A public policy think tank has cautioned regulators that the proposed abolition of bill deposits for residential electricity consumers, while aimed at easing household burdens, could backfire by pushing power rates higher and weakening the financial stability of distribution utilities if carried out without adequate safeguards.
In a letter to Energy Regulatory Commission Chairman Francis Saturnino C. Juan, InfraWatch PH said the proposal comes at a sensitive time, as utilities prepare for rate reset applications under the Performance-Based Regulation (PBR) framework.
While the proposal is framed as short-term consumer relief, InfraWatch PH cautioned that the long-term consequences could be more damaging. “The result is predictable and mathematically certain: rate increases will be substantially larger than the one-time refund consumers receive,” said InfraWatch PH convenor Raymond E. Kahiwat.
He added that this creates an “optical contradiction” in which immediate relief is granted, only for regulatory decisions to later drive permanent rate increases that outweigh the refund.
The group warned that removing bill deposits outright would undermine regulatory predictability and introduce cost pressures that utilities would eventually recover through higher electricity rates.
InfraWatch PH explained that bill deposits function as a low-cost source of working capital and a buffer against credit risk. Eliminating them abruptly, the group said, would force utilities to rely more heavily on commercial borrowing, increase provisions for bad debts, and assume higher cost-of-capital estimates—all elements that feed directly into rate-setting calculations.
The think tank also flagged disproportionate impacts on smaller distribution utilities and rural electric cooperatives, which typically operate on thin margins and face higher collection costs due to dispersed service areas. According to InfraWatch PH, these entities are least equipped to absorb the financial shock of losing deposit-backed security.
Another concern raised was the lack of a coordinated implementation framework. InfraWatch PH noted that existing consumer protections under the Magna Carta for Residential Electricity Consumers, such as grace periods and disconnection suspensions, were designed alongside bill deposit requirements.
Removing deposits without clarifying how these safeguards will function could, the group warned, incentivize more aggressive disconnection practices by utilities seeking to manage heightened credit risks.
InfraWatch PH urged the ERC to adopt a more measured, data-driven approach. Among its recommendations were the publication of a transparent regulatory impact analysis quantifying cost and rate implications, alignment of any policy change with the PBR rate-reset timeline, and the establishment of transition safeguards for smaller utilities and electric cooperatives.
The group also called for stronger coordination between the proposed policy and existing disconnection and grace-period rules, as well as the identification of clear alternative mechanisms to replace bill deposits.
The think tank stressed that it is not opposed to abolishing bill deposits in principle, but emphasized the need for careful sequencing and coordination.
“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.