Scribd Logo
Upload

Welcome to Scribd!

  • 208 views

    Rate Rebasing Concepts For Public Consultation, MWSS

    Uploaded by

    Imperator Furiosa
    The document discusses the rate rebasing framework for water utilities under concession agreements in the Philippines. It provides three key points: 1) Concession agreements require utilities to set rates that allow recovery of efficient and prudent operating, capital, maintenance, and investment costs over the 25-year term plus a rate of return. Rates are rebased through a formula using historical and future cash flows. 2) The rate rebasing process involves reviewing historical cash flows and service performance, approving projections for expenses, capital expenditures, demand, and other factors to set future cash flows and tariffs. 3) Rates are linked to service levels as the opening cash position reflects past service, expenditures impact future service and demand,

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd

    Rate Rebasing Concepts For Public Consultation, MWSS

    Uploaded by

    Imperator Furiosa
    208 views13 pages
    The document discusses the rate rebasing framework for water utilities under concession agreements in the Philippines. It provides three key points: 1) Concession agreements require utilities to set rates that allow recovery of efficient and prudent operating, capital, maintenance, and investment costs over the 25-year term plus a rate of return. Rates are rebased through a formula using historical and future cash flows. 2) The rate rebasing process involves reviewing historical cash flows and service performance, approving projections for expenses, capital expenditures, demand, and other factors to set future cash flows and tariffs. 3) Rates are linked to service levels as the opening cash position reflects past service, expenditures impact future service and demand,

    Original Description:

    Rate Rebasing Concepts for Public Consultation, June 11, 2013

    Original Title

    Rate Rebasing Concepts for Public Consultation, MWSS

    Copyright

    © Attribution Non-Commercial (BY-NC)

    Available Formats

    PPTX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    The document discusses the rate rebasing framework for water utilities under concession agreements in the Philippines. It provides three key points: 1) Concession agreements require utilities to set rates that allow recovery of efficient and prudent operating, capital, maintenance, and investment costs over the 25-year term plus a rate of return. Rates are rebased through a formula using historical and future cash flows. 2) The rate rebasing process involves reviewing historical cash flows and service performance, approving projections for expenses, capital expenditures, demand, and other factors to set future cash flows and tariffs. 3) Rates are linked to service levels as the opening cash position reflects past service, expenditures impact future service and demand,

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    208 views13 pages

    Rate Rebasing Concepts For Public Consultation, MWSS

    Uploaded by

    Imperator Furiosa
    The document discusses the rate rebasing framework for water utilities under concession agreements in the Philippines. It provides three key points: 1) Concession agreements require utilities to set rates that allow recovery of efficient and prudent operating, capital, maintenance, and investment costs over the 25-year term plus a rate of return. Rates are rebased through a formula using historical and future cash flows. 2) The rate rebasing process involves reviewing historical cash flows and service performance, approving projections for expenses, capital expenditures, demand, and other factors to set future cash flows and tariffs. 3) Rates are linked to service levels as the opening cash position reflects past service, expenditures impact future service and demand,

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 13

    THE RATE REBASING FRAMEWORK

    MWSS REGULATORY OFFICE

    Presentation Outline

    What the Concession Agreement Provides


    Rate Rebasing Guidelines Rate Setting vs Service Levels

    Concession Agreement Framework


    Economic Regulation
    TARIFF ASPECTS Tariffs Revenue Requirements Financial Monitoring TECHNICAL ASPECTS Service Quality Operational Performance Customer Services

    Source: Stone & Webber Consultants, Inc., Severn Trent Water International Ltd., IDP Consult, Inc. 2003. Introduction to Economic Regulation of Water Supply and Wastewater Utilities

    Concession Agreement Framework


    Asset Management Obligations operate, maintain and renew Meet Service Obligations provision of water supply & sewerage services

    Cash Flows prudently and efficiency incurred


    Historical and Future ; Receipts and Expenditures

    WHAT THE CA PROVIDES ON RATE REBASING


    Article 9.4 General Rate Setting Policy (Rate Rebasing) . . . the rates for water and sewerage services shall be set at a level that will permit the Concessionaire to recover over the 25-year term of the Concession operating, capital maintenance and investment expenditures efficiently and prudently incurred, Philippine business taxes and payments corresponding to debt service on the MWSS Loans and Concessionaire Loans incurred to finance such expenditures, and to earn a rate of return on these expenditures for the remaining term of the Concession.

