Plan to Scrap Power Bill Deposits May Backfire, Think Tank Cautions

A public policy group has urged regulators to take a cautious approach to a proposal that would abolish electricity bill deposits, warning that an abrupt implementation could drive power rates higher and strain the finances of distribution utilities.

In a letter to Energy Regulatory Commission (ERC) Chairperson and Chief Executive Officer Francis Saturnino C. Juan, think tank InfraWatch PH said the plan to remove bill deposits, while intended to ease the burden on households, could have unintended long-term consequences if carried out without adequate safeguards.

Long-Term Costs

InfraWatch PH convenor Raymond E. Kahiwat said the outcome was “predictable and mathematically certain”: the one-time refund of deposits would likely be followed by larger and permanent rate increases as utilities seek to recover higher financing costs.

“The result is predictable and mathematically certain: rate increases will be substantially larger than the one-time refund consumers receive,” Kahiwat said, calling it an “optical contradiction” that grants short-term relief at the expense of long-term affordability.

The group warned that removing deposits outright would disrupt regulatory stability and introduce new cost pressures. These costs, it said, would ultimately be passed on to consumers through higher rates.

Stabilizing Mechanism

Under the Magna Carta for Residential Electricity Consumers, promulgated in 2004, bill deposits are required as a form of security for payment of electric bills. The deposits serve as a low-cost source of working capital for power distributors and as protection against customer defaults.

InfraWatch PH said abolishing this mechanism without replacement would force utilities to depend more on commercial loans or increase provisions for bad debts—both of which factor into rate-setting calculations under the Performance-Based Regulation (PBR) framework.

The group explained that bill deposits play a stabilizing role in utilities’ cash flow, noting that their removal would likely raise the industry’s cost of capital and financing expenses. They cautioned that smaller distribution utilities and rural electric cooperatives, many of which operate on thin margins and serve dispersed areas, would be hardest hit. 

Without deposit-backed security, these entities could face liquidity challenges that may compromise service reliability or increase collection costs.

Abolition Backed By Legislators And Consumer Groups

The ERC earlier announced that it was studying the cessation of bill deposit collection by power distribution utilities, following calls from legislators and consumer groups.

At a press briefing in Pasig City, ERC chair Francis Saturnino Juan said the commission had begun consulting stakeholders on the proposal, which aligns with the Anti-Bill Deposit Act filed by Senator Sherwin Gatchalian. The bill seeks to end the collection of bill deposits and mandate the refund of all previously collected amounts.

Juan said his support for the idea stemmed from a discussion with a utility that had successfully operated without collecting deposits from customers. However, he emphasized that the ERC would continue consultations to balance the interests of both consumers and utilities.

Need For Measured Transition

InfraWatch PH stressed that it was not opposing the abolition of bill deposits in principle but was advocating for a data-driven, phased approach. The group recommended that the ERC conduct a transparent regulatory impact analysis to quantify cost and rate implications, align any new policy with the PBR rate reset schedule, and establish transition safeguards for smaller utilities.

It also called for coordination with existing consumer protection rules under the Magna Carta, such as grace periods and disconnection suspensions, which were originally designed alongside bill deposit requirements. Removing deposits without replacing these safeguards, InfraWatch warned, could inadvertently encourage more aggressive disconnection practices by utilities seeking to manage increased credit risks.

“Responsible regulatory stewardship requires that immediate consumer relief not be pursued through mechanisms that compromise long-term sector viability, regulatory predictability, and the stability required for continued infrastructure investment,” Kahiwat said.

Source:

https://www.gmanetwork.com/news/money/economy/969371/erc-removal-bill-deposit-collection/story