ERC clarifies use of Universal Charge

ERC Chairman Manuel R. Sanchez clarified that “the universal charge (UC) is a cost recovery mechanism for NPC and the distribution utilities. It is a non-bypassable charge, which shall be passed on and collected from all end-users on a monthly basis by the distribution utilities.”

Sanchez issued this clarification in view of the misconceptions that the UC earns revenues for the electric utilities. On the contrary, “these are revenue-neutral charges collected from all end-users and reflected as a separate item in their electric bills,” the ERC chief added.

The UC will pay for the stranded debts and stranded contract costs of NPC as well as the stranded contract costs of eligible contracts of distribution utilities. It will also be used to equalize the taxes and royalties applied to indigenous or renewable energy sources vis-à-vis imported energy fuels. In addition, for period not exceeding three (3) years, a charge to account for all forms of cross-subsidies will be collected through the universal charge.

At present, a portion of the UC goes to an environmental fund to be used solely for watershed rehabilitation and management. Electricity users are now being charged P0.0025 per kilowatt-hour for this purpose.

Another cost component of the UC which is now being applied to electricity consumers is the missionary electrification charge at P0.0373/kWh. Missionary electrification refers to the provision of basic electricity service in unviable areas with the ultimate aim of bringing the operations in these areas to viability levels.

The Power Sector Assets and Liablilities Management Corporation (PSALM) shall administer the funds and shall create a special trust fund for proper management of the account. Distribution utilities are required to remit said funds on a monthly basis.

“PSALM is required to submit a quarterly report to ERC and the Department of Finance (DOF) on the collections and disbursements of the funds. We will see to it that said funds are properly accounted for,” the ERC chief said.

September 04, 2003