Republic of the Philippines . ENERGY REGULATORY COMMISSION San Miguel Avenue, Pasig City RESOLUTION NO. __'8__, Series of 2006 A RESOLUTION ADOPTING A FORMAT FOR RATE APPLICATIONS OF DISTRIBUTION UTILITIES (EXCEPT FOR REGULATED ENTITIES UNDER PERFORMANCE BASED REGULATION) WHEREAS, it is the pojicy of the State to ensure transparent and reasonable prices of electricity in a regime of free and fair competition and full public accountability to achieve greater operationai and economic efficiency; WHEREAS, Section 4 (e) of the Implementing Ruies and Regulations (IRR) of R.A. 9136 provides that any application or petition for rate adjustment or for any relief affecting the consumers must be verified and accompanied with an acknowledgement of receipt of a copy thereof by the LGU Legislative Body of the locality where the applicant or petitioner principally operates together with the certification of the notice of publication thereof in a newspaper of general circulation in the same locality; WHEREAS, on Apri! 6, 2006, the Commission conducted a public consultation for the adoption of a format on rate application of all Distribution Utilities (DUs) (except for those regulated entities under the Performance Based Regulation); WHEREAS, the said format seeks to: (1) provide the DUs a uniform rate application format; (2) protect the public interest as it is affected by the rates of DUs and other providers of electric power; (3) balance the interest of the consumers and the public utilities providing electric power through the fair and non-discriminatory treatment of two sectors; and (4) ensure transparency in all rate applications affecting electricity consumers; NOW, THEREFORE, the Commission, after thorough and due deliberation, RESOLVED, as it hereby RESOLVES, to APPROVE and ADOPT, as it hereby APPROVES and ADOPTS, the format on rate application of all Distribution Utilities (except for those regulated entities under the Performance Based Regulation) hereto attached as “ANNEX A” and made integral part of thisResolution No. series of 2006 April 14, 2006 Page 2 This Resolution shail take effect immediately after its publication in a newspaper of general circulation in the country. This Resolution is hereby ordered to be posted on the.ERC website and filed with the University of the Philippines Law Center Office of the National Administrative Register (ONAR). Pasig City, April 11, 2006. xB ~~ Ol{VER B. BUTALID ~" JESUS N. ALCORDO Commissioner Commissioner Kgs (On Leave) RAW A. TAN ALEJANDRO 2. BARIN Commissioner CommissionerFinal Draft The following format shall be applicable for rate application of ail Distribution Ulilities (DUs) except those regulated under the Performance Based Regulation (PBR) which shall also be published in a newspaper of general circulation in the same jocality of their franchise area pursuant to Sec. 4(e), Rule 3 of the IRR of R.A.9136. FORMAT ON RATE APPLICATION PARAGRAPH 1 : Should include a brief introduction/background about the applicant, such as its organization, office address, the General Manager, etc. PARAGRAPH 2 : Should include the petition being prayed for by the applicant and the table of the comparative existing distribution rates vis-a-vis their proposed rates per customer class. (For DUs that are stil! implementing the bundled rates, the distribution charge to be incorporated in their existing rate should exclude the power cost component), Table |. Comparison of Proposed & Existing rates Customer Class’ Proposed Rates Existing Rates Difference Residential: Distribution Supply Metering Commercial: Distribution Supply Metering Industrial: Distribution Supply Metering Pubiic Buildings: Distribution ‘Supply Metering Street Lights: Distribution Supply Metering irrigation: Distribution Supply Metoring Note: Cross-Subsidy should be part of the DU's proposed rates # the DU has not yet implemented its existing unbundled rates. ‘The specific customer class used in all the tables are provided only for illustration.PARAGRAPH 3 : Should include the explanation or the reason why they _Table #l. Comparison of Revenue Requirement * have to raise the rates provided in the previous table, that is, to achieve the proposed revenue requirement of the utility as provided in the following table. Said revenue requirement will not be achieved if the utility will continue to utilize its existing unbundled rates. Customer Class" Billing Determinants (Annualized kWh Saies, Number of Customers andior kW demand) Existing Rates Proposed Rates (PRP/KWh, Existing {PhPIKWh, Proposed PhPicustomerimo/ | Revenues | PhP/customer/mo! | Revenues PhPIRW) PRPIKW) Residential: Distribution Supply Metering Commercial: Distribution ‘Supply Metering Industria: Distribution Supply Metering Public Buildings: Distribution ‘Supply Metering Street Lights: Distribution ‘Supply Metering Irrigation: Distribution ‘Supply Meterin “TThe Specie caster cass used in he above tables proved ooly for hustrtion.PARAGRAPH 4 : Should include the table of the DUs proposed Revenue Requirements and a brief explanation on the reasons why they need to increase such component/s of the same. Table Ill, Summary of Proposed Revenue Requirement per Cost Component PROPOSED REVENUE REQUIREMENT Proposed Total Electric Revenue Particulars Company* [| Adjustment | Requirement (PhP) {PhP) (PhP) a 2) (+2) Payroll Operation & Maintenance (ess fuel, PP & Payrot) Depreciation & Amortization(for PUs only) |. ther Expenses (for PUs onty) Return on Rate Base (For PUs only) ECs Debt Service (For ECs) Less: ORI (Other Revenue liems) Add: CAPEX Fund (For ECs) TOTAL REVENUE REQUIREMENT Total Rate Base (For PUs only) “Per Audited Financial Statement Reasons for the Electric Adjustment are as follows (Sample Reasons are provided to show levet of detail): Payroll - Increase was due to Wage Order No. __ dated , reorganization as approved by NEA which requires annualization of the cost provided in the audited Financial Statement Operation & Maint. Expenses - Adjustment was due to increase in gasoline prices, increase in prices of supplies and services Since year 2004 up to present. Depreciation & Amortization - Adjustment due to additions/ retirement of assets and appraisal increase. Return on Rate Base - Adjustments due to increase in Rate Base Rate Base - Adjustments due to additions/retirement of assets and appraisal increases. - Movement of the cash working capital. ~ Completion of construction work in progress as of December 2005 - Increase in cost of materials and supplies. Debt Service - Adjusted to reflect actual amortization consistent with the NEA foan profile ending December 2005Increase in CAPEX Fund PARAGRAPH 5 : - Cost of the approved CAPEX projects cannot be financed merely by the 5% reinvestment fund. Hence, the DU may propose a higher percentage of Reinvestment fund to fully cover cost of the project. the capital Should include a discussion on the Functionalization and Allocation of Cost using the Uniform Filing Requirements Model to arrive at the Revenue Summary Table IV Revenue Summary per Customer Class & Function Sustomer Glass’ Distribution Related Supply Related Total Revenue Revenue, Revenue Watering Related Revenue Residentiat ‘Commercial Industries Public Buldings Street Lights jterigation, TOTAL PARAGRAPH 6 : This portion is applicable only for DUs that have not yet implemented their unbundled rates. The following table has to be implemented pursuant to Section 74 of R.A. 9136 and Rule 16, Section 5 of its IRR. ‘Table V. Computation of Inter-Class Cross-Subsidy ‘Customer Ciass’ Inter-Class. Existing | Increase | Total __| Proposed | Cross Subsidy Cross- Subsidy/kwh Residential Commerciat Industrial Public Buildings Street Lights Irrigation However for those that have already implemented their unbundied rates but whose cross-subsidies have not yet been fully removed, said DUs should continue to implement the gradual removal of the said subsidies. 7 The specific cistomer class used in the above tables arp provided onty for Hustration,PARAGRAPH 7 : Should include a brief discussion on the lifeline rates PARAGRAPH 8 PARAGRAPH 9 (level of discount, lifeline discount/subsidy charge, No. of Lifeline customers and corresponding Percentage (%)} to Total Number of Residential customers that would benefit from the Lifeline Discount, etc.) For those that have implemented the unbundled rates and are proposing a new lifefine level of computation, the reason for proposing said new level should aiso be included. ‘Table Vi. Lifeline kWh Consumption Level and Discount Level of Discount kWh_Consumption (Sample) O- KWh 50% kWh 40% kWh 30% kWh 20% kWh 10% kWh 5% : Should briefly discuss the DUs compliance to the {RR on pre-filing requirements. : Should enumerate the documents included in the DU's application in compliance with the Uniform Filing Requirements PARAGRAPH 10 : PRAYER by the DU should emphasize the proposed revenue requirement (in Peso) which is exclusive of the Power Cost that the DU needs in order to be continuously viable in its electricity distribution operation. It should also include the specific charges per customer class. ‘Table Vil. Proposed Charges per Customer Class Custorner Class" Public | Street Particulars Residential | Commercial | industriat | Sidg. {Lights Distribution (PesoreWh) Distribution Demand Gharge (PhPIKW)_ ‘Supply (PhP/KWh) ‘Supply (PhPicust/Mo.) Metering (PesolKWh) Metering (Peso/Cust Mo.) The spediic customer class used in the above table is provided only for Hustration,ADDITIONAL INFORMATION: In the computation of the unbundled rates using the UFR model prescribed by the ERC, the DUs should have a “zero” input on the Generation, Transmission and System Loss column, The reason for this is that Generation, Transmission and System Loss charges will no. longer be part of the rate application since the Generation, Transmission and System Loss Charges are covered by the AGRA, TRAM and System Loss Recovery Guidelines, respectively. For those DUs that have already submitted, docketed and have been set for hearing their rate applications, said DUs have to recaiculate their UFR applications without the Generation, Transmission and System Loss revenue requirement leaving only the revenue requirement for the DUs distribution system operations. For DUs that have “Sale for Resale” customers, said customer class should only be allowed a distribution charge to cover the distribution wheeling cost incurred in servicing their Sale for Resale customers. The CAPEX Fund may not be pegged at 5% as long as it is supported by documents and computations that will justify the required proposed revenue for improvement, expansion and rehabilitation of the DU's distribution system. A Consumer Expository Hour shall be conducted by the DU for their consumers 2 weeks prior to the set hearing date. This should be recorded and a report on the discussion shall form part of the case to be submitted to the Commission. The DU has to make a presentation on why they have to apply a rate adjustment with the Commission,