    THE RATE REBASING FORMULA

    +
    +
    TARIFF = F. RECEIPTS FROM RATES F. BILLED VOLUME

    RATE REBASING FORMULA

    Opening Cash Position (OCP) Net Future Expenditures

    Net of Historical Receipts and Expenditures

    Stated in Current Prices

    Negative amount

    Expenditures net of other Receipts, and Expiration Payment

    Stated in Current Prices

    Efficiently and prudently incurred

    Cost of Money

    Project Return (not Equity)

    REAL Rate of Return (insulated from inflation)

    Represents Weighted Average Cost of Capital after Taxes

    RATE REBASING PROCESS

    Review Actual vs. Committed Performance on Service Obligations and Operational Efficiency

    Technical Aspects

    Reinforce, Modify or Enhance Service Obligations and Establish Performance Targets

    Historical Cash Flows or Opening Cash Position

    TARIFF

    Future Cash Flows

    THE RATE REBASING PROCESS


    Population growth Consumption patterns Demand vs. supply for reasonableness of projections

    Check accuracy and completeness

    RECEIPTS

    Demand Projections

    OPEX

    Audit for accuracy Prudency and efficiency test; benchmark determine intercompany costs for disallowances Ring-fencing
    Audit for accuracy Prudency and efficiency test, benchmark determine related party transactions for disallowances Ring-fencing

    OPEX

    Check for reasonableness of projections Check prudency and efficiency Benchmark

    CAPEX

    CAPEX

    Check for reasonableness of projection Check prudency and efficiency Benchmark MWSS-CO review

    Service Obligations Rewards and KPIs, BEMs NRW, OPEX penalties

    ADR

    Cost of Equity Cost of Debt Gearing Ratio


    Check accuracy of estimates of Concession Fees Check inclusion of other operating reciepts Determine appropriate macro-economic assumptions (i.e. inflation, forex rates)

    Others

    Review non-recurring costs such as retirement pay Review accuracy of recorded concession fee payments

    Others

    RATES vs LEVELS OF SERVICE

    T A R I F F

    S L E E R V O V E F I L C S E

    HOW??

    LEVELS OF SERVICE
    COVERAGE AVAILABILITY PRESSURE QUALITY RESPONSE TO CUSTOMER COMPLAINT/REQUEST INFORMATION TO CUSTOMERS

    RATES vs SERVICE LEVELS

    Opening Cash Position (OCP)

    REFLECTS THE PAST ACTIVITIES OF THE CONCESSIONAIRES THAT RESULTED IN THE PRESENT LEVELS OF SERVICE

    INCLUDES PENALTIES FOR FAILURE TO MEET SERVICE LEVEL TARGETS

    Net Future Expenditures


    Cost of Money Future Billed Volume

    BASED ON TARGET LEVELS OF SERVICE

    REFLECTS FUTURE ACTIVITIES OF THE CONCESSIONAIRES TO MEET THE SERVICE LEVEL TARGETS

    AFFECTS WILLINGNESS OF CONCESSIONAIRES TO INVEST IN F. EXPENDITURES

    IN TURN, LEVELS OF F. EXPENDITURES AFFECTS BILLED VOLUME AND LEVELS OF SERVICE

    AFFECTED BY LEVELS OF F. EXPENDITURES

    AFFECTS LEVELS OF SERVICE (I.E. COVERAGE, AVAILABILITY AND PRESSURE)

    THANK YOU

    You might also like