 4.8.2 requirement for asset re-valuation tied to the Third Regulatory Period.
The resolution identifies the RDWR’s Article XIV as the basis for the option where valuation is undertaken by Regulatory Reset Experts retained by the Commission.
The resolution states that the Valuation Handbook supersedes:
- the Asset Valuation Policy Guidelines for Privately Owned Distribution Utilities Subject to Performance Based Regulation Final Determination dated August 9, 2006; and
- the Guidelines for Preparing Asset Schedules for Performance Based Regulatory Initial Asset Valuations dated March 2, 2009.

The resolution adopts a Valuation Handbook that establishes ERC requirements for valuing the Regulatory Asset Base (RAB) using the Optimized Depreciated Replacement Cost (ODRC) methodology.
The resolution provides that the Valuation Handbook governs how the ODRC valuation for fixed assets must be prepared for privately owned distribution utilities under Performance-Based Regulation (PBR).
The resolution emphasizes that valuation results must comply with the Valuation Handbook and form part of each entity’s Revenue Application.

The resolution provides that the ODRC valuation is governed by the Valuation Handbook for system fixed assets of privately owned distribution utilities under PBR.
The resolution states that, prior to the Third Regulatory Period, an asset re-valuation must be undertaken for each Regulated Distribution System.
The resolution provides two valuation options for each entry group, and both operate under the Valuation Handbook requirements:
- Option (a): The distribution utility engages an independent appraisal company; the ERC must also retain a Regulatory Reset Expert or Experts to review the valuation results and the Valuation Report.
- Option (b): The ERC’s Regulatory Reset Expert or Experts undertake the valuation (and preparation of the Valuation Report) pursuant to Article XIV of the RDWR.
The resolution provides that for the Third Regulatory Period, each Regulated Entity conducts the asset re-valuation, and the ERC reviews the valuations submitted by the distribution utility and may make adjustments when the supporting information is insufficient to substantiate the valuation.

The resolution identifies Clause 3.2.2 of the Position Paper as providing that each Regulated Entity conducts its valuation of its Regulatory Asset Base (RAB) in accordance with the Valuation Handbook.
The resolution states that the valuation results form part of each Regulated Entity’s Revenue Application.

The resolution states that the Valuation Handbook’s impact applies to the Third Regulatory Period Board.
The resolution states that the Valuation Handbook takes effect on July 1, 2011.
The resolution also sets the general effectivity rule: it takes effect fifteen (15) days after publication in a newspaper of general circulation in the Philippines.

The resolution directs compliance with a publication requirement as a condition for its effectivity.
The resolution requires furnishing copies of the resolution to the University of the Philippines Law Center–Office of the National Administrative Register (UPLC-ONAR).
The resolution requires furnishing copies to all Privately Owned Distribution Utilities Operating under the Performance Based Regulation.
The resolution attaches a copy of the Valuation Handbook as an Annex (“Annex A”).