For Posting 629 - DECISION - ERC Case 2009-066 RC - PELCO I RSEC-WR (SGD)

Republic of the Philippines
ENERGY REGULATORY COMMISSION Digitally signed by Heiddi
San Miguel Avenue, Pasig City

Venecia R. Barrozo
IN THE MATTER OF THE

APPLICATION FOR
APPROVAL OF AN
ADJUSTMENT IN RATES
UNDER THE RULES FOR
SETTING ELECTRIC
COOPERATIVES
WHEELING RATES (RSEC-
WR), WITH PRAYER FOR
PROVISIONAL AUTHORITY
ERC CASE NO. 2009-066 RC
PAMPANGA I ELECTRIC
COOPERATIVE, INC.
(PELCO I),
Applicant.
x-------------------------------------x
DECISION
Before the Commission for resolution is the Amended

Application dated 16 November 2009 (Amended Application) filed by
Pampanga I Electric Cooperative, Inc. (PELCO I) on 19 November
2009 for approval of the rates adjustment pursuant to the new Rate
Setting Methodology as provided under Resolution No. 20, Series of
2009 or the Rules for Setting the Electric Cooperatives’ Wheeling
Rates” (RSEC-WR)1, with prayer for provisional authority.
FACTUAL ANTECEDENTS
The allegations of PELCO I in its Amended Application are

hereby quoted as follows:
1. PELCO I is an electric cooperative duly organized and existing

under and by virtue of the laws of the Republic of the
Philippines, with principal office at Sto. Domingo, Mexico,
Pampanga where it may be served with summons and other
legal processes, represented in this instance by its General
1Energy Regulatory Commission, A Resolution Adopting the Rules for Setting the Electric
Cooperatives’ Wheeling Rates, Resolution No. 20, Series of 2009 [RSEC-WR] (23 September
2009).
ERC Case No. 2009-066 RC
DECISION/23 SEPTEMBER 2020
Page 2 of 23
Manager, Engr. Loliano E. Allas, of legal age, Filipino and with

office address also at PELCO I Office;
2. Herein applicant is the exclusive franchise holder issued by

the National Electrification Administration (NEA) to operate
an electric light and power services in the
cities/municipalities of the province of Pampanga, namely:
Arayat, Candaba, Magalang, Mexico, San Luis, and Sta. Ana;
3. Section 43(f) of Republic Act No. 9136, otherwise known as

the “Electric Power Industry Reform Act of 2001” (EPIRA)
and Section 5(a), Rule 15 of its Implementing Rules and
Regulations (IRR) authorizes the ERC to establish a
methodology for setting distribution wheeling rates;
4. By virtue of the said authority, as early as 2006 the ERC

embarked on a process to establish a new rate setting
methodology for determining electric cooperatives’ (ECs)
rates;
5. From 2006 to 2009, the ERC conducted several public

consultations with the industry stakeholders to discuss the
details of the new regulatory framework for fixing the electric
cooperatives’ wheeling rates;
6. Said regulatory framework is embodied in a document

denominated as the Rules for Settling the Electric
Cooperatives’ Wheeling Rates (RSEC-WR);
7. The regulatory framework as embodied in the RSEC-WR

seeks to develop a regulatory regime that encourages
efficiency in the operations of the ECs and provides incentives
for their good performance, from a regulatory perspective, the
framework seeks to develop a regime that eases regulatory
burden and can be easily implemented and monitored;
8. PELCO I participated in the abovementioned public

consultations, it has likewise submitted data/documents
required by the ERC for purposed of implementing said rules;
9. On October 3, 2009, PELCO I’s Board of Director’s passed

Board Resolution No. 43-09, imploring upon the ERC to
implement the new rate settling methodology embodied in the
RSEC-WR;
10. After holding another round of public consultations

nationwide, particularly in the locality wherein the electric
cooperatives operate, the ERC published for promulgation on
September 24, 2009 the final RSEC-WR thus, this
application;
11. Under the RSEC-WR, PELCO I was categorized as Group “E”;

Page 3 of 23
12. As a Group “E” EC, PELCO I determined Operating Revenue

Requirement (ORR) per kWh is PhP 1.32;
13. Further, PELCO I is required to implement a new customer

class, as follows:
Table 1. Existing Customer Class and New Customer Class
EXISTING CUSTOMERS NEW CUSTOMER

SEGMENTATION
Residential
BAPA Residential Customer
Sale for Resale
Small Commercial
Industrial
Public Building Low Voltage Customers
Street Lights
Irrigation/CWS
Large Commercial
Industrial Higher Voltage Customers
14. After functionalizing and allocating the above set ORR and
using the new customer class, PELCO I’s initial Distribution,
Supply and Metering (DSM) rate caps are as follows:
Table 2. Initial DSM Rate Caps Per Customer Class

RESIDENTIAL LOW VOLTAGE HIGHER VOLTAGE
PhP/ PhP/Cust. PhP/ PhP/Cust PhP/
PhP/kWh PhP/kWh PhP/kW
Meter/Mo. /Mo. Meter/Mo /Mo. Meter/Mo.
Distribution 0.5782 0.7595 219.68
Supply 0.6001 42.92 42.92
Metering 0.4326 5.00 35.94 35.94
15. As a Group “E” EC, PELCO I is also authorized to collect a

