Generation Charge This refers to the associated costs for the purchase of power from suppliers through Power

Supply
Agreements (PSAs) with BENECO or the Wholesale Electricity Spot Market (WESM).

Transmission Charge This refers to the associated costs to deliver power from the generators to the various BENECO
substation facilities passing through the transmission network managed and operated by the National Grid Corporation
of the Philippines (NGCP).

System Loss Charge This refers to the cost to recover the power lost due to technical and non-technical system losses.
The maximum level of losses that may be recovered by electric cooperatives was set at 12% by the ERC through its
Resolution No.17, Series of 2008. BENECO is currently maintaining a 9% level of system loss.

Distribution Charge This covers the cost of developing, constructing, operating and maintaining the distribution system
of BENECO.

Metering Charge This is the charge for 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 This is for the cost of rendering service to customers such as billing, collection, customer assistance and
other associated services.

Lifeline Discount or Lifeline Subsidy This is a socialized pricing mechanism under Section 73 of the EPIRA to benefit
marginalized/low-income captive market customers. As approved by the ERC, residential customers using up to 45 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 This 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. The discount extended will be recovered through
Senior Citizen Subsidy to be charged to all other types of consumers not enjoying the discount.

Value Added Tax This is a consumption tax imposed on 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.

Feed-in-Tariff Allowance is an additional tariff levied on consumers of electric power connected to the grid and will be
given to renewable energy (RE) players as an incentive to invest in the more expensive but less lucrative RE sector.

Universal Charges 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, the following
are the imposed universal charges

Missionary Electrification (UC-ME) is used to fund the necessary subsidy for the electrification of areas not
connected to the transmission system, as mandated under Section 70 of the EPIRA. BENECO does not enjoy any
subsidy from this fund.

Environmental Charges (UC-EC) are collected to be used solely for watershed rehabilitation and management by
the National Power Corporation (NPC). 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.

Stranded Contract Cost (UC-SCC) of NPC under Section 32 of the EPIRA, refers to the excess of the contracted
cost of electricity under eligible IPP contracts of NPC over the actual selling price of the contracted energy
output of such contracts in the market.

Stranded Debts (UC-SD) of the NPC used to recover the stranded debts entered into by NPC.

Renewable Energy Developers’ Cash Incentive refers to the incentive given to Renewable Energy Developers
who operate in missionary areas.
ADB provided the US$ 300M - Power Sector Restructuring Program (PSRP) Loan in 1998 for the restructuring
of the Philippine power industry and the privatization of NPC. It also provided technical assistance amounting
to $5,110,000- since 1998 to support power sector restructuring and privatization of the National Power
Corporation (NPC). Aside from this, it also approved loans related to power sector restructuring and
privatization: $40 M for Electricity Market and Transmission Development, approved in 2004, $450 M
Power Sector Development Program loan, released inDecember 2006, $60 M Power Transmission
Developmentdue for approval in 2009. Even at the start of privatization in the generation sector, ADB was
there. It provided $10 million loan for the Hopewell project in Navotas in 1991, and $40million loan and $10
million equity for the Hopewell project in Pagbilao in 1993. ADB also provides guarantees for NPCbonds.
Release of $300 M rehabilitation loan from IMF and Power sector loans from WB are hinged on the passage of
power sector restructuring and privatization law. The IMF also required the privatization of NPC for its standby
credit facility for the Philippines in 1997-1998.

The policy matrix in the PSRP contains sixty actions, twentyseven

of which are core conditions for tranche releases of
loan. The first tranche amounting to US$100 million was
released on 24 December 1998, following compliance by the
government on 13 conditions including the effectivity of the
PSRP loan. ADB had been closely monitoring the
implementation of the PSRP since then.
The second tranche worth $100 million was released on 18
December 2001, after the government had fully complied
with six of the eight conditions. A major condition for the
release was the passage of the Electric Power Industry
Reform Act (EPIRA) in June 2001 which provides “an
enabling legal and regulatory environment to support
competitive markets in electricity.”
The last tranche of $100 million was disbursed to the
Philippine government through the DoF on 29 November
2002 when five of the six conditions for release were fully
complied with. A major condition was the promulgation of
Implementing Rules and Regulations which happened in
February 2002. The remaining condition was the
establishment of wholesale electricity spot market (WESM)
which happened in 2006, one year behind ADB’s expected
schedule. Due to delays in government’s compliance to the
loan conditionalities, the closing date for PSRP was on 31
December 2002 instead of 30 September 2000.
The passage of power sector restructuring and privatization
law (EPIRA) was one condition by the IMF and WB for the
release of their loans for the Philippine gov’t and the power
sector.