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(NAR) VOL. 10 NO. 1 / JANUARY - MARCH 1999

[ ERB, December 22, 1998 ]

GUIDELINES IMPLEMENTING EXECUTIVE ORDER NO. 473 FOR THE SEGREGATION AND UNBUNDLING OF THE POWER TARIFFS OF THE NATIONAL POWER CORPORATION AND THE ELECTRIC DISTRIBUTION UTILITIES



Pursuant to Executive Order No. 473 (E.O. 473), the Energy Regulatory Board hereby adopts and promulgates the following Guidelines for the Segregation and Unbundling of Power Tariffs of the National Power Corporation (NPC) and the electric distribution utilities.

Article I
Objectives, Scope and Definition of Terms

Section 1. Objectives. These Guidelines are prescribed to attain the following objectives:

(a) To promote a policy of full disclosure of all transactions involving public interest;

(b) To promote transparency and accountability in all phases of providing electric service;

(c) To identify, segregate and unbundle the different components of the electricity rates of NPC and the electric distribution utilities;

(d) To provide an environment conducive to wholesome and constructive competition thereby promoting efficiency in the management and operation of electric utilities, with the advent of increased competition resulting from the approval by Congress of the Omnibus Bill on the Electric Power Industry.

Section 2. Scope. These Guidelines shall apply to the NPC, private investor-owned utilities, local government-owned/operated utilities, and electric cooperatives (ECs).

Section 3. Definition of Terms. As used in these Guidelines, the following terms shall have the following respective meanings:

a) “Distribution Charge” shall refer to the allowed costs of distribution of electricity, and includes all costs, taxes, return to investors, other charges incurred by the distributor associated with the ownership, operation and maintenance of the distribution system.

b) “Distribution System” shall refer to the electric system of an electric utility which delivers electricity from transformation points on the transmission system to the consumers or end-users.

c) “Electric Cooperative” or “EC” shall refer to an entity created under Republic Act No. 6038 or Presidential Decree No. 269, as amended, for the purpose of providing electric service.

d) “Electric Utility” refers to the private investor-owned utility, local government-owned/operated utility and electric cooperative operating within the NPC grids and other electric systems.

e) “Energy Regulatory Board” or “ERB” refers to the administrative agency created under Executive Order No. 172, dated May 8, 1987, which, among other functions, fixes and regulates the power rates of electric utilities, now including NPC and electric cooperatives, pursuant to Section 18 of Republic Act No. 7638.

f) “Independent Power Producers (IPPs)” refers to generating facilities owned by entities from the private sector and supplying capacity and energy to their customers.

g) “Load Following and Frequency Regulation” refers to the provision of generating capacity necessary to adjust total system generation over short periods of time (e.g. minutes) to match system load changes that result from random fluctuations in total Transmission System Load.

h) “Local Government-Owned/Operated Utility” refers to an electric system/company owned and/or operated by the Local Government for the coordination and delivery of the electric services to its inhabitants within its territorial jurisdiction.

i) “National Electrification Administration” or “NEA” means the corporation, wholly-owned and controlled by the government created under the provisions of Presidential Decree No. 269, as amended, and tasked primarily to administer the rural electrification program of the country.

j) “National Power Corporation” or “NPC” means the corporation, wholly-owned and controlled by the government, formed under the provisions of Republic Act No. 6395, as amended, and tasked primarily to undertake the development of hydroelectric generation of power and the production of electricity from nuclear, geothermal and other sources, as well as the transmission of electric power on a nationwide basis.

k) “Private Investor-Owned Utility” refers to an electric system/company owned and operated by private individuals, partnerships, corporations, etc. for the delivery of electric services to customers within a defined franchise area.

l) “Rate” means any price or charge imposed in connection with the sale or purchase and/or wheeling of electricity.

m) “Self-generation Facilities” refers to electric generating facilities intended primarily for the internal use of the owner but the excess production of which may be sold to the grids.

n) “Spinning Reserve” refers to the provision of generating capacity necessary to respond immediately to infrequent, but usually large, failures of generating units or transmission plants.

o) “Sub-transmission Charge” is a charge for the use of NPC’s sub-transmission facilities for power delivery service.

p) “System Loss” refers to energy lost in an electric system in the process of delivering electricity to consumers or end-users. Lost energy may be caused either by technical factors or by non-technical factors like pilferage.

q) “Transmission Charge” is the amount charged by NPC for providing access to its transmission lines to transmit power to any party.

r) “Unbundled Rate” refers to the modified rate structure where the different components of the power rates are made transparent to power users.