Member’s Contribution for Capital Expenditure Rate in the
amount of PhP 0.2904/kWh;
16. Considering the above-mentioned rates, PELCO I’s rate caps

would be as follows: 1.) DSM – 1.3200; and 2.) MCC – 0.2904;
Table 2. 1 Initial DSM Rate Caps and MCC Per Customer Class
RESIDENTIAL LOW VOLTAGE HIGHER VOLTAGE
PhP/ Php/kW PhP/Cust/ PhP/Meter/ PhP/Cust/ PhP/
PhP/kWh PhP/kW
Meter/Mo h Mo Mo Mo Meter/Mo
Distribution 0.5782 0.7595 219.68
Supply 0.6001 42.92 42.92
Metering 0.4326 5.00 35.94 35.94
Members 0.2904 0.2904 0.2904
Contribution
for Capital
Expenditure
17. PELCO I intends to move the rate caps during the transition
period as follows:
Page 4 of 23
Table 3
PROPOSED TRANSITION RATES
Bill Rates
RESIDENTIAL
Start of End of Year End of
Current
Transition One Transition
Cust. Type: Residential
Distribution Php/kWh 0.6243 0.5782 0.5782 0.5782
Supply PhP/kWh 0.3049 0.6001 0.6001 0.6001
Metering PhP/Meter/Mo 5.00 5.00 5.00 5.00
Metering PhP/kWh 0.2728 0.4326 0.4326 0.4326
Members
Contribution for PhP/kWh 0.2904 0.2904 0.2904
Capital Expenditure
Final Loan Condo PhP/kWh
LOW VOLTAGE
Current
Cust. Type: Commercial
Distribution Php/kW - -
Supply PhP/kWh - -
Supply PhP/Cust/Mo 34.55 42.92 42.92 42.92
Metering PhP/kWh - - -
Members
Contribution for PhP/kWh
0.2904 0.2904 0.2904
Capital Expenditure
Final Loan Condo PhP/kWh -
Final Loan Condo PhP/Cust/Mo -
Cust. Type: Irrigation
Distribution Php/kW - - -
Supply PhP/kWh - -
Metering PhP/kWh - -
Members
0.2904 0.2904 0.2904
Capital Expenditure
Cust. Type: Public Building
Supply PhP/kWh - -
Members
0.2904 0.2904 0.2904
Capital Expenditure
Cust. Type: Street Lights
Supply PhP/kWh - - -
Members
0.2904 0.2904 0.2904
Capital Expenditure
Cust. Type: Industrial
Distribution Php/kW 20.00 - -
Supply PhP/kWh - -
Page 5 of 23

Members
Contribution for PhP/kWh 0.2904 0.2904 0.2904
Capital Expenditure
HIGHER VOLTAGE
Current
Cust. Type: Industrial
Distribution Php/kWh 0.2490
Distribution Php/kW 20.00 219.68 219.68 219.68
Supply PhP/kWh - -
Members PhP/kWh
Contribution for - 0.2904 0.2904 0.2904
Capital Expenditure
Cust. Type: Commercial
Distribution Php/kWh 0.3645 - - -
Distribution Php/kW - 219.68 219.68 219.68
Supply PhP/kWh - -
Metering PhP/Meter/Mo 35,91 35.94 35.94 35.94
Members
Contribution for PhP/kWh - 0.2904 0.2904 0.2904
Capital Expenditure
Cust. Type: Irrigation
Distribution Php/kWh 0.5723 - -
Distribution Php/kW - 219.68 219.68 219.68
Supply PhP/kWh - -
Members
Contribution for PhP/kWh - 0.2904 0.2904 0.2904
Capital Expenditure
18. PELCO I believes that the implementation of the proposed

rates would be to the best interest of its consumers
considering that it would be returned to them in the form of
dependable and quality electric service; and
19. PELCO I has duly complied with the pre-filing requirements

by furnishing copies of the Application together with its
supporting annexes and accompanying documents to the
Local Government Units’ legislative bodies within the
franchise area and published the Application in its entirety in
a newspaper of general circulation in the Province of
Pampanga.
Page 6 of 23
PRAYER
WHEREFORE, foregoing premises considered, it is most

respectfully prayed on this Honorable Commission, after due notice
and hearing, to approve the new rate schedule for applicant PELCO
I, as follows:
PROPOSED RATE
Members’
TYPE OF
UNITS Contribution for
CUSTOMERS Distribution Supply Metering
Capital
Expenditures
PhP/kWh 0.57820 0.6001 0.4326 0.2904
RESIDENTIAL
PhP/Meter/Mo 5.0000
PhP/kWh 0.7595 0.2904
LOW VOLTAGE Php/Cust/Mo 42.92
PhP/Meter/Mo 35.94
PhP/kWh 0.2904
PhP/kW 219.68
HIGHER VOLTAGE
PhP/Cust/Mo 42.92
PhP/Meter/Mo 35.94
It is further prayed, that applicant be provisionally authorized

to implement the said rates pending hearing and final evaluation of
the application by the Honorable Commission.
Proceedings Conducted by the

Commission
On 13 October 2009, PELCO I filed its original Application dated

09 October 2009.
However, the Commission in its Order dated 11 November 2009,

directed various Electric Cooperatives (ECs), including PELCO I, to file
their amended applications to reflect the following amendments:
1. The rates for Metering of the Low Voltage and Higher

Voltage customer segmentation as shown in Table 2
of the Applications, including the sub-table must be
reflected in peso per meter per month
(PhP/Meter/Mo.);
2. The components of the rates for the different

customer classes, such as Distribution, Supply,
Metering, Member’s Contribution for Capital
Expenditures (MCC) and Final Loan Condonation as
shown in Table 3 thereof, must also be reflected in
peso per kilowatt hour (PhP/kWh), or peso per
kilowatt (PhP/kW), or peso per customer per month
(PhP/Cust./Mo.), or peso per meter per month
(PhP/Meter/Mo.); and
Page 7 of 23
3. The new rate schedule as prayed must also reflect the

unit peso per meter per month (PhP/Meter/Mo.) for
the different types of customers.
On 17 November 2009, the National Association of Electricity

