Question & AnswerQ&A (ERC Resolution NO. 12, S. 2005)
The resolution approves a new policy on the treatment of Prompt Payment Discount (PPD) for distribution utilities in the electricity sector under Philippine law.
Section 26 allows distribution utilities to engage in related business undertakings that maximize asset utilization, with the requirement that a portion of net income derived from such undertakings (utilizing rate base assets) be used to reduce distribution wheeling charges, not exceeding 50% of the net income, and separate accounts must be maintained to prevent subsidization or encumbrance of distribution assets.
Section 36 mandates all distribution utilities to file applications for unbundling of rates.
The ERC deducted 50% of the total Prompt Payment Discount on the National Power Corporation bills for generation and transmission from the respective revenue requirements of the distribution utilities in their unbundling applications.
Yes, the ERC recognizes that distribution utilities may or may not be able to avail of the PPD.
They are allowed to pass on to their customers 50% of the PPD only if they availed of the same; otherwise, nothing is passed on to customers.
The resolution allows the reinstatement of the previously deducted 50% of the total PPD into the approved revenue requirements of distribution utilities that availed of the discount.
The reinstated amount should be added back to the distribution, metering, and/or supply function of the unbundled rates, using the same allocation factors and billing determinants employed in the original rate unbundling.
The Energy Regulatory Commission (ERC) shall determine the amount to be reinstated for each distribution utility and shall issue appropriate Orders containing these details and their effectivity.