Article II
Types Of Charges On Services Provided By The National Power Corporation

Section 1. Rates for Generation. The rate for the generation portion of NPC shall be segregated to reflect the authorized cost of generating electricity and other generation-related costs, including return. It shall show the charge of the provider (whether NPC-owned or from IPPs) and the corresponding percentage share of generation.

Any social obligations and/or subsidies shall be clearly indicated.

Section 2. Power Delivery Services. The rate for the Power Delivery Service shall include transmission and sub-transmission charges, including return.

A. Transmission Charge — This shall refer to the rate to be charged for the use of NPC’s transmission facilities from the point/s of delivery to the point/s of receipt.

The transmission charge shall conform to the decision in ERB Case No. 96-118 entitled “In Re: Application for Approval of the Open Access Transmission Tariff (OATT) and Tariff for Ancillary Services for Private Sector Generation Facility” and subsequent decisions related thereto.

B. Sub-Transmission Charge — This shall refer to the rate to be charged for the use of NPC’s sub-transmission lines from the point/s of delivery to the point/s of receipt.

The sub-transmission charge shall conform to the decision in ERB Case No. 96-118 (SUPRA) and subsequent decisions related thereto.

Section 3. Ancillary Services Charges. This shall refer to the rates to be charged for the ancillary services including the costs of services necessary to support the transmission of capacity and energy from resources to loads while maintaining reliable operation of the Transmission Provider’s Transmission System in accordance with Good Utility Practice. Said charges shall include rates for load following and frequency regulation, spinning reserve, and back-up power.

The ancillary services charges shall also conform to the decision in ERB Case No. 96-118 (SUPRA) and subsequent decisions related thereto.

Section 4. Customer Charge. This shall refer to the specific charge intended for the facilities that are dedicated to a particular customer. Such facilities shall include but not be limited to, the metering equipment and related accessories for a customer with multiple points of delivery.

Article III
Types of Charges on Services Provided by the Private Investor-Owned and Local Government-Owned/Operated Electric Utilities

Section 1. Power Cost. This shall refer to the rate to be charged to reflect the authorized cost of generation, transmission/sub-transmission, ancillary and other charges associated with the purchase of electricity from (a) NPC; (b) IPPS; and (c) Self-generation Facilities. Power Cost shall also include as a separate item, taxes paid by the electric utility that are applicable to the cost of purchased power. IHAcCS

Section 2. System Loss. This shall refer to the cost equivalent to the energy lost in the electric system in the process of delivering electricity to consumers or end-users and shall be computed at the prevailing power cost. In estimating the allowed system loss, the provisions of Republic Act No. 7832, Section 10 (a) thereof, and its implementing rules and regulations shall prevail.

Section 3. Distribution Charge. This charge/cost shall include all reasonable costs incurred by the electric utility associated with the distribution business, including taxes paid by such utility that are attributable to the cost of distribution.

Any social obligations and/or subsidies shall be clearly indicated.

To the extent possible, the private investor-owned and local government-owned/operated electric utilities may opt to further unbundle the distribution charge into:

a) Wire Charges — Refers to the rate component that reflects the costs of owning, operating and maintaining the lines and wires, substations, and associated equipment and facilities of the said electric utilities.

b) Customer-related — Refers to the rate component that reflects the costs related to billing, metering, meter reading, customer information, collection, and similar services.

Article IV
Types of Charges on Services Provided by the Electric Cooperatives

Section 1. Power Cost. This shall refer to the rate to be charged to reflect the authorized cost of generation, transmission/sub-transmission, ancillary and other charges associated with the purchase of electricity from (a) NPC; (b) IPPs; and (c) Self-generation Facilities. Power Cost shall also include as a separate item, taxes paid by the electric cooperative that are applicable to the cost of purchased power.

Section 2. System Loss. This shall refer to the cost equivalent to the energy lost in the electric system in the process of delivering electricity to consumers or end-users and shall be computed at the prevailing power cost. In estimating the allowed system loss, the provisions of Republic Act No. 7832, Section 10 (b) thereof, and its implementing rules and regulations shall prevail.

Section 3. Non-Power Cost. This charge/cost shall include all costs incurred by the electric cooperative associated with the operation and maintenance of the distribution business, including taxes paid by such electric cooperative that are attributable to the cost of distribution.

Any social obligations and/or subsidies shall be clearly indicated.