Consumers for Reforms, Inc. (NASECORE) filed an Omnibus Petition
for Intervention dated 16 November 2009 (Petition for Intervention)
to the applications of various ECs, including PELCO I.
On 19 November 2009, PELCO I filed the instant Amended

Application.
On 08 December 2009, the Commission issued an Order dated

07 December 2009 taking note of NASECORE’s Petition for
Intervention and granting its request that it be furnished with copies
of the applications with annexes of the various ECs.
On 18 January 2010, PELCO I filed its Opposition/Comment

(Re: Omnibus Petition for Intervention dated 16 November 2009)
dated 17 January 2010.
On even date, the Commission issued an Order and a Notice of

Public Hearing, both dated 04 January 2010, setting the case for
Jurisdictional Hearing on 02 February 2010.
In the same Order, the Commission provisionally authorized

PELCO I to implement its proposed Revised Rate Schedule with
modification effective on its January 2010 billing period, to wit:
WHEREFORE, the foregoing premises considered, the

Commission hereby PROVISIONALLY AUTHORIZES Pampanga I
Electric Cooperative, Inc. (PELCO I) to implement its proposed
Revised Rate Schedule with modification. In the event that the rate
adjustment provisionally authorized herein is found to be excessive
or insufficient after final evaluation, the amount corresponding to
the difference shall be accordingly refunded or collected in a manner
to be determined by the Commission.
Accordingly, PELCO I is hereby directed to adopt the

provisionally approved Revised Rate Schedule to be implemented
effective its January 2010 billing period:
Page 8 of 23
Start of Transition January 2010
New Customer Classes Residential LOW VOLTAGE HIGHER VOLTAGE
Current Customer Class Residential Commer- Industrial Irrigation Public Street Industrial Commer- Irrigation
cial Building Lights cial
Distribution Charges:
Demand Charge PhP/kW 13.3333 86.5602 73.2269 73.2269
Distribution System PhP/kWh 0.6089 0.4962 0.4192 0.6347 0.5128 0.5472 0.1660 0.2430 0.3815
Charge
Supply Charges:
Retail Customer PhP/cust/mo 37.3401 37.3401 37.3401 37.3401 36.2868 37.3401 37.3401 37.3401
Charge
Supply System PhP/kWh 0.4033
Charge
Metering Charges:
Retail Customer PhP/meter/ 5.0000 35.9210 35.9210 35.9210 35.9210 35.9210 35.9210 35.9210 35.9210
Charge mo
Metering System PhP/kWh 0.3261
Charge
MCC PhP/kWh 0.2904 0.2904 0.2904 0.2904 0.2904 0.2904 0.2904 0.2904 0.2904
End of Year 1 January 2011
New Customer Classes Residenti LOW VOLTAGE HIGHER VOLTAGE

al
Current Customer Class Residential Commer- Industrial Irrigation Public Street Industrial Commer- Irrigation
cial Building Lights cial
Demand Charge PhP/kW 6.6667 153.1205 146.4538 146.4538
Distribution System PhP/kWh 0.5936 0.6278 0.5893 0.6971 0.6362 0.6534 0.0830 0.1215 0.1908
Charge
Supply Charges:
Retail Customer PhP/cust/m 40.1302 40.1302 40.1302 40.1302 39.6035 40.1302 40.1302 40.1302
Charge o
Supply System Charge PhP/kWh 0.5017
Metering Charges:
Charge mo
Charge
MCC PhP/kWh 0.2904 0.2904 0.2904 0.2904 0.2904 0.2904 0.2904 0.2904 0.2904
End of Transition January 2012
Current Customer Class Residentia Commer- Industrial Irrigation Public Street Industrial Commer- Irrigation
l cial Building Lights cial
Demand Charge PhP/kW 219.6807 219.6807 219.6807
Distribution System PhP/kWh 0.5782 0.7595 0.7595 0.7595 0.7595 0.7595
Charge
Supply Charges:
Retail Customer PhP/cust/m 42.9203 42.9203 42.9203 42.9203 42.9203 42.9203 42.9203 42.9203
Charge o
Supply System Charge PhP/kWh 0.6001
Metering Charges:
Charge mo
Charge
MCC PhP/kWh 0.2904 0.2904 0.2904 0.2904 0.2904 0.2904 0.2904 0.2904 0.2904
On 01 February 2010, PELCO I filed Pre-trial Brief and

Compliance, both dated 29 January 2010.
During the 02 February 2010 Jurisdictional Hearing, PELCO I

presented its proofs of compliance with the Commission’s publication
and posting of notice requirements pursuant to the Order dated 04
Page 9 of 23
January 2010. However, upon review of the documents submitted, the

Commission noted that PELCO I failed to comply with the publication
requirements of the Notice of Public Hearing. Accordingly, the
Commission cancelled the scheduled hearing.
On 22 February 2010, PELCO I filed a Motion for

Reconsideration dated 18 February 2018 praying that the Commission
reconsiders its ruling during the 02 February 2009 hearing declaring
PELCO I as non-compliant with the publication requirements
pursuant to the Order dated 04 January 2010.
On 16 March 2010, the Commission issued an Order dated 15

March 2010 denying the Motion for Reconsideration filed by PELCO
I.
On 30 March 2010, the Commission issued another Order with

Notice of Public Hearing, both dated 29 March 2010, setting the case
for Jurisdictional Hearing on 29 April 2010.
During the 29 April 2010 hearing, PELCO I presented its proofs

of compliance with the Commission’s publication and posting of notice
requirements pursuant to the Order dated 29 March 2010. The
Commission found PELCO I’s submissions compliant. Thus, the
Commission acquired jurisdiction over the instant case.
On 13 July 2010, the Commission issued another Order dated 12

