Bureau of Local Government Finance Opinion

February 13, 2015 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Mr. Wendell V. Ballesteros General Manager Philippine Rural Electric Cooperative Association, Inc. 4th Floor CASMAN Bldg. 1198 Quezon Avenue Quezon City Sir : This refers to your letter dated February 9, 2015 requesting modification of the letter dated November 28, 2014 of this Bureau particularly on the issue of System Loss Charge. It is claimed that there was a clerical omission on the second paragraph of the last page of the said letter-response quoted below, which states: " With respect to the system loss charge, considering the claim of PHILRECA that the charge is an account for recovery of generation and transmission costs influenced by the actual system loss of the ECs, thus intended for the account of Generation and Transmission Companies, as the same does form part of the gross receipts of ECs ." In this connection and considering that the system loss charge is an account for the recovery of generation and transmission costs influenced by the actual system loss of the ECs or the allowable system loss whichever is lower, we agree that such amount is intended for the account of the Generation and Transmission Companies, hence, the system loss charge shall not be included in the gross sales/receipt of ECs. To do so would lead to an absurd and unfair situation on the part of ECs. In view thereof, second paragraph of the last page of the letter dated November 28, 2014 is hereby modified and should read as follows: " With respect to the system loss charge, considering the claim of PHILRECA that the charge is an account for recovery of generation and transmission costs influenced by the actual system loss of the ECs or the allowable system loss whichever is lower, thus intended for the account of Generation and Transmission Companies, as the same does NOT form part of the gross receipts of ECs. " However, it is emphasized that the ruling of this Bureau embodied under its Letter dated November 28, 2014 still holds true in the case of generation charges, transmission charges, reinvestment fund and universal charges. We hope that this will help clarify matters. ASEcHI Very truly yours, (SGD.) SALVADOR M. DEL CASTILLO OIC-Executive Director