REGULATORY ASSET

BASE VALUATION
USING ODRC

Meralco Experience
Presentation Outline

I. ODRC Background
II. Asset Accounting
III. Replacement Costs
IV. Optimization
V. Depreciation
VI. Results of Meralco’s ODRC
Valuation
Conceptual Framework

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.
 Typical Entries in the ODRC Register

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A3A 0300000001 PTX001 Power 1 01/01/82 45 132,382,744 - 132,382,744 60,326,864
Transformer,
230/115/13.8 kV,
300 MVA

A3B 0300000177 BB0005 230 kV Breaker 3 01/01/92 35 - 29,425,149 - 29,425,149 17,240,177

& Disconnect
Module (3 pole)

A6 03000015955 OH0011 #4/0 AWG Bare 22 01/31/06 35 3,472 3,431 11,286 - 11,286 11,153
Copper
Conductor

A12 0300015804 DT0002 DT, 25 kVA, 100 1/1/06 30 4,595,473 4,519,931 8,919,800 - 8,919,800 8,773,173
19.92 kV -
240/120 V, 1 ph,
Pole Mounted
Asset Accounting
Asset Accounting Tools

1. Fixed Asset Register (FAR)

2. Automated Mapping/Facilities Management (AM/FM)

3. Field Verification/Sampling
Challenges Encountered by Meralco
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

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
Sample Meralco Substations Survey
Schedule
Major Substations: From March 15 – April 7, 2006
Minor Substations: From June 1 – June 8, 2006
SUBSTATION VOLTAGE LEVEL AREA DATE GROUP ADDRESS
AYALA ALABANG 110 kV - 34.5kV - 13.8kV SOUTH 20-Mar-06 A Madrigal Business Park, Bo. Alabang, Muntinlupa
CALUMPIT 69 kV - 13.8 kV NORTH 20-Mar-06 B McArthur Highway, Bo. San Marcos, Calumpit, Bulacan
CBP1A 110 kV - 34.5kV - 13.8kV CENTRAL 20-Mar-06 C Reclamation Area, Roxas Blvd., Pasay
GARDNER 110 kV - 34.5kV - 13.8kV SOUTH 20-Mar-06 D Sucat, Muntinlupa
MANDALUYONG 110 kV - 34.5kV - 13.8kV CENTRAL 20-Mar-06 E Edsa, Mandaluyong
B. F. PARANAQUE 110 kV - 34.5kV - 13.8kV SOUTH 21-Mar-06 A Bo. San Dionisio, Paranaque
DILIMAN 110 kV - 34.5kV - 13.8kV NORTH 21-Mar-06 B Diliman, Quezon City
NOVALICHES 110 kV - 34.5 kV - 13.8 kV NORTH 21-Mar-06 C
D Quirino Highway, Novaliches, Quezon City
MALIBAY 111 kV - 34.5 kV - 13.8 kV CENTRAL 21-Mar-06 C Pasong Tamo, Makati
SUNVALLEY 110 kV - 34.5kV - 13.8kV SOUTH 21-Mar-06 E Sun Valley Drive, Paranaque, Metro Manila
BAGBAGUIN 110 kV - 34.5 kV - 13.8 kV NORTH 22-Mar-06 A Molina Compound, Molina St., Bagbaguin, Valenzuela
CAINTA 110 kV - 34.5kV - 13.8kV CENTRAL 22-Mar-06 B Ortigas Avenue Extension, Bo. Sto. Domingo, Cainta, Rizal
DOLORES 110 kV - 34.5kV - 13.8kV CENTRAL 22-Mar-06 C Bo. Dolores, Taytay, Rizal
PAMPLONA 110 kV - 34.5kV - 13.8kV SOUTH 22-Mar-06 D Sta. Cecilia, Kubo-kob, Bo. Pamplona, Las Pinas, Mapulang Lupa, M.M.
ZAPOTE 110 kV - 34.5kV - 13.8kV SOUTH 22-Mar-06 E Bo. Zapote, MCCRRP
BALIBAGO 110 kV - 34.5 kV - 13.8 kV SOUTH 23-Mar-06 A Sta. Rosa, Bo. Balibago, Sta. Rosa, Laguna[Road To Filsyn]
BOCAUE 110 kV - 34.5 kV - 13.8 kV NORTH 23-Mar-06 B Dona Remedios, Trinidad Highway, Bo. Sto. Cristo, Baliwag, Bulacan
CUBAO 110 kV - 34.5kV - 13.8kV CENTRAL 23-Mar-06 C Cubao, Quezon city
LIIP 110 kV - 34.5 kV - 13.8 kV SOUTH 23-Mar-06 D LIIP, Binan, Laguna
STA. MARIA 110 kV - 34.5 kV - 13.8 kV NORTH 23-Mar-06 E Bocaue Exit, Bocaue-Sta. Maria Provincial Road, Bo. Turo, Bocaue, Bulacan
MALOLOS 69 kV - 13.8 kV NORTH 24-Mar-06 A La Trinidad, Bo. Bundukan, Bocaue, Bulacan
CARMELRAY 110 kV - 34.5 kV - 13.8 kV SOUTH 24-Mar-06 B Bo. Canlubang, Calamba, Laguna
HILLCREST 110 kV - 34.5kV - 13.8kV CENTRAL 24-Mar-06 C Hillcrest Drive, Pasig Blvd., Pasig
TAGUIG 110 kV - 34.5kV - 13.8kV CENTRAL 24-Mar-06 D Elizco Road, Taguig, Metro Manila
LISP 110 kV - 34.5 kV - 13.8 kV SOUTH 24-Mar-06 E Bo. Diezmo, Cabuyao, Laguna
SAN MIGUEL 69 kV - 13.8 kV NORTH 27-Mar-06 A Cagayan Valley Road, Provincial Road, Bo. Silangan, San Miguel, Bulacan
Actual Field Verification