July 2010, setting the case for expository presentation, Pre-trial
Conference and evidentiary hearing on 22 July 2010.
On 22 July 2010, the hearing for expository presentation, Pre-

trial Conference and evidentiary hearing proceeded as scheduled
pursuant to the Order dated 12 July 2010. At the end of the hearing,
the Commission directed PELCO I to submit its formal offer of
evidence.
On 20 October 2010, the Commission issued an Order dated 18

October 2010 setting another hearing on 03 November 2010 for the
presentation of evidence by NASECORE. In the same Order, the
Commission partially granted NASECORE’s Motion for Production of
Documents. Thus, PELCO I was directed to submit and furnish
NASECORE with the requested documents.
During the 03 November 2010 hearing for the presentation of

evidence by NASECORE, only PELCO I appeared. NASECORE failed
Page 10 of 23
to appear despite due notice. Accordingly, PELCO I moved that

NASECORE be declared to have waived its right to present its evidence.
The Commission granted said motion.
Nonetheless, on even date, NASECORE filed an Omnibus Motion

for Comprehensive Regulatory Audit with a prayer that a regulatory
audit be conducted to all ECs, which have been granted a provisional
increase in its rate, to determine the reasonableness of their current
rates and to suspend the resolution of the applications pending
completion of the regulatory audit.
On 08 November 2010, NASECORE filed a Motion to Correct,

Strike Out and Replace with a prayer that the Commission correct item
5 of page 5 and strike out some portions in item 6 page 6 of its Omnibus
Motion for Comprehensive Regulatory Audit and replace the same
with the attached pages 5 and 6.
On 12 November 2010, the Commission issued an Order dated

10 November 2010 duly noting NASECORE’s Omnibus Motion for
Comprehensive Regulatory Audit and Motion to Correct, Strike Out
and Replace. In the same Order, PELCO I was directed to file its
comment thereon within ten (10) days from receipt thereof. Failure of
PELCO I to file its comment within the prescribed period shall be
deemed a waiver of its right to do so, and the motions of NASECORE
shall be deemed submitted for resolution of the Commission.
On 22 November 2010, PELCO I filed its Formal Offer of

Evidence dated 12 November 2010.
On 12 May 2011, NASECORE filed an Omnibus Motion for

Production of Documents dated 11 May 2011 requesting for relevant
data regarding the MCC.
On 02 June 2011, the Commission issued an Order dated 30 May

2011 duly noting NASECORE’s Omnibus Motion for Production of
Documents. In the same Order, the Commission granted with
modification NASECORE’s request for the production of documents,
and directed PELCO I to submit within fifteen (15) days from receipt
thereof and to furnish NASECORE with the requested documents.
On 18 October 2011, the Commission issued an Order and

Record of Proceedings dated 17 October 2011 wherein the Commission
declared that the instant case was submitted for resolution for failure
Page 11 of 23
of NASECORE to appear during the 03 November 2010 hearing

despite due notice, thus, waiving its right to present evidence.
On 16 April 2018, the Commission issued an Order dated 20

March 2018, denying NASECORE’s Omnibus Motion for
Comprehensive Regulatory Audit.
Having found the exhibits contained in the Applicant’s FOE to be

relevant and material in the evaluation of the instant Application, the
Commission admitted the same and declared the instant case
submitted for resolution.
ISSUE
The issue for the Commission’s resolution is whether or not

PELCO I’s implemented rates pursuant to the provisionally approved
Revised Rate Schedule in the Order dated 04 January 2010 should be
confirmed.
THE COMMISSION’S RULING
After deliberation and thorough evaluation of all evidence

presented and information gathered by the Commission pursuant to
its regulatory power, the Commission resolves to confirm the
implemented rates of PELCO I pursuant to the Order dated 04 January
2010 and authorizes PELCO I to implement the same until a new rate
is determined by the Commission.
DISCUSSION
The Commission noted that the costs of electric service have

increased significantly from the time that the rates of the ECs were
determined by the Commission based on the 2000 test year.
Consequently, the Commission saw the need to establish a new rate-
setting methodology for on-grid ECs because their previous rates,
under the cash flow rate-setting methodology, were no longer
responsive to the costs of providing electric service to the consumers.
Thus, on 23 September 2009, the Commission promulgated

Resolution No. 20, Series of 20092 or the RSEC-WR establishing a new
rate-setting methodology for on-grid ECs.
2 Supra, Note 1
Page 12 of 23
The regulatory framework embodied in the RSEC-WR sought to

encourage the ECs to be financially sufficient, efficient, and responsive
to its member-consumers. Likewise, the RSEC-WR sought to address
the regulatory lag in the cash flow rate-setting methodology.
I. Classification of ECs
The RSEC-WR classified the on-grid ECs into seven (7) groups
based on characteristics or variables that have the most impact on their
total operating distribution costs and operating distribution costs per
kWh, namely: 1) size (number of customers); and 2) consumption
(MWh sales per customer). In making the classification, the
Commission also evaluated the data submitted by the ECs, particularly,
their respective operating distribution costs3 for the years 2001 to
2006 and the average adjusted unbundled rates 4.
The results of the analysis made by the Commission based on the

characteristics used in the classification is shown in Table 1.
Table 1. Grouping and Characteristics of ECs5
Group Characteristics
Size
NO. OF ECs Customer Consumption (No. of
GROUP (MWh per year) Customers, in
Thousand)
A 11 <1 10 to 25
B 16 <1 25 to 50
C 5 <1 50 to 100
D 17 1 to 2 10 to 50
E 28 1 to 2 50 to 100
F 15 1 to 3 20 to 150
G 6 3 to 5 30 to 150
Based on the data submitted by PELCO I, its customer

consumption is within the range of 1 to 2 MWh per year, likewise, the
number of PELCO I’s customers is within the range of 50,000 to
100,000. Thus, based on data in Table 1, PELCO I is considered part of
the Group E ECs.
3 Operations and Maintenance Expenses, Customer Expenses, and General and Administrative
Expenses
4 Reinvestment Fund and Debt Service
5 supra note 1, Article 2.3, Table 4
Page 13 of 23
II. Development of the Initial Tariff
Before the implementation of the Revised Rate Schedule

provided in the provisional authority granted by the Commission in the
Order dated 04 January 2010, PELCO I’s tariff structure was
composed of the Distribution, Supply, and Metering (DSM) Charges,
which were determined using its operating costs (operation and
maintenance expenses and payroll) and capital costs (reinvestment
fund and debt service).
Under the RSEC-WR, there will be a transition from the tariff of

