Policy, objectives, and public interest
- These Guidelines aim to ensure and maintain the quality, reliability, security, and affordability of electric power supply.
- These Guidelines aim to ensure transparent and reasonable prices of electric power service in a regime of free and fair competition and to achieve greater operational and economic efficiency.
- These Guidelines aim to ensure full recovery of all allowable Generation Costs and other costs associated with the System Loss Caps in an efficient and timely manner.
- These Guidelines aim to protect the public interest as it is affected by the rates and services of Distribution Utilities.
Coverage and defined terms
- These Guidelines apply to all Distribution Utilities.
- “Act” refers to Republic Act No. 9136, also known as the “Electric Power Industry Reform Act of 2001.”
- “Average Transmission Rate (ATR)” means transmission costs approved per unbundling divided by annualized kWh sales per unbundling.
- “Deferred Accounting Adjustment (DAA)” means the generation-rate component calculated in accordance with the Generation Rate Adjustment Mechanism (GRAM) intended to recover the deferred accounting balance.
- “Distribution Utility (DU)” means any electric cooperative, private corporation, government-owned utility, or existing local government unit that has an exclusive franchise to operate a distribution system in accordance with the Act.
- “Energy Regulatory Commission (ERC)” refers to the regulatory agency created by Section 38 of the Act.
- “Generation Cost” means costs associated with acquisition of purchased power that are reasonable, prudently incurred, and eligible for recovery in accordance with the ERC’s current practice.
- “Generation Rate” means the cost of power generated and sold to the Distribution Utility by the National Power Corporation (NPC) and Independent Power Producers (IPPs), which is passed on to the DU’s customers, using the formula prescribed by these Guidelines.
- “Ineligible Supply Contracts” means power supply agreements entered into by DUs with IPPs that were not approved by the then Energy Regulatory Board or by the ERC.
- “Other Generation Rate Adjustments (OGA)” means under/over-recoveries in generation costs, recoveries from violation of contracts and other pilferages, and other adjustments deemed necessary by the ERC, subject to these Guidelines; OGA is not subject to any carrying charge.
- “Prompt Payment Discount (PPD)” means the three percent (3%) discount that DUs get from NPC for paying power bills on or before the tenth (10th) day of the month following the billing period.
- “System Loss” means the difference between kWh purchased and/or generated and kWh sold by a DU, expressed as a percentage of kWh purchased and/or generated.
- “System Loss Cap” means the level of System Loss recoverable from customers as established by the ERC under Section 43(f) of the Act.
- “System Loss Rate” means the rate determined using the formula in Article IV; individual System Loss Rates may be calculated for different customer classes if the DU maintains records for the individual customer class System Loss.
Automatic Generation Rate calculation and billing
- The Generation Rate (GR) to be charged per kWh is computed as: GR = AGC + OGA.
- AGC (Adjusted Generation Cost) is automatically computed without need of prior ERC verification and confirmation using the formula:
[(GCi + GCii + a.. + GCn) - (PPD * 50%)] / TP - GCi to GCn means the Generation Cost in Pesos from power sources 1 through n for the previous month, excluding power sourced from self-generating facilities.
- PPD is the Prompt Payment Discount availed by the DU, net of the Prompt Payment Discounts passed on to the end customers relative to the previous month’s generation cost.
- TP means Total Purchases in kWh for the previous month.
- Other Generation Rate Adjustments (OGA) include adjustments deemed necessary by the ERC, including but not limited to under/over-recoveries, recoveries from violation of contracts, and other pilferages, and OGA is not subject to any carrying charge.
- Generation costs from ineligible supply contracts are excluded from recoverable generation costs in the GR calculation.
- If a DU inadvertently or willfully recovers generation costs from ineligible supply contracts, the ERC shall automatically order the refund through OGA, without prejudice to the imposition of appropriate penalties.
- DUs must bill customers the Generation Rates calculated under the prior rule effective on the 10th day of each month.
Monthly System Loss Rate computation and billing
- DUs compute a new System Loss Rate (SLR) on the 10th day of each calendar month using:
SLR = (GR * U) + (ATR * U). - SLR is the System Loss Rate.
- GR is the Generation Rate calculated under the Generation Rate rules.
- ATR is computed as Transmission Costs per unbundling divided by Annualized Sales in kWh per unbundling, based on the most recent unbundling decision.
- U is the Gross Up Factor computed as: U = % System Loss / [1 - %System Loss].
- The % System Loss used in the Gross Up Factor is based on the actual System Loss or the System Loss cap whichever is lower plus actual company use or the company use cap of 1% whichever is lower, using previous month figures submitted by the DU.
- Actual System Loss can be calculated at the individual customer class level if the DU has the requisite information to support individual System Loss Rates.
- DUs must bill customers the System Loss Rates on the 10th day of each month using the computed System Loss Rates.
Monthly reporting and ERC verification cycles
- On or before the 20th day of each month, DUs must provide the ERC all calculations related to Articles III and IV with supporting documentation, including:
- Invoices from power suppliers;
- Sample bills to end-users;
- Official receipts of payment of power supplier invoices;
- ERC Forms M-001 & M-002; and
- Other documents deemed relevant by the ERC.
- The ERC verifies recovery of Generation Costs at least every six (6) months by comparing:
- Actual allowable costs incurred for the period, with
- Actual revenues for the same period generated by the Generation Rates and the portion of the System Loss Rates attributable to Generation Costs.
- If the ERC fails to verify the Generation Rate (including the OGA) and System Loss Rate within six (6) months from submission, the rates are deemed final and confirmed.
- After completion of semi-annual verification, the ERC issues an Order establishing adjustments to be included in OGA resulting from the semi-annual verification.
- The OGA adjustments ordered from semi-annual verification are implemented in the succeeding six (6) month period to reflect over or under recovery.
- OGA other than those included in Article V, Section 2 must be verified and confirmed by the ERC within forty five (45) days from filing before it becomes recoverable.
End of GRAM applicability and final GRAM filing
- After the effectivity of these Guidelines, the Generation Rate Adjustment Mechanism (GRAM) is no longer applicable to Distribution Utilities.
- DUs using GRAM to recover Generation Costs must file their final GRAM applications within sixty (60) days from the effectivity of these Guidelines.
- The final GRAM filing must include the period from the DU’s last approved GRAM filing to the effectivity of these Guidelines for purposes of calculating the final Deferred Accounting Adjustment (DAA).
Administrative sanctions for guideline violations
- Any violation of any provision of these Guidelines is subject to fines and penalties imposed under the ERC Guidelines to Govern the Imposition of Administrative Sanctions in the Form of Fines and Penalties Pursuant to Section 46 of Republic Act No. 9136, promulgated by the ERC on May 17, 2002.
ERC exception, separability, and implementation rules
- Where good cause appears, the ERC may allow an exception from any provision of these Guidelines if the exception is found to be in the public interest and is not contrary to law or any other related rules and regulations.
- If any part or section of these Guidelines is declared unconstitutional or invalid, the remaining parts or sections continue in full force and effect.