To the extent possible, the electric cooperatives may opt to further unbundle the non-power cost into:

a) Wire Charges — Refers to the rate component that reflects the cost of operating and maintaining the lines and wires, substations, and associated equipment and facilities of the said electric cooperatives.

b) Customer-related — Refers to the rate component that reflects the costs related to billing, meter reading, customer information, collection, and similar services.

Section 4. Amortization. This shall refer to the cost incurred by the electric cooperative in the payment of loans extended by NEA and other recognized creditors as certified by NEA and authorized by ERB.

Section 5. Reinvestment. This rate component shall be the equivalent of five percent (5%) of the gross revenue of the electric cooperative or an amount approved by the ERB to partly finance said cooperative’s counterpart cost of system expansion, rehabilitation/upgrading of existing electric power system, add-ons and institutional development in accordance with its approved workplan.

Article V
Implementation of the Unbundled Tariffs for the National Power Corporation, the Private Investor-Owned Utilities, Local Government-Owned/Operated Utilities and Electric Cooperatives

Section 1. Basis. The unbundled tariffs of the NPC, private investor-owned utilities, local government-owned/operated utilities and the electric cooperatives shall be based on their respective existing authorized revenue requirements.

Section 2. Automatic Adjustment Clauses. The automatic adjustment clauses which are currently part of the customer’s bills shall be revised to reflect the unbundled charges.

Section 3. Application. The NPC, private investor-owned utilities, local government-owned/operated utilities and electric cooperatives shall file an application with the ERB for the approval of their unbundled rates which shall be reflected in their respective authorized rate schedules.

In the allocation of common costs, cost shifting among functions and customer classes shall be avoided to the extent possible. Where shifting of costs cannot be avoided, the shifted costs shall be properly disclosed. The allocation of assets, expenses or charges that are common to two or more types or components of service or customer classes shall be clearly described in the application for unbundling of rates filed by NPC and each electric distribution utility.

Section 4. Billing. The NPC, private investor-owned utilities, local government-owned/operated utilities and electric cooperatives are enjoined to develop their respective standardized billing formats for approval by the ERB. To the extent possible, each billing format shall contain all the unbundled rates, taking into consideration simplicity and understandability.

Continuity of customer’s bills shall be maintained, so that the amount paid by the different customer classes after the unbundling of the rates shall not deviate significantly from the amount paid by them before the unbundling, except for increases or decreases authorized by the ERB.

Section 5. Additional Unbundling of Rates. There shall be a further unbundling of rates for products and services when the same shall have been identified in the future.

Section 6. Identification of Assets and Expenses and Revision of Accounting Systems. In the application for unbundling of rates, NPC and the electric utilities shall identify the assets, expenses, and charges upon which the rate for each type or component of service is based.

For subsequent revision of rates, NPC and the electric utilities shall revise their accounting systems, if necessary, subject to ERB approval, in order to facilitate the identification of assets, expenses, and charges for each type or component of service.

Section 7. Information Dissemination. The NPC, private investor-owned utilities, local government-owned/operated utilities, electric cooperatives, and NEA, as well as the various consumer groups shall, in cooperation with each other, undertake vigorous educational campaign in order to inform the public of the provisions of this Implementing Guidelines, within sixty (60) days from the effectivity thereof and at least once a year thereafter, and to incorporate a faithful understanding of said provisions in the consumer’s contracts for electric service.

Section 8. Filing. The electric distribution utilities shall file their respective application for unbundling of rates and billing formats based on a standard billing format for each group of utilities within one hundred eighty (180) days from approval by the ERB of NPC’s application for unbundling of its rates.

Section 9. Non-Compliance. Non-compliance with any of the provisions of this Implementing Guidelines by the National Power Corporation, private investor-owned utilities, local government-owned/operated utilities, and electric cooperatives shall be subject to the appropriate penalty which the Board may impose in accordance with law.

Article VI
Repeal and Separability

Section 1. Repeal and Separability. All existing rules, regulations or orders or any part thereof inconsistent with these Guidelines are hereby repealed, amended or modified accordingly. If any part or provision of these Guidelines is declared unconstitutional or illegal, the other parts or provisions which are not affected thereby shall remain in full force and effect.

Article VII
Effectivity

Section 1. Effectivity. These Guidelines shall take effect fifteen (15) days after publication in the Official Gazette.

Adopted: 22 Dec. 1998

(SGD.) MELINDA L. OCAMPO
Chairman

(SGD.) ALBERTO D. DOSAYLA
(SGD.) OSCAR E. ALA
(SGD.) NICOMEDES B. DEYNATA
(SGD.) MARIETTA U. LARRACAS
Members
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