ECs under the cash flow rate-setting methodology towards the Initial
Tariff. In developing the Initial Tariff, the operating and capital costs
shall be unbundled wherein the DSM Charges shall represent only the
operating costs. On the other hand, a separate charge called the MCC
shall represent the EC’s debt service and reinvestment fund to cover
for its capital expenditure (CAPEX) requirements. Thus, the Initial
Tariff shall consist of the unbundled DSM Charges and MCC.
A detailed discussion of the DSM Charges and MCC components

of the Initial Tariff is provided below.
a. Operating Cost
In the determination of the Initial Tariff for each group, the

operating cost per kWh as of the year 2000 of the DSM of each EC was
adjusted to the year 2008 level using the average rate of increase in the
minimum wages for the period 2001 to 2008 or a wage index of 5.12%.
The wage index was used in the adjustment since labor cost accounted
for seventy percent (70%) of the operating cost.
The calculated costs were then reduced by five percent (5%) to

account for Other Revenue Income (ORI) which was included as part
of the revenue requirement under the cash flow methodology.
In determining the appropriate operating cost for each ECs, the

Commission simulated different options, such as the 2006 Median,
2006 70th percentile, and 2008 Median. The Operating Revenue
Requirement per kWh was set at the 2008 Median of the ECs’
operating costs as shown in Table 2.
Page 14 of 23
Table 2. Operating Cost6
2008 Level
Group
(Median)
A 2.4200
B 1.8200
C 1.6800
D 1.1400
E 1.3200
F 0.9900
G 0.6900
b. MCC, now the Reinvestment Fund for Sustainable

Capital Expenditures (RFSC)7
The ECs’ previous unbundled rate includes a reinvestment fund

provision calculated at five percent (5%) of its unbundled retail rate,
inclusive of generation, transmission, and distribution charges, as part
of their Rate Unbundling Decision.
After reviewing the financial submissions of the ECs, the

Commission found that the reinvestment fund, at an average,
translates to twenty-two percent (22%) of the ECs’ operation and
maintenance expenses. Hence, the MCC was set at twenty-two percent
(22%) of the respective Group’s 2008 Median operating costs per kwh.
Similar with the provision on reinvestment fund, the MCC was

envisioned to fund the amortization or debt service of an EC’s
indebtedness associated with the expansion, rehabilitation, or
upgrading of its existing electric power system in accordance with its
Commission-approved CAPEX plan.
The appropriate level of MCC rate cap was set for each group
based on the foregoing, as shown in Table 3.
Table 3. MCC Rate Cap per Group8
2008 Median Level MCC at 22%

Group
(PhP/kWh) (PhP/kWh)
A 2.4200 0.5324
6 supra note 1, Article 4.1 (f)

7 On 06 July 2011, the Commission issued Resolution No. 14, Series of 2011, entitled, A Resolution
Modifying the Terms Members’ Contribution for Capital Expenditures (MCC) to Reinvestment
Fund for Sustainable Capital Expenditures (RFSC) and MCC – Real Property Tax (RPT) to
Provision for RPT as Provided in the Rules for Setting Electric Cooperatives’ Wheeling Rates
(RSEC-WR).
Page 15 of 23
2008 Median Level MCC at 22%

Group
(PhP/kWh) (PhP/kWh)
B 1.8200 0.4004
C 1.6800 0.3696
D 1.1400 0.2508
E 1.3200 0.2904
F 0.9900 0.2178
G 0.6900 0.1518
III. Development of New Customer Classes
a. Old Customer Classes
The customer classes of the ECs, including PELCO I before the

implementation of the RSEC-WR were varied. The customer classes
included Residential, Commercial, Industrial, Street Lights, Irrigation
and Public Buildings.
The determination of the customer classes was mainly left to the

discretion of each EC since the Commission did not set a standard for
such determination. Thus, the ECs determined their respective classes
based on either energy sales or customer demand.
The Commission, however, found that the said manner of

determination was inconsistent with the cost of service principle
because the customer classes were only identified based on their
energy or demand sales regardless of the line voltage these customers
are connected to and the costs that they attribute and impose to the
distribution system.
b. New Customer Classes
Through the RSEC-WR, the Commission determined a new set

of customer classes based on the power service delivery voltage used in
serving the customers. The Commission finds that the new customer
segmentation is fair and reasonable as it allows a justifiable allocation
of costs and is consistent with cost of service principle, as shown in
Table 4.
Page 16 of 23
Table 4. New Customer Classes9
NEW CUSTOMER SEGMENTATION

