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This is the cost associated with Meralco's purchase of power, from its suppliers - the NPC, Independent Power Producers (IPPs) and the Wholesale Electricity Spot Market (WESM).
This refers to the cost of delivery of electricity from generators, usually located in other provinces or in remote areas outside the distribution utility's franchise area, to the distribution system of Meralco. This is paid to the National Grid Corporation of the Philippines (NGCP), the transmission service provider.
This refers to the cost-recovery of power lost due to technical and non-technical system losses. The maximum level of losses that may be recovered by private distribution utilities was set at 9.5% by Republic Act No. 7832 which was reduced to 8.5% starting 2010, as provided under ERC Resolution No.17, Series of 2008.
This refers to the cost of developing, constructing, operating and maintaining the distribution system of Meralco, which delivers power from high-voltage transmission grids to commercial and industrial establishments and residential end-users. Components are:
Metering Charge refers to the cost of reading, operating and maintaining power metering facilities and associated equipment, as well as other costs attributed to the provision of metering service.
Supply Charge refers to the cost of rendering service to customers such as billing, collection, customer assistance and other associated services.
Lifeline Discount or Lifeline Subsidy is a socialized pricing mechanism under Section 73 of the EPIRA to benefit marginalized/low-income captive market customers. In Meralco's case, as approved by the ERC, residential customers using up to 100 kWh in a given month enjoy a Lifeline Discount to be applied to the total of the generation, transmission, system loss, distribution, supply and metering charges. The discount varies according to consumption and is funded by a Lifeline Subsidy Charge to be paid by all other customers.
Senior Citizen Discount or Senior Citizen Subsidy is a socialized pricing mechanism for senior citizens provided under Republic Act No. 8884 or the Expanded Senior Citizens Act of 2010. There are two Senior Citizens Discounts provided to end-users. The first provides a maximum of 5% discount on the electricity bills of residential accounts registered under the name of a senior citizen which consume not more than 100 kWh a month. The second grants a 50% discount on the electricity bills of senior citizen institutions accredited by the Department of Social Welfare and Development (DSWD). The discounts are applied on the qualified customers' total generation, transmission, system loss, distribution, supply and metering charges amount, net of lifeline discount, and are funded through a subsidy to be paid by customers that are not availing of the Senior Citizen Discount or the Lifeline Discount.
Local Franchise Tax is levied by provinces and cities for businesses enjoying a franchise, and paid to such local government units, in accordance with the provisions of Sections 15 and 137 of the Local Government Code. This is a pass-through charge for Meralco paid and collected in accordance with BIR and ERC Regulations.
Value Added Tax (VAT) is the percentage tax imposed on the value of the sale of electricity and related services through all the stages of generation, transmission, distribution and sale of electricity to the final consumer. It is a form of indirect sales tax because the total of the VAT collected on each sale transaction in all the stages mentioned is charged to the final consumer as part of the purchased price with sellers and utilities acting merely as tax collectors.
This is a charge imposed on all electricity end-users as determined, fixed and approved by the ERC, pursuant to Section 34 of the EPIRA. It is remitted to the Power Sector Assets and Liabilities Management Corporation (PSALM), a government-owned and controlled corporation created by Republic Act No. 9136. At present, this includes the missionary electrification and environmental charges.
Other possible components of the Universal Charge which are yet to be resolved by the ERC are:
(A) Stranded Debts and Stranded Contract Costs of the NPC,
(B) Stranded Contract Costs of Distribution Utilities, and
(C) Equalization of the taxes and royalties applied to indigenous or renewable sources of energy vis-a-vis imported fuels.
Under Universal Charges are the following:
Environmental Charge is a universal charge that accrues to an environmental fund to be used solely for watershed rehabilitation and management. Such fund is managed by the National Power Corporation (NPC) under existing arrangements and, under Section 34(d) of the Republic Act No. 9136, or the Electric Power Industry Reform Act (EPIRA), is pegged at Php0.0025 per kWh.
Missionary Electrification Charge is a universal charge to fund the electrification of remote and unviable areas, as well as areas not connected to the transmission system, as mandated under Section 70 of the EPIRA.