Pre-survey Meeting
Actual Field Verification

Verification of Single-line diagrams

and nameplate ratings
Actual Field Verification

Verification of switchgear and control

room equipment
Learnings on Asset Accounting

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.
Replacement Cost (RC)
Replacement Cost
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.
Challenges Encountered by Meralco

Cost Estimating Methods

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.

Learnings on Replacement Cost

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.
Optimization
Optimization

In practice, optimization is carried out in accordance with the

following principles:
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.
Planning Horizon

Network Components Planning Horizon

Subtransmission lines
Substations (excluding transformers) 15 years
Primary distribution circuits (2022)

Points of connection to transmission network

Substation transformers 10 years
(2017)
Distribution Line Transformers

Secondary distribution circuits 5 years

Low voltage network (2012)
Other distribution assets
Factors Considered in the Optimization

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

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
SUMMARY OF PROPOSED OPTIMIZATION OF PBA OF
MERALCO DISTRIBUTION ASSETS

Asset Sub-
Category Description Count

Substation I. 34.5 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.
Loading Of Distribution Transformers
(2012)
TOTAL DT CAPACITY ENERGY DELIVERY
SECTOR IN 2006 APRIL, 2012 UTILIZATION
(KVA) (KWH) LF=1.0 LF=0.4
ALABANG 899,480.00 161,535,234 24.9% 62.4%

BALINTAWAK 735,964.50 116,700,321 22.0% 55.1%

DASMARINAS 770,885.50 103,218,433 18.6% 46.5%

MANILA 1,551,839.50 248,179,890 22.2% 55.5%
PASIG 2,490,373.50 381,887,940 21.3% 53.2%
PLARIDEL 654,713.00 103,302,858 21.9% 54.8%
RIZAL 642,898.50 118,988,822 25.7% 64.3%
SAN PABLO 419,290.50 62,890,315 20.8% 52.1%
STA. ROSA 722,460.50 114,500,776 22.0% 55.0%

VALENZUELA 1,322,403.50 196,614,651 20.6% 51.6%

TOTAL 10,210,309.00 1,607,819,240 21.9% 54.7%
 SUMMARY OF PBA’s PROPOSED OPTIMIZATION OF
MERALCO DISTRIBUTION ASSETS

% Optimized
Asset

1 Substation 6.72%

2 Line Transformers * 0.16%

3 Meters 40.41%

* PBA found the optimization of line transformers not significant and thus was not
included in the final valuation report.
 Learnings on Optimization

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.
Depreciation
Depreciation

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
Factors in assessing effective lives

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
Challenges Encountered by Meralco

• 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

Learnings on Asset Lives

Finalize failure rates for power transformers, distribution

transformers and meters.

