ERC approves Guidelines for Segregating and Establishing Caps on Recoverable Distribution System Losses
The Energy Regulatory Commission (ERC) recently approved the Guidelines for the Segregation of Distribution System Losses and Establishing Caps for Recoverable Rates of Distribution System Losses. “The guidelines intend to benefit the distribution system in promoting transparency and accountability, and likewise protect public interest,” ERC Chairman Rodolfo B. Albano, Jr. declared. “The reduction of system losses could also save on investments for additional generation capacity in the near future,” the Chief Regulator added.
The ERC is mandated by the EPIRA to prescribe a distribution system loss (DSL) cap for all electric distribution utilities, including those operating within the economic zones and other duly authorized entities engaged in electricity distribution. Prior to the promulgation of the said guidelines, private distribution utilities were entitled to recover 9.5 percent, while the electric cooperatives (ECs) were entitled to 14 percent or actual, whichever is lower, of their system loss.
With the approved guidelines, distribution system losses shall be segregated into technical, non-technical and administrative losses. A comprehensive segregation of losses paves the way for the establishment of separate caps for the segregated losses. A distribution system loss (DSL) cap on the recoverable rate of losses based on load density, cost of service, sales mix, connected essential load, delivery voltage and other such technical considerations, is established for operational efficiency.
Prior to the approval of the said guidelines, training workshops for Distribution Utility engineers were conducted in Quezon City, Cebu and Baguio for developing procedures in the segregation of losses, benchmarking the system loss performance of DUs and establishing caps for the recoverable rates of distribution losses. Representatives of electric cooperatives, private and local government unit (LGU)- owned distribution utilities from all over the country were trained on collecting and analyzing distribution system data, segregating system losses, and preparing the required documents to support the application of their respective utilities on the recoverable rates. A national consultative workshop was likewise conducted in June of this year for the establishment of the said caps.
The formulation of the said guidelines was a technical assistance project of the Asian Development Bank and the World Bank, in cooperation with the UP National Engineering Center, to the ERC through the Public-Private Infrastructure Advisory Facility (PPIAF).
October 5 , 2004