Residential Customers End-users that are registered as Residential
customers
Low Voltage Customers End-users that are non-residential and
connected to Low Voltage or LV (not
exceeding 1 kV)
Higher Voltage Customers End-users that are non-residential and
connected to Medium Voltage or MV
(exceeding 1 kV up to 34.5 kV) or High
Voltage or HV (exceeding 34.5 kV)
Based on the foregoing, PELCO I’s new customer segmentation

vis-à-vis its old customer segmentation is as follows: a) the Residential
customers are still classified under the Residential customer segment;
b) most of the Commercial, Industrial, Public Buildings, Irrigation and
Streetlight Customers that are connected to the low voltage
distribution facilities are now classified under the Low Voltage
customer segment; and c) the rest of the customers that are connected
to higher voltage distribution facilities and have demand meters are
now classified under Higher Voltage customer segment.
The comparison between the new customer segmentation and

old customer segmentation of PELCO I is shown in Table 5.
Table 5. Comparison of PELCO I’s Old and New Customer

Segmentation
OLD CUSTOMER NEW CUSTOMER

SEGMENTATION SEGMENTATION
Residential Residential
Commercial
Irrigation
Public Buildings Low Voltage
Street Lights
Industrial
Industrial
Commercial Higher Voltage
Irrigation
IV. Determination of Initial DSM Rate Caps per EC Group
In calculating the required average Operating Revenue

Requirement (ORR) for each group, the operating cost in Table 2 above
was multiplied by the average kWh sales of each group for the year
9 supra note 1, Article 6.4

Page 17 of 23
2007. The said revenue requirement was the basis for the calculation
of the rate caps per customer class.
The ORR per group was then functionalized or assigned to DSM

functions using the ratio of each group’s DSM costs to the total costs as
determined in the Rate Unbundling Decision. The functionalized ORR
was then classified and allocated into customer classes using the
factors based on the cost causation principle. The allocation factors
utilized were the group’s Non-Coincidental Peak (NCP) Demand Ratio
for Distribution, and the Number of Customers Ratio for Supply and
Metering. Thereafter, the allocated functionalized ORR of each
customer class was translated into DSM rate caps as shown in Table 6.
Based on the said methodology, the initial DSM rate caps

calculated per group are as follows:
Table 6. Initial DSM Rate Caps per EC Group10
V. New Rates Phasing-In Period
In granting the provisional authority to implement the Revised

Rate Schedule provided in the Order dated 04 January 2010, the
Commission looked into the over-all impact of the new rates and the
corresponding number of years of phasing-in so that PELCO I and its

Page 18 of 23
customers would have a smooth transition from the old rates to the
initial rates under the RSEC-WR.
Table 7 shows the manner by which the Commission determined

the phasing-in period of an EC.
Table 7. Impact of the New Rates and

the Corresponding Approved Phase-In Period
Range Approved Phase-In
Negative impact up to PhP0.25/kWh One-time implementation
PhP0.26/kWh up to PhP0.60/kWh 50%-50% phase-in
Above PhP0.60/kWh One third (1/3) phase-in
Exception: if the EC is entitled to any of the As prayed for

above phasing but prays for an adjustment
lower than what it is entitled to
The determination of the phasing-in period was based on how

the ECs would transition from the unbundled rate to the Initial DSM
Rate Caps. A one-time phase-in means that the ECs would be allowed
to implement the DSM Rate Caps on the immediately succeeding year,
the 50%-50% phase-in would allow the ECs to transition to its DSM
Rate Caps on the second year, and the one third phase-in would allow
the ECs to transition to its DSM Rate Caps on the third year.
In its Amended Application, PELCO I proposed a one-time

implementation for its DSM Rates towards the Initial DSM Rate Caps,
and a one-time implementation of its MCC rate so that it would have
the necessary funds for its CAPEX projects.
The Commission, in the case of PELCO I, approved a one-third

