ERC holds national workshop on DU system loss cap establishment

The Energy Regulatory Commission (ERC) has completed its final evaluation on the application of 20 electric cooperatives for rate reduction due to condonation of debts. It also completed the evaluation of applications for the removal of inter-class cross subsidies. The decision on loan condonation and inter-class cross subsidy removal will be contained in separate Orders but will be released simultaneously to avoid confusion among electricity customers on the rate change.

“The Commission is committed to doing its part in the government’s rural electrification program by fulfilling its mandated task to reduce the rates of electric cooperatives by loan condonation,” says Chairman Rodolfo B. Albano, Jr.

A total of 588,794 customers will benefit from the final decisions of the Commission on said applications. The amount of combined amortizations of final loans to be condoned is estimated at 211 million pesos. The rate reduction applies to all customer types of each electric cooperative, which include residential, industrial, irrigation/water system, public buildings, and street lights.

The applications for loan condonation were filed by the electric cooperatives in compliance with Section 60 of Republic Act No. 9136, in relation to Rule 31 of its Implementing Rules and Regulations and Sections 5 and 6 of Executive Order No. 119. It reduces the rates of electric cooperatives as a result of the removal of amortization payments of their loans to National Electrification Administration (NEA) and other government agencies, which loans were incurred for the purpose of financing their rural electrification programs. The law mandates the Power Sector Assets and Liabilities Management (PSALM) Corporation to assume said outstanding financial obligations.

Removal of cross subsidies, on the other hand, is pursuant to Section 74 of R.A. 9136. Inter-class cross subsidy refers to the amount charged by distribution utilities to industrial and commercial end-users as well as to other subsidizing customer sectors in order to reduce the electricity rates of other customer sectors such as the residential end-users, hospitals and streetlights. The law mandates ERC to phase out cross subsidies within the grid, between grids and/or classes and establish a universal charge which shall be collected from all end-users by suppliers.

There are still 83 loan condonation applications for evaluation and 15 more applications awaiting PSALM’s final audit.

June 10, 2004