The Energy Regulatory Commission (ERC) has reduced system loss charges that distribution utilities (DUs) can pass on to their consumers.
In a statement on Wednesday, ERC said that under its Resolution 20, Series of 2017, DUs would have a 6.5-percent distribution loss this year. This would be gradually reduced annually until it reaches 5.5 percent by 2021.
Electric cooperatives (ECs), which will be grouped into three clusters based on technical considerations, shall impose a 12-percent cap for 2018.
They can charge between 8.25 percent and 12 percent until 2022 onward, depending on which cluster they are assigned to.
The reduction will take effect starting with the May billing period.
System loss is the power used or lost in the distribution system for delivering power from a DU’s receiving point to its consumer’s metering point. It can be both technical and non-technical.
Current system loss caps are 8.5 percent for DUs and 13 percent for ECs.
“DUs’ electricity usage shall be treated as an operation and maintenance expense…under the appropriate rate-setting methodology,” ERC said.
“The lowering of the system loss cap is a move to bring down power rates and help electricity consumers mitigate the impact of rising costs of commodities and services,” ERC Chairman and CEO Agnes Devanadera said.
“This will encourage DUs to improve their distribution system and facilities, so that they adhere to the newly prescribed system loss cap,” she added.
Responding to ERC’s move, Manila Electric Co. (Meralco) Spokesman Joe Zaldarriaga said on Thursday his company had managed to keep its system loss levels low over the years.
Meralco kept these levels “under the cap of 8.5 percent that the law has set. The performance below the cap level has benefited our customers through lower rates,” he added.
“For example, if you compare the system loss charges in the 2011 with that of 2017, you can really see that outperforming the cap has resulted in consumer savings of about P30 billion since 2008,” Zaldarriaga said.
For his part, Allan Laniba, general manager of Leyte 3 Electric Cooperative Inc. (Leyeco 3) and Don Orestes Romualdez Electric Cooperative Inc. (Dorelco) told The Manila Times the majority of ECs have managed to maintain low system loss charges.
Leyeco 3 and Doroleco have system loss caps of 9.8 percent and 12 percent, respectively.
“With the four-year transition, ECs will be given more time to improve their lines in order to impose the new system loss cap,” Laniba said on Thursday.
They have been conditioned by Republic Act 9136, or the Electric Power Industry Reform Act of 2001 (Epira), to lower power rates, he added.
Although his ECs support ERC’s move, Laniba said they would be forced to apply for capital expenditure before the power regulator “so we can impose the system loss charge.”
Certificates of compliance
This comes after ERC issued on February 13 certificates of compliance (COCs) to the 150-megawatt (MW) Circulating Fluidized Bed Coal-fired Power Plant (Unit 3) of Panay Energy Development Corp. in Iloilo City, Iloilo province, and 25-MW Silay Power Plant of Silay Solar Power Inc. in Silay City, Negros Occidental province.
It also released provisional authorities to operate (PAOs) to the 135-MW Concepcion Coal-fired Power Plant (Unit
1) of Palm Concepcion Power Corp. in Concepcion town, Iloilo; 10.944-MW Surigao Diesel Power Plant of Nickel Asia Corp. in Surigao City, Surigao del Norte province; 0.6144-MW Gaisano solar rooftop projects in Iloilo’s Balasan and Oton towns that are run by EDC Siklab Power Corp.; 1.0304-MW Bago Solar Rooftop Project of EDC Bago Power Corp. in La Paz; and 150-MW Limay Power Plant (Unit 2) of SMC Consolidated Power Corp. in Limay town, Bataan province.
The ERC issued these documents in pursuit of Section 6 of Epira and Section 4 of the law’s implementing rules and regulations. In the case of PAOs, these shall be valid for six months.
“It is imperative for a generation company (genco) to secure a COC or PAO from the ERC prior to its commercial operation,” Devanadera said on Wednesday.
“The ERC recognizes the need for the immediate issuance of the COCs and PAOs to gencos in order to ensure a reliable and sustainable power supply, especially that there is an upsurge in power demand during the summer months,” she added.