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Why your power bills are too long
by Delmar Cariño

Electric cooperatives, cognizant of the highly technical nature of their operations, including their bills, have gone the extra mile to explain – in ways that an ordinary consumer would understand – the complexity of the business.

But while extensive information and education campaigns have been done on the items appearing on the electric bill, chances are you are still confused about it or you still have queries aching for answers. Believe me, those 27 or so items, almost all of which you are supposed to pay, have made that thermal paper really quite long (7.62 cm by 30.48 cm).

But the best way to get over it is to appreciate the bill itself. Don’t get tired of that long list. The bill charges you the cost of the kilowatt hours you have consumed but the same was so designed to also tell you what you are actually paying.

That’s what they call unbundling of the rates. The Electric Power Industry Reform Act mandated all distribution utilities (DUs) in the country to unbundle, meaning it must be detailed so consumers could understand where, for instance, that P7 per kilowatt hour is spent.

Here, the law wanted the DU to observe the business practice of itemizing the cost of power and the services that go with it. That’s transparency for electric cooperatives which, in the long run, is a convenient way to inform customers what the industry is all about and how it works.

No distribution utility is exempt. Be it private, like power giant Meralco, or electric cooperatives (EC), like the Ifugao Electric Cooperative, Kalinga Electric Cooperative, Mountain Province Electric Cooperative, Abra Electric Cooperative, and Benguet Electric Cooperative.

Let’s take a peek at your monthly power bill one more time.

Briefly, the components of the bill are defined as follows:
Generation Charge. This is the cost of power generated and purchased by the DU to be distributed to its member consumers.

Transmission Charge.
This is the cost for the use of the transmission system for the delivery of power from the generators to the DUs.

System Loss Charge. This represents the recovery of the cost of power due to technical and non-technical losses. The law puts the cap at 13 percent for electric cooperatives, meaning the amount of power lost during distribution should not exceed that figure.

Distribution Charge. This is the regulated cost of operating and maintaining the distribution system that brings electricity from the high-voltage transmission grid to commercial / industrial establishments and residential end-users.

Supply Charge. This is the cost of rendering service to customers such as billing, collection, customer assistance, and related services.

Metering Charge. This refers to the cost of metering, its reading, operation, and maintenance of metering facilities.

Universal Charge. This is the charge imposed for the recovery of stranded debts and stranded contract cost of the National Power Corporation. It is a mandatory charge which shall be passed on and collected from all end-users on a monthly basis by the DUs. This charge also has two other components:

a. Missionary Electrification Charge. The cost associated with the provision of basic electricity service in unviable areas with the ultimate aim of bringing the operations in these areas.

b. Environmental Charge. A charge of P0.0025/kWhr (or one fourth of a centavo) to be used for the rehabilitation and management of watershed areas.
Value Added Tax (VAT). This is imposed on the sale of goods and services in the ordinary course of the business. The VAT on power refers to the national tax imposed on the sale of electricity by generation, transmission, and distribution companies.

Members Contribution for Capital Expenditure (now officially called Reinvestment Fund for Sustainable Capital Expenditure). This is the portion of the rate for debt servicing to fund capital expenditure projects of the EC.

But wait, not all those listed in the bill are to be paid. There are also refunds and discounts. They could be easily spotted since they are the components with negative or minus signs.

For refund, there’s the loan condonation (the reduction in rate of all types of customers as a result of the condonation of the debts of ECs from the National Electrification Administration; meter deposit refund (refund of collected deposits supposedly for meters), and power purchase adjustment (computed over recovery of power cost brought about by the fluctuations in the cost of power previously billed by the NPC).

For discount, there’s the power rate reduction (for residential consumers at a rate of P0.30 /kWhr); lifeline rate (for marginalized residential consumers) and the senior citizen discount.

It may look complicated at this point. But getting lost is not the intention of the industry practice of unbundling the rates. Rather, the unbundling would help consumers see the particular items that go with the cost of power.

Now, here are facts consumers must understand: 1. The bill is composed of power (generation, transmission, and system loss) and non-power costs (distribution, supply, and metering). This means that a consumer does not only pay for the current itself but also the services, taxes, and loan components of the rate; 2. The EC does not decide the components of the rate. It is the law that says so. Neither is the EC empowered to unilaterally decide an increase in the rates. The government through the Energy Regulatory Commission must approve it; 3. The EC or the DU represents only one sector of the power industry – distribution. Other stakeholders operate the generation and transmission sectors.

This leads us to one crucial thing – distinguishing what the industry calls as "pass on" and "pass through" charges. While the DU issues the bill, with all its components, it does not mean that the utility pockets all the amount it collects. The EC remits the cost of generation, transmission, EVAT, universal charge, and system loss to the power supplier, National Grid Corporation of the Philippines and the Power Sector Assets and Liabilities Management Corp. (pass through). In this case, the DU or EC is a mere collection agent. What the ECs or DUs actually impose from its end are the distribution, supply, and metering charges (pass on).

Stated otherwise, the ECs actually retains around 0.99 for the average of P7/kWhr. The rest simply passes through.

Your electric bill is indeed long. But it was styled that way for all of us to know and understand what we actually pay. You will surely agree that as a commodity, electricity is intangible, far different from a can of sardines or a bottle or a sachet of feminine wash.
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