The Universal Charge

RULE 18.

Section 1. Guiding Principle.

Within one (1) year from the effectivity , there shall be a Universal Charge to be determined, fixed and approved by the ERC that shall be imposed on all electricity End-users, including self-generation entities.

Section 2. Scope of Application.

This Rule shall apply to the following: (a) Petitioners for availments from the Universal Charge. (i) PSALM for the Stranded Debts and Stranded Contract Costs of NAPOCOR; (ii) DUs with respect to their Stranded Contract Costs of Eligible Contracts;

• b) (iii) Missionary Electrification; (iv) Qualified Generation Companies with respect to the equalization of taxes and royalties between indigenous or Renewable Energy Resources and imported fuels; (v) NAPOCOR, with respect to the environmental charge of P0.0025 per kilowatt-hour sales to be used for the rehabilitation and management of watershed areas; and (vi) NAPOCOR/PSALM and DUs with respect to the mitigation of the removal of cross subsidies. Electricity End-users such as but not limited to: (i) All End-users of DUs such as residential, commercial, and industrial including government and/or public buildings, irrigation systems, and special lightings; (ii) Directly-connected End-users of NAPOCOR such as but not limited to government agencies and institutions, and industrial enterprises; (iii) Persons using Self-Generation Facilities; (iv) Locators, developers, operators and facilities operating in EZs; and (v) Other entities identified by the ERC pursuant to the intent of the Act. Section 3. Mitigation on the Removal of Cross Subsidies. (a) Unbundled rates of the NAPOCOR and the DUs as approved by the ERC in accordance with Section 36 , shall reflect the respective costs of providing service to End-users without any type of cross subsidy. The removal of cross subsidies to the End-users of DUs will however be mitigated and done gradually in accordance with Section 74 . ERC shall issue a phase out scheme to gradually remove the cross subsidies. Any amount of subsidy provided to End-users during the phase out period shall be recovered through the Universal Charge. (b) With respect to SPUG, rates for Missionary Electrification shall be in accordance with Rule 15 on Unbundling of Rates. Section 4. (a) Procedures for Petitions Against the Universal Charge. For the first year after the effectivity , the following rules shall apply: (i) The petitioners identified in Section 2 of this Rule shall file their availments from the Universal Charge with the ERC on or before Page 59 of 10015 March 2002 and submit all pertinent documents in support of such availments made and the basis for their computation. (ii) The ERC shall evaluate the petitions and thereafter issue the corresponding order no later than 26 June 2002 which shall prescribe the following: (1) The Universal Charge on a per kWh basis to be included in the billing statements to the End-users; (2) Breakdown of the applicable Universal Charge for each of the intended purposes: (a) (b) (c) (d) (e) (3) Stranded Debts and Stranded Contract Costs of NAPOCOR; Missionary Electrification; Equalization of taxes and royalties between indigenous or renewable sources of energy vis-à-vis imported energy fuels; Environmental Charge of P0.0025 per kilowatt-hour sales for the rehabilitation and maintenance of watershed areas; and Mitigation Fund for the removal of cross-subsidies of NAPOCOR and DUs. Period of disbursement by each of the beneficiaries as well as submission of reportorial requirements prescribed by the ERC. (b) Petitions for availment under the Universal Charge for the succeeding years shall be submitted to the ERC on or before March 15 of every year. (c) A Distribution Utility that seeks to recover Stranded Contract Costs of its Eligible Contracts shall submit a petition for availment under the Universal Charge to the ERC within one (1) year from the start of Open Access. Within three (3) months from the submission of the petition by such Distribution Utility, the ERC shall verify the reasonable amounts and determine the manner and duration for the full recovery thereof, as approved by the ERC.

(d) With respect to the equalization of taxes and royalties applied to indigenous or renewable sources of energy, qualified Generation Companies shall be entitled to make claims against STF created for this purpose. The STF shall be constituted out of the proceeds from the Universal Charge specified under Section 34 : Provided, That said claims shall only be to the extent of the additional cost or reduction in the cost of generating electricity. For this purpose, qualified Generation Companies making said claims shall submit a detailed statement of their sales and costs of operation, including a breakdown of how their claims are estimated and the impact thereof on generation rates, the corresponding assumptions Page 60 of 100and justification therefor and such other information as may be required by the PSALM. Only those claims that meet the foregoing documentation requirements shall be evaluated and acted upon by PSALM. (e) Failure by any petitioner to submit its petition within the periods specified above shall result in a forfeiture of such petition for the period in question. (f) In case of over- or under-recovery by beneficiaries, true-up adjustments shall follow the rules and regulations to be prescribed by the ERC, except as otherwise provided in these Rules. Section 5. Collection of the Universal Charge. (a) The Universal Charge shall be a non-by passable charge that shall be collected from all End-users on a monthly basis by the Distribution Utilities or Suppliers in case of Contestable Markets. Any End-user or self-generation entity not connected to a Distribution Utility shall remit its corresponding Universal Charge directly to the TRANSCO. Collections by the DUs shall be remitted to the PSALM on or before the fifteenth (15th) day of the succeeding month, net of any amount due to the Distribution Utility. (b) Separate books of accounts shall be maintained by the Distribution Utility and made available to the ERC for purposes of monitoring, verifying and accounting of amounts collected from the Universal Charge and remitted to the PSALM.

