ERC: Revising pass-through rules to protect consumers

BY LORENZ S. MARASIGAN – DECEMBER 29, 2022
from Business Mirror

The Energy Regulatory Commission (ERC) said it is revising the rules on pass-through charges for greater transparency starting 2023.

ERC Chairperson Monalisa C. Dimalanta said the agency has adopted Resolution No. 14 Series of 2022, which revises the rules governing the automatic cost adjustment and true-up mechanisms and corresponding confirmation processes for distribution utilities (DUs).

In a nutshell, the resolution will provide greater transparency in prescribing detailed calculations of different components of the power bill and will reinforce the DU’s accountability by ensuring the accuracy and completeness of the information provided to the ERC through more frequent submission of reports.

It will also set a limit, which if exceeded, prompts an adjustment to correct over or under-recovery of the pass-through charges; and it will streamline the process and will reduce regulatory lag for more efficient rate reviews.

A timely confirmation process strikes a balance between protecting electricity consumers from overcharging and DUs from under-recovery, Dimalanta said.

Pass-through costs are amounts collected by DUs for charges other than the distribution charge or the payment for use of the DUs facilities. These include payments to generation companies, Feed-in Tariff Allowance (FIT-All), and Universal Charge (UC).

By its nature, the principle of “pass-through” dictates that the DUs shall not gain or lose from these charges.

Under the revised rules, passed-through costs to be collected are: generation charges, transmission charges, and other subsidies and mandatory payments, such as Lifeline and Senior Citizen Subsidies, mandated by laws, System Loss, and Other Pass-through Costs as may be approved by the Commission.

Dimalanta said the revisions will not only promote transparency and accountability among the DUs, but will also ensure the protection of all electricity consumers.

“We are looking forward to 2023 as the beginning of an era of greater transparency in electricity pricing. The new URR [uniform reportorial requirement] form will allow more information to be available and accessible. 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,” she said.

Resolution No. 14 also directs the creation of a Restricted Fund by the DUs, in which over-collections are maintained and earmarked for the specific purpose of being used as repayment to customers in subsequent billing months.

This results in a mechanism whereby DUs effect more timely refunds without being subjected to regulatory lag, under certain conditions.