The unfair price of system loss

WHEN electricity from power plants is transmitted through the cables and wires to reach factories, offices and homes, some of it is lost. It is called system loss. The cost of this technical loss is being charged to consumers.

This dissipated electricity disappears. It does not reach the consumer. But he or she is billed for it.

Even the cost of pilfered electricity is paid by the public though the system loss charge, yet Republic Act 7832 or the Anti-Pilferage of Electricity and Theft of Electric Transmission Lines/Materials Act also allows electricity companies to charge thieves for the cost of the pilferage power.

It would appear then that electricity firms recover their losses twice, once by passing these onto the public through the system loss charge and another through RA 7832, according to Dr. Giovanni Tapang, a professor at the National Institute of Physics at the University of the Philippines Diliman and convenor of the consumer group People Opposed to Warrantless Electricity Rates (POWER). He also a columnist of The Manila Times.

RA 7832 has rationalized the system loss charge by setting a cap no lower than 9 percent of recoverable losses. Republic Act 9316 or the Electric Power Industry Reform Act (EPIRA) has retained the allowance of the cap but mandates the Electricity Regulation Commission (ERC) to determine the limit.

Right now, ERC has brought down the system loss cap from 9 percent to “as low as 8.5 percent,” according to ERC Executive Director Francis Saturnino Juan.

Tapang, who is also the national chairperson of the organization of Filipino scientists AGHAM, questions why electricity firms can’t exert effort to minimize their technical system losses when in a market-driven electricity industry promised by EPIRA, competition should force them to reduce charges for the benefit of the public.

POWER also questions why the electricity used by distribution utilities like Manila Electric Company (Meralco) in its operations is considered as administrative losses included in system loss charge.

“Our main criticism with regard to system losses is the fact that Meralco and other distribution utilities pass on these losses to the public,” according to POWER. “This part of our electric bill is due to energy that never gets used in our homes and is mainly due to any technical inefficiency in the part of the distributor, their in-house use of electricity, and pilferages.”

Asked why the cost of the energy used by electricity firms is included in the system loss charge, Juan explains that before, it was included in the “allowance for company use.” But now, based on the existing regulations of ERC, this cost is already part of operating and maintenance expense, which electricity firms recover through their charges.

Juan also explains that if a lower system loss cap is imposed, the firms will tend to invest in equipment that will mitigate technical system loss. This investment, he says, will entail added cost, which the firms will recover through another adjustment.

“So it is a choice between having a reasonable system loss charge by way of setting caps or allowing [firms] to invest and invest so it can bring down its system loss,” adds Juan.

But why should ERC help the utility firms recover all their expenses by passing these on to the consumers?

ERC’s answer we guess would be: Because if we don’t approve their request, then they would close down companies and there would be a power shortage. –CLAIRE MERCADO, Manila Times