Section 6. Administration of the Universal Charge.

a) As per the last paragraph of Section 34 , PSALM shall act as the administrator of the funds generated from the Universal Charge. For this purpose, the PSALM shall create a STF to be established in the Bureau of Treasury (BTr) or in a Government Financing Institution (GFI) that is acceptable to the DOF. Separate STFs shall be established for each of the intended purposes of the Universal Charge. Funds shall be disbursed in an open and transparent manner and shall only be used for the intended purposes specified in Section 3 of this Rule. (b) All qualified availments shall be approved and certified by the ERC. In this regard, PSALM, in consultation with the DOF, shall promulgate, within one (1) year from the effectivity and subject to the approval of the ERC, procedures and guidelines that shall govern all remittances to and disbursements from the STF. (c) The PSALM shall transfer funds from the STF and shall distribute to the beneficiaries on or before the twentieth (20 th ) day of each month. (d) The PSALM shall submit to the DOF and ERC a report on the remittances and disbursements against the fund on a quarterly basis. Page 61 of 100(e) Separate Books of accounts shall be maintained by the PSALM for over-recovery of the Distribution Utility stranded cost component and made available to the ERC for purposes of monitoring and accounting for sums collected from the Universal Charge. (f) In the event that the total amount collected for the Universal Charge is greater than the actual availments against the Universal Charge, the PSALM shall retain the balance within the STF to pay for periods where a shortfall occurs. (g) In determining the amount which a Distribution Utility can net off from its remittance of the Universal Charge to PSALM, the Distribution Utility shall not discriminate in its own favor at the expense of other beneficiaries in the event that actual collections differ from expected collections based on the level of kilowatt-hour sales used by ERC in setting the Universal Charge per kilowatt-hour (kwh). In such cases, the Distribution Utility shall only retain its proportionate share in the actual collection. Section 7. Deferment. All Self-Generation Facilities whether new, existing or under construction shall not be covered by the imposition of Universal Charge for a period of four (4) years from its imposition: Provided, That, such Self-Generation Facilities shall register with the ERC and PSALM. Section 8. Fines and Penalties. (a) In cases where the TRANSCO or its Buyer or Concessionaire or a Distribution Utility collects funds earmarked for the Universal Charge but fails to remit the same to PSALM on or before the fifteenth (15th) day of the succeeding month, the ERC may impose the appropriate fines and penalties prescribed in Section 46 including, but not limited to, assessed interest charges. (b) In cases where a Self-Generation Facility refuses to pay the Universal Charge, the ERC may impose the appropriate fines and penalties prescribed in Section 46 , including but not limited to, assessed interest charges.

RULE 19. MANDATED RESIDENTIAL REBATE

a) The ERC shall monitor and ensure the implementation of its Resolution No. 2001-04 issued on 26 July 2001 and any amendments thereto. The ERC shall impose fines and penalties on parties who fail to comply with said Resolution. (b) The reduction shall be reflected as a separate item in the consumer billing statement.

RULE 20. LIFELINE RATE

Section 1. Guiding Principle. As per Section 73 , a socialized pricing mechanism called a Lifeline Rate for the Marginalized End-users shall be set by the ERC. Section 2. Scope of Application. The provision of Lifeline Rate shall be applied to all Marginalized End-users of all DUs pursuant to the Act. It is the responsibility of the ERC to monitor compliance to specific guidelines it shall issue pursuant to the implementation of Lifeline Rate. Section 3. Application. (a) The Lifeline Rate shall be exempted from the cross subsidy removal under the Act for a period of ten (10) years, unless extended by law. (b) Each Distribution Utility shall file a petition with the ERC recommending the level of consumption (kWh per month) to be qualified for the Lifeline Rate. (c) The ERC shall determine and approve different levels of consumption and cross-subsidy support for each Distribution Utility or classification of DUs.