ERC eyes lower system loss cap by Q4

MANILA, Philippines - The Energy Regulatory Commission (ERC) is targeting to implement a lower system loss cap by the fourth quarter this year to reduce the pass-on burden to consumers.

The power regulator will start conducting a series of public consultations next month to seek inputs from industry stakeholders on the proposal to lower system loss charges, ERC spokesperson Floresinda Digal said in an interview yesterday.

 “Since we are a quasi-judicial, quasi-legislative body, we need to do a public consultation before we can implement a new cap and implementation mechanism on monitoring system loss charges,” she said.

“Our target, which is a very tight timeline, is to finalize (a new system loss cap) by fourth quarter of this year. That is a very optimistic timeline, barring unforeseen (circumstances),” Digal said.

System loss refers to unbilled power caused by pilferage and physical loss of energy when electricity passes through distribution lines, which can be passed on to consumers as stated under Republic Act 7832, or the Anti-Electricity and Electric Transmission Lines/Materials Pilferage Act of 1994.

The proposal for lower system loss cap was drafted by a third party consultant the ERC tapped in September 2016, Digal said.

The consultant will review how the components of the system loss charge can be segregated into technical and non-technical items as well as study updating the system loss cap.

Technical system loss is an inherent loss in the physical delivery of electricity while non-technical system loss is a result of pilferage, human error like tampering of meters and erroneous meter reading.

Under its proposal, the consultant segregated the technical from the non-technical system loss. The proposed cap for non-technical system loss of electric cooperatives (EC) is at 4.5 percent and 1.25 percent for privately-owned distribution utilities (DUs).

Meanwhile, the technical loss cap will have a formula and will range between 2.5 percent and seven percent.

“These are all subject to public consultations,” Digal said.

Currently, the ERC has set the system loss cap at 8.5 percent for privately-owned DUs and 13 percent for EC, which can be passed on to consumers through a line item in their monthly electricity bills.

Recently, Sen. Sherwin Gatchalian urged ERC implement a periodic review of the system loss program to encourage efficiency among power distributors.

The lawmaker also said the power regulator should fast-track the assessment on the program to facilitate the early implementation of new system loss caps that will reduce the charges that private DUs and ECs can pass on to consumers.