PBA used a 10% annual DT failure rate (of the total DT

population)
Results of Meralco’s
ODRC Valuation
Results of Valuation
Replacement Optimisation Optimsed Optimised
Meralco Cost Adjustment Replacement Depreciated
Cost Replacement
Cost
A. Distribution Plant
A1 Land and Land Rights (Distribution Purpose) 100% 0% 100% 100%

A2 Structures and Improvements (Distribution 100% -1% 99% 68%

Purpose)
A3 Station Equipment 0% 0% 0% 0%
A3a Power transformers 100% 0% 100% 63%
A3b Switchgear 100% -7% 93% 53%
A3c Protective equipment 100% 0% 100% 43%
A3d Metering & control equipment 100% 0% 100% 51%
A3e Communications equipment 100% 0% 100% 36%
A3f Other station equipment 100% 0% 100% 51%
A4 Poles, Towers and Fixtures – Distribution 100% 0% 100% 58%

A5 Poles, Towers and Fixtures – Customer 0% 0% 0% 0%

A6 Overhead Conductors and Devices – 100% 0% 100% 64%
Distribution
A7 Overhead Conductors and Devices – 0% 0% 0% 0%
Customer
A8 Underground Conduits – Distribution 100% 0% 100% 65%
A9 Underground Conduits - Customer 0% 0% 0% 0%
Results of Valuation
Replacement Optimisation Optimsed Optimised
Meralco Cost Adjustment Replacement Depreciated
Cost Replacement
Cost
A10 Underground Conductors and Devices – 100% 0% 100% 89%
Distribution
A11 Underground Conductors and Devices – 0% 0% 0% 0%
Customer
A12 Line Transformers – Distribution 100% 0% 100% 58%
A13 Line Transformers – Customer 0% 0% 0% 0%
A14 Power Conditioning Equipment 100% 0% 100% 48%
A15 Services 100% 0% 100% 53%
A16 Meters, Instruments & Metering 100% -40% 60% 42%
Transformers-distribution
A17 Meters, Instruments & Metering 0% 0% 0% 0%
Transformers – customer
A18 Information technology equipment 100% 0% 100% 14%
(distribution)
A19 Regulated Entity Property on Consumers' 100% 0% 100% 50%
Premises
A20 Street Lights and Signal Systems 100% 0% 100% 36%
A21 Submarine Cables 0% 0% 0% 0%
SUB-TOTAL 100% -8% 92% 55%
% FROM TOTAL 79%
Results of Valuation
Replacement Optimisation Optimsed Optimised
Meralco Cost Adjustment Replacement Depreciated
Cost Replacement
Cost
B. General Plant
B1 Land and Land Rights (non-network) 100% -13% 87% 87%
B2 Structures and Improvements (non-network) 100% -8% 92% 32%

B3 Office Furniture and Equipment 100% 0% 100% 10%

B4 Transportation Equipment 100% 0% 100% 12%
B5 Stores Equipment 100% 0% 100% 38%
B6 Tools, Shop and Garage Equipment 100% 0% 100% 43%
B7 Laboratory Equipment 100% 0% 100% 54%
B8 Information systems equipment (non- 100% 0% 100% 14%
network)
B9 Power-operated Equipment 100% 0% 100% 51%
B10 Communication Plant and Equipment 100% 0% 100% 36%
B11 Miscellaneous Equipment 100% 0% 100% 27%
C. Materials and Supplies (including 100% 0% 100% 100%
spares)
D. Transf. subtransmission assets 0% 0% 0% 0%
E. Allocated OH Capitalized 0% 0% 0% 0%
SUB-TOTAL 100% -9% 91% 67%
% FROM TOTAL 21%
TOTAL 100% -8% 92% 57%
Results of Valuation

As of June 30, 2006

Meralco Depreciated Replacement Cost Optimized Optimized
Historical Cost Replacement Cost Depreciated
Replacemnt Cost
Totals 48,819,313,786 169,072,111,739 155,257,925,205 96,640,693,811
Percentages 29% 100% 92% 57%
THANK YOU!