ERC Guidelines on Inter-Class Cross Subsidy True-Up

The guidelines are intended (a) to ensure transparent and reasonable electric power service prices while moving toward the true cost of service, consistent with Article I, 1.1.1.
The guidelines are intended (b) to ensure a revenue-neutral position for distribution utilities (DUs) in implementing inter-class cross subsidy removal, consistent with Article I, 1.1.2.
The guidelines are intended (c) to protect the public interest affected by DU rates and services, consistent with Article I, 1.1.3.
The guidelines are intended (d) to ensure and maintain the quality, reliability, security, and affordability of electric power supply, consistent with Article I, 1.1.4.
The guidelines apply to all Distribution Utilities under Article I, 1.2.

Distribution Utility (DU) means any electric cooperative, private corporation, government-owned utility, or existing local government unit with an exclusive franchise to operate a distribution system in accordance with Republic Act No. 9136.
Energy Regulatory Commission (ERC) means the regulatory agency created under Section 38 of Republic Act No. 9136.
Inter-Class Cross Subsidy means subsidy rates either charged or deducted from customer that are part of the Rate Unbundling approved by ERC.
Inter-Class Cross Subsidy Adjustments (ICSA) means over or under recoveries (in Pesos) incurred from the time the approved inter-class cross subsidy rates were implemented until the time they were phased out.
Cross Subsidy Charge means inter-class cross subsidy over/(under) recoveries in peso per kWh to be recovered from all electricity consumers through the Universal Charge for a period determined by ERC.
The Cross Subsidy Charge cannot be passed-on without prior approval by ERC and shall not be subject to any carrying charge.
Universal Charge means the charge, if any, imposed for recovery of stranded debts, stranded contract costs of NPC, stranded contract costs of eligible contracts of distribution utilities, and other purposes pursuant to Section 34 of Republic Act No. 9136.

DUs must calculate inter-class cross subsidy over/(under) recoveries in Peso per kWh for the period using the formula in Article II, 2.1.
The Cross Subsidy Charge formula is:
- Cross Subsidy Charge = ICSA / S, under Article II, 2.1.
ICSA is defined as the inter-class cross subsidy over/(under) recoveries in Pesos incurred from implementation of approved unbundled rates and during the phase-out period.
ICSA equals the summation of inter-class cross subsidy charge per customer class multiplied by its actual kWh sales, under Article II, 2.1.
S is the Projected kWh sales for the period, under Article II, 2.1.
The Cross Subsidy Charge is to be included in the Universal Charge and applied to all customer class’ monthly bill, consistent with the definition used in Article II, 2.1.

No later than sixty (60) days from the end of the inter-class cross subsidy removal scheme, DUs must submit to ERC their calculation of inter-class cross subsidy over/(under) recoveries incurred from implementation of approved unbundled rates and during the removal period (Article II, 2.2).
DUs must submit to ERC soft and hard copies of all calculations related to Articles II (2.1) using the format in Annex “A”, no later than sixty (60) days from the end of inter-class cross subsidy removal (Article II, 2.3).
ERC must verify the cross subsidy charge within ninety (90) days upon submission of complete documents as required by the guidelines (Article II, 2.4).
If ERC fails to verify within the prescribed period, the inter-class cross subsidy rate is deemed final and confirmed, under Article II, 2.4.
After completion of verification, ERC issues an Order establishing the adjustment resulting from verification to be included in the Universal Charge as the cross subsidy charge (Article II, 2.4).
The adjustment, if any, is implemented in the period prescribed by ERC (Article II, 2.4).

DUs must bill their customers/end-users the Cross Subsidy Charge from all electricity end-users as approved by ERC (Article II, “Billing of the Cross Subsidy Charge”).
DUs must recover or refund the Cross Subsidy Charge from all electricity end users through the Universal Charge under Rule 18 on the universal charge.
Recovery or refund continues until the full amount of over/(under) recoveries has been fully refunded/collected, consistent with Article II (last paragraph under billing).

Any violation of any provision of the guidelines is subject to fines and penalties in accordance with 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 ERC on May 17, 2002 (Article III, 3.1).

Where good cause appears, ERC may allow an exception from any provision of the guidelines if the exception is found to be in the public interest and not contrary to any law, rules and regulations (Article IV, 4.1).
If a DU has a valid reason not to strictly comply, it must submit a proposed alternative mechanism/formula to ERC within fifteen (15) days from the effectivity of the guidelines (Article IV, 4.1).
Recovery/refund resulting from the alternative mechanism/formula is allowed only after ERC approval of the proposed mechanism/formula (Article IV, 4.1).

If any provision of the guidelines is declared unconstitutional or invalid by final judgment of a competent court, the other provisions not affected by the ruling continue in full force and effect (Article V, 5.1).