Distribution firms must set up refund facility -- ERC

By Myrna M. Velasco

The country’s power distribution utilities (DUs) are being mandated to set up "restricted fund" which they can readily tap into for the implementation of refund to customers.

This contingency is in preparation in case a regulatory validation process on their pass-through charges will determine that they have over-collections in their billing to customers.

The "restricted fund" edict is part of the revised rules issued by the Energy Regulatory Commission (ERC) relating to pass-through charges being billed to customers by the DUs – and that covers the private power utilities as well as the electric cooperatives (ECs).

Under Resolution No. 14 series of 2022 that was issued by the regulatory body, it is aiming to enforce more transparency as well as higher accountability on the DUs when it comes to its pass-through collections – including those on: generation charges which are being paid to power suppliers or the generation companies (GenCos); transmission charge which is collected and remitted to system operator National Grid Corporation of the Philippines (NGCP); as well as taxes and subsidies, including lifeline subsidy rate, the discount being extended to senior citizens as well as the subsidy payments to renewable energy (RE) developers.

As defined, "pass through" charges refer to the other cost components reflected in the bills that are not directly flowing into the coffers of the distribution utilities (DUs). Instead, these are being collected on behalf of the other service providers in the supply chain of the deregulated power industry.

ERC Chairperson Monalisa C. Dimalanta said “the revisions will not only promote transparency and accountability among the DUs – these will also ensure the protection of all electricity consumers.”

The chief regulator stated that the reinforced policy “will allow more information to be available and accessible,” while also qualifying that “this is the first step to the digital transformation we are undertaking in the Commission to speed up our processes and allow more predictability in regulation.”

The "restricted fund" in particular, according to the ERC, shall also be maintained by the DUs and this shall be “earmarked for the specific purpose of being used as repayment to customers in subsequent billing months.”

The industry regulator emphasized that the propounded fund will institutionalize “a mechanism whereby DUs effect more timely refunds without being subjected to regulatory lag, under certain conditions.”

The Commission primarily noted that the amended rules on pass-through charges is primarily aimed at “promoting transparency in prescribing detailed calculation of different components of the power bill.”

Additionally, the ERC indicated that it will be “reinforcing DUs’ accountability by ensuring accuracy and completeness of information provided to the ERC through more frequent submission of reports to facilitate ERC’s confirmation of the DUs’ charges to consumers vis-à-vis the ERC authorized rates.”

The regulatory body is also targeting to set a limit on the pass-through charges, and once that is exceeded, it shall “prompt an adjustment to correct over- or under-recovery of pass-through charges.”

In instances of over-recoveries or over-collections, that will warrant refund to customers; while under-recoveries entail that additional charges shall be passed on or collected from the ratepayers.