REGULATORY ASSET BASE VALUATION USING ODRC Meralco Experience

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REGULATORY ASSET BASE VALUATION USING ODRC
Meralco Experience
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Presentation Outline

• ODRC Background
• Asset Accounting
• Replacement Costs
• Optimization
• Depreciation
• Results of Meralcos ODRC Valuation

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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.
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Typical Entries in the ODRC Register
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Asset Accounting
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Asset Accounting Tools

• Fixed Asset Register (FAR)
• Automated Mapping/Facilities Management (AM/FM)
• Field Verification/Sampling

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Challenges Encountered by Meralco

• Asset information was stored in several
  databasesso 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

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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

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Sample Meralco Substations Survey Schedule
Major Substations From March 15 April 7, 2006
Minor Substations From June 1 June 8, 2006
D
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Actual Field Verification
Pre-survey Meeting
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Actual Field Verification
Verification of Single-line diagrams and
nameplate ratings
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Actual Field Verification
Verification of switchgear and control room
equipment
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Learnings on Asset Accounting

• 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).
• Revive the pole monitoring system.
• Assign company numbers to all major equipment
  upon acceptance.

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Replacement Cost (RC)
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Replacement Cost

• Replacement Cost can be established by
• Reference to historical costs, adjusted for
  inflationary increases since construction
  (indexation)
• Comparison with recent costs of similar assets
  (replacement cost method)
• 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.

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Challenges Encountered by Meralco
Cost Estimating Methods

• 1. There were differences between the estimated
  and actual costs because of the following
• Average material costs were used instead of last
  purchase cost.
• Overtime and night differential cost not
  considered as relevant cost.
• 2. Actual and estimated labor cost do not match
  perfectly.

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Learnings on Replacement Cost

• Incorporate overtime and night differential pay
  in the cost estimates.
• Review manhours requirement per constructive
  unit.
• Implementing offices to explain if there are wide
  discrepancies between estimated and actual costs.

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Optimization
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Optimization
In practice, optimization is carried out in
accordance with the following principles

• Exclude stranded assets.
• Optimize the configuration of the network
  system is reconfigured resulting in a lower value
  network.
• Optimize the capacity of elements in the network.
• Optimize network engineering components of the
  network are replaced with components with lower
  value.
• Optimize stores and spares.

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Planning Horizon
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Factors Considered in the Optimization

• Loading of delivery point power transformers or
  grid exit points
• Loading of subtransmission lines
• Subtransmission System Configuration (number and
  size of transformers and feeders per substation)
• Loading of substation power transformers
• Substation topology (breaker-and-a-half bus
  configuration against single bus scheme)
• Substation engineering (AIS or GIS 34.5 kV
  switchgear, spare GIS breakers, OLTC vs. AVRs)

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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
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SUMMARY OF PROPOSED OPTIMIZATION OF PBA OF
MERALCO DISTRIBUTION ASSETS
Optimization of circuit breakers was not
included in the final valuation report but
included in the optimization report.
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Loading Of Distribution Transformers (2012)
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SUMMARY OF PBAs PROPOSED OPTIMIZATION OF MERALCO
DISTRIBUTION ASSETS
PBA found the optimization of line transformers
not significant and thus was not included in the
final valuation report.
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Learnings on Optimization

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

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Depreciation
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Depreciation

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

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Factors in assessing effective lives

• Manufacturers recommendations
• Maintenance levels and life extension policies
• Environment in which the assets reside
• External factors such as supply/demand
  characteristics
• Physical, technological, functional and economic
  obsolescence
• Survivor data failure rates

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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

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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)
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Results of MeralcosODRC Valuation
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Results of Valuation
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Results of Valuation
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Results of Valuation
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Results of Valuation
As of June 30, 2006
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THANK YOU!