(1/3) phase-in, since the impact on its rates is above PhP0.60/kWh.
Thus, in the Order dated 04 January 2010, PELCO I was directed to
implement the provisionally approved Revised Rate Schedule starting
its January 2010 billing period. The phasing-in period of the PELCO I
ended in January 2012. Thus, starting its January 2012 billing period
up to present, PELCO I is implementing the approved DSM Rate Caps
for Group E.
Page 19 of 23
VI. Impact of the Revised Rate Schedule
Table 8 shows the old rates11 before the RSEC-WR and the
provisionally approved Revised Rate Schedule under the RSEC-WR of
PELCO I, as well as the difference between the two rates or the impact
of the Revised Rate Schedule on the old rates of PELCO I.
Table 8. PELCO I’s Old Rate and Revised Rate Schedule12
RATE ADJUSTMENT (Per ERC Case No. 2006-048 RC, Decision dated 15 January 2008)
Public Street
Customer Type Units Residential Commercial Industrial Irrigation Industrial Commercial Irrigation
Building Lights
Demand Charge PhP/kW - - 20.0000 - - - 20.0000 - -
Distribution System Charge PhP/kWh 0.6243 0.3645 0.2490 0.5723 0.3895 0.4411 0.2490 0.3645 0.5723
Supply Charges:
Retail Customer Charge PhP/Cust/Mo. - 34.5500 34.5500 34.5500 34.5500 32.9700 34.5500 34.5500 34.5500
Supply System Charge PhP/kWh 0.3049 - - - - - - - -
Metering Charges:
Retail Customer Charge PhP/Meter/Mo 5.0000 35.9100 35.9100 35.9100 35.9100 35.9100 35.9100 35.9100 35.9100
Metering System Charge PhP/kWh 0.2728 - - - - - - - -
TOTAL PhP/kW 0.0000 0.0000 20.0000 0.0000 0.0000 0.0000 20.0000 0.0000 0.0000
PhP/kWh 1.2020 0.3645 0.2490 0.5723 0.3895 0.4411 0.2490 0.3645 0.5723
PhP/Cust/Mo. 0.0000 34.5500 34.5500 34.5500 34.5500 32.9700 34.5500 34.5500 34.5500
PhP/Meter/Mo 5.0000 35.9100 35.9100 35.9100 35.91 35.9100 35.9100 35.9100 35.9100
RSEC-WR Rates
Residential LOW VOLTAGE HIGHER VOLTAGE
Customer Type Units Public Street
Residential Commercial Industrial Irrigation Industrial Commercial Irrigation
Building Lights
Demand Charge PhP/kW - - - - - - 219.6807 219.6807 219.6807
Distribution System Charge PhP/kWh 0.5782 0.7595 0.7595 0.7595 0.7595 0.7595 - - -
Supply Charges:
Retail Customer Charge PhP/Cust/Mo. - 42.9203 42.9203 37.3401 42.9203 42.9203 42.9203 42.9203 42.9203
Metering Charges:
Retail Customer Charge PhP/Meter/Mo 5.0000 35.9431 35.9431 35.9210 35.9431 35.9431 35.9431 35.9431 35.9431
TOTAL PhP/kW 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 219.6807 219.6807 219.6807
PhP/kWh 1.6109 0.7595 0.7595 0.7595 0.7595 0.7595 0.0000 0.0000 0.0000
PhP/Cust/Mo. 0.0000 42.9203 42.9203 37.3401 42.9203 42.9203 42.9203 42.9203 42.9203
PhP/Meter/Mo 5.0000 35.9431 35.9431 35.9210 35.9431 35.9431 35.9431 35.9431 35.9431
Variance: Increase/(Decrease) Rate Adjustment versus RSEC-WR Rates
TOTAL PhP/kW 0.0000 0.0000 (20.0000) 0.0000 0.0000 0.0000 199.6807 219.6807 219.6807
PhP/kWh 0.4089 0.3950 0.5105 0.1872 0.3700 0.3184 (0.2490) (0.3645) (0.5723)
PhP/Cust/Mo. 0.0000 8.3703 8.3703 2.7901 8.3703 9.9503 8.3703 8.3703 8.3703
PhP/Meter/Mo 0.0000 0.0331 0.0331 0.0110 0.03 0.0331 0.0331 0.0331 0.0331
11 ERC Case No. 2006-048 RC, “In The Matter of The Application For Approval For Rate
Adjustments In Accordance With The Provisions Of R.A. No. 9136, With Prayer For Issuance Of
Provisional Authority”;
12 ERC Case No. 2009-066RC, Order dated 4 January 2010
Page 20 of 23
VII. Final Rate Schedule
In the Commission’s Order dated 04 January 2010, PELCO I was

directed to adopt and implement the provisionally approved Revised
Rate Schedule starting its January 2010 billing period.
After a thorough review and evaluation of the instant case, the

Commission determined that the provisionally approved and
implemented Revised Rate Schedule provided in the Order dated 04
January 2010 is reasonable and consistent with the RSEC-WR. Thus,
the Commission confirms the implementation of the said rate schedule
and authorizes the implementation of the same until the Commission
determines a new rate.
Table 9 shows the Final Rate Schedule of PELCO I.
Table 9. Final Rate Schedule
Start of Transition January 2010 to December 2010

Public Street
Current Customer Class Residential Commercial Industrial Irrigation Building Lights Industrial Commercial Irrigation
Demand Charge PhP/kW - - 13.3333 - - - 86.5602 73.2269 73.2269
Supply Charges:
Retail Customer Charge PhP/cust/mo - 37.3401 37.3401 37.3401 37.3401 36.2868 37.3401 37.3401 37.3401
Metering Charges:
Retail Customer Charge PhP/meter/mo 5.0000 35.9210 35.9210 35.9210 35.9210 35.9210 35.9210 35.9210 35.9210
RFSC PhP/kWh 0.2904 0.2904 0.2904 0.2904 0.2904 0.2904 0.2904 0.2904 0.2904
End of year 1 January 2011 to December 2011

New Customer Classes LOW VOLTAGE HIGHER VOLTAGE
Public Street
Demand Charge PhP/kW - - 6.6667 - - - 153.1205 146.4538 146.4538
Supply Charges:
Metering Charges:
RFSC PhP/kWh 0.2904 0.2904 0.2904 0.2904 0.2904 0.2904 0.2904 0.2904 0.2904
Page 21 of 23
End of Transition January 2012 onwards

New Customer Classes LOW VOLTAGE HIGHER VOLTAGE
Public Street
Demand Charge PhP/kW - - - - - - 219.6807 219.6807 219.6807
Distribution System Charge PhP/kWh 0.5782 0.7595 0.7595 0.7595 0.7595 0.7595 - - -
Supply Charges:
Metering Charges:
RFSC PhP/kWh 0.2904 0.2904 0.2904 0.2904 0.2904 0.2904 0.2904 0.2904 0.2904
WHEREFORE, the foregoing premises considered, the

implemented Revised Rate Schedule of Pampanga I Electric
Cooperative, Inc. (PELCO I) starting its January 2010 billing period
provided in the Order dated 04 January 2010 is hereby
CONFIRMED.
Accordingly, PELCO I is AUTHORIZED to implement the

aforementioned Revised Rate Schedule until a new rate is determined
by the Commission.
SO ORDERED.
Pasig City, 23 September 2020.
AGNES VST DEVANADERA

Chairperson and CEO
(took no part)
ALEXIS M. LUMBATAN CATHERINE P. MACEDA
Commissioner Commissioner
FLORESINDA G. BALDO-DIGAL MARKO ROMEO L. FUENTES

Commissioner Commissioner
LS: RCP/MVM/LSP/MCCG ROS: CBD/DBBI/LOC/AJMO/LLG

Page 22 of 23
Copy Furnished:
1. Engr. Loliano E. Allas

General Manager
Pampanga I Electric Cooperative, Inc. (PELCO I)
Applicant
Sto. Domingo, Mexico, Pampanga
2. Atty. Arnido O. Inumerable

