Lawmaker urges ERC to fast-track system loss review

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THE Energy Regulatory Commission (ERC) should fast-track its assessment of the system loss program to facilitate the early implementation of new system loss caps that would reduce the charges that private distribution utilities and electric cooperatives may pass on to their consumers, a lawmaker said on Monday.

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Senator Sherwin Gatchalian, chairman of the Senate Committee on Energy, also urged the ERC to put in place a periodic review of the system loss program to encourage power supply stakeholders to engage in more efficient processes.

“The ERC should have a regular mechanism that will study the system loss every so often,” Gatchalian said, as he noted the long gap between the last ERC regulation of recoverable system loss charges, which was in 2008, and its ongoing review of the program.

“The last caps are still in the 2008 levels. The ERC can do a review of the program at shorter intervals. The utilities are now more efficient in power generation and distribution because they are already equipped and very knowledgeable on how to reduce their system losses,” he added.

The ERC told senators that the agency is currently assessing the system loss program, and is set next month to start public consultations and group discussions on the proposed new caps submitted by a third party that reviewed documentary submissions of distribution utilities and electric cooperatives.

The new caps, once approved, will take effect in 2019 for private distribution utilities and in 2020 for electric cooperatives. Thereafter, the next scheduled assessment will be conducted after four years for private utilities and six years for rural cooperatives.

“I find this too long. It is only 2017, that is two more years. There must be a way that the caps can be changed more regularly. Consumers should not continue to be burdened with the high cost of system inefficiency,” Gatchalian said.

Senator Gatchalian has filed Senate Bill No. 1188, which seeks to reduce the existing system loss cap for private distribution utilities to 5 percent from 8.5 percent, and to 10 percent from 13 percent for electric cooperatives. The measure likewise proposes the exemption of system loss charges from value added tax (VAT).

Noting that Manila Electric Co. (Meralco), the country’s largest power distribution utility, has maintained a system loss charge of 6.5 percent, Gatchalian said lowering this to 5 percent can possibly reduce the current cost of electricity by 12 centavos per kilowatt hour (kWh), or total consumer savings of approximately P3.38 billion per year.

Meanwhile, lowering the system loss cap for the worst performing electric cooperatives will lead to reduced costs of 26 centavos per kWh, or annual savings of P2. 8 billion for consumers in covered jurisdictions, the senator added.

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