Counsel for Applicant PELCO I
405 Elisa St., U.E. Village,
Cainta Rizal
3. Office of the Solicitor General (OSG)

134 Amorsolo Street, Legaspi Village, Makati City
4. Commission on Audit (COA)

Commonwealth Avenue, Quezon City
5. Senate Committee on Energy

GSIS Building, Roxas Boulevard, Pasay City
6. House of Representatives Committee on Energy

Batasan Hills, Quezon City
7. Office of the Governor

Pampanga
8. Sangguniang Panlalawigan of the Province of Pampanga

Pampanga
9. Office of the City Mayor

City of San Fernando, Pampanga
10. Sangguniang Panlungsod of the Municipality of San Fernando

Arayat, Pampanga
11. Office of the Municipal Mayor

Arayat, Pampanga
12. Sangguniang Bayan of the Municipality of Arayat

Arayat, Pampanga

Candaba, Pampanga
14. Sangguniang Bayan of the Municipality of Candaba

Candaba, Pampanga

Magalang, Pampanga
16. Sangguniang Bayan of the Municipality of Magalang

Magalangt, Pampanga

Page 23 of 23
Mexico, Pampanga
18. Sangguniang Bayan of the Municipality of Mexico

Mexico, Pampanga

San Luis, Pampanga
20. Sangguniang Bayan of the Municipality of San Luis

San Luis, Pampanga

Sta. Ana, Pampanga
22. Sangguniang Bayan of the Municipality of Sta. Ana

Sta. Ana, Pampanga
23. Philippine Chamber of Commerce and Industry (PCCI)

3rd Floor, Chamber and Industry Plaza (CIP)
1030 Campus corner Park Avenues
McKinley Town Center, Fort Bonifacio, Taguig City
24. National Association of Electricity Consumers for Reforms, Inc.

(NASECORE)
Mr. Petronilo L. Ilagan
Intervenor
Roxas Seafront Garden Townhomes
Roxas Boulevard corner Ortigas Street, Pasay City
25. Regulatory Operations Service (ROS)

17th Floor, Pacific Center Building, San Miguel Avenue
Ortigas Center, Pasig City

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Republic of the Philippines

ENERGY REGULATORY COMMISSION Digitally signed by Heiddi

San Miguel Avenue, Pasig City

IN THE MATTER OF THE

ERC CASE NO. 2009-066 RC

Before the Commission for resolution is the Amended

The allegations of PELCO I in its Amended Application are

1. PELCO I is an electric cooperative duly organized and existing

Manager, Engr. Loliano E. Allas, of legal age, Filipino and with

2. Herein applicant is the exclusive franchise holder issued by

3. Section 43(f) of Republic Act No. 9136, otherwise known as

4. By virtue of the said authority, as early as 2006 the ERC

5. From 2006 to 2009, the ERC conducted several public

6. Said regulatory framework is embodied in a document

7. The regulatory framework as embodied in the RSEC-WR

8. PELCO I participated in the abovementioned public

9. On October 3, 2009, PELCO I’s Board of Director’s passed

10. After holding another round of public consultations

11. Under the RSEC-WR, PELCO I was categorized as Group “E”;

12. As a Group “E” EC, PELCO I determined Operating Revenue

13. Further, PELCO I is required to implement a new customer

Table 1. Existing Customer Class and New Customer Class

EXISTING CUSTOMERS NEW CUSTOMER

Table 2. Initial DSM Rate Caps Per Customer Class

15. As a Group “E” EC, PELCO I is also authorized to collect a

16. Considering the above-mentioned rates, PELCO I’s rate caps

Supply PhP/Cust/Mo 34.55 42.92 42.92 42.92

18. PELCO I believes that the implementation of the proposed

19. PELCO I has duly complied with the pre-filing requirements

WHEREFORE, foregoing premises considered, it is most

It is further prayed, that applicant be provisionally authorized

Proceedings Conducted by the

On 13 October 2009, PELCO I filed its original Application dated

However, the Commission in its Order dated 11 November 2009,

1. The rates for Metering of the Low Voltage and Higher

2. The components of the rates for the different

3. The new rate schedule as prayed must also reflect the

On 17 November 2009, the National Association of Electricity

On 19 November 2009, PELCO I filed the instant Amended

On 08 December 2009, the Commission issued an Order dated

On 18 January 2010, PELCO I filed its Opposition/Comment

On even date, the Commission issued an Order and a Notice of

In the same Order, the Commission provisionally authorized

WHEREFORE, the foregoing premises considered, the

Accordingly, PELCO I is hereby directed to adopt the

Start of Transition January 2010

New Customer Classes Residential LOW VOLTAGE HIGHER VOLTAGE

End of Year 1 January 2011

New Customer Classes Residenti LOW VOLTAGE HIGHER VOLTAGE

End of Transition January 2012

New Customer Classes Residential LOW VOLTAGE HIGHER VOLTAGE

On 01 February 2010, PELCO I filed Pre-trial Brief and

During the 02 February 2010 Jurisdictional Hearing, PELCO I

January 2010. However, upon review of the documents submitted, the

On 22 February 2010, PELCO I filed a Motion for

On 16 March 2010, the Commission issued an Order dated 15

On 30 March 2010, the Commission issued another Order with

During the 29 April 2010 hearing, PELCO I presented its proofs

On 13 July 2010, the Commission issued another Order dated 12

On 22 July 2010, the hearing for expository presentation, Pre-

On 20 October 2010, the Commission issued an Order dated 18

During the 03 November 2010 hearing for the presentation of

to appear despite due notice. Accordingly, PELCO I moved that