ERC: Stricter System Loss Cap Guidelines to Lower Consumer Electricity Bills

The Energy Regulatory Commission (ERC) anticipates the electricity bills of consumers to go down as a result of stricter system loss cap guidelines. However, this will only start to be realized as soon as the distribution utilities (DUs) take the necessary first step of submitting their respective applications on segregation of system loss caps for ERC’s evaluation and approval. The caps pertain to the limit on the system losses that can be charged to the electricity consumers.

“The ERC sadly notes that despite the guidelines that contain all the necessary details to aid the DUs in the computation of their segregated system losses, not a single DU has submitted its application after three (3) extensions from its original date of 04 November 2005 to 31 January 2007. The ERC even went on a regional hop to train them in the segregation of their system losses,” ERC Chairman Rodolfo B. Albano, Jr. lamented.

The ERC issued the “Guidelines for the Application and Approval of Caps on the Recoverable Rate of Distribution System Losses” on 29 September 2004 to provide directions to the DUs in computing their segregated system losses. The guidelines became effective upon its publication in two (2) dailies of general circulation on 04 November 2004.

Section 43 (f) of Republic Act No. 9136 and Rule 15, Section 5 of its Implementing Rules and Regulations (IRR) which provided the bases for the Guidelines, amended the cap on the recoverable rate of system losses prescribed in Section 10 of Republic Act No. 7832. The caps will now be determined by the ERC based on load density, sales mix, cost of service, delivery voltage and other technical considerations it may promulgate.

The Guidelines also categorized, in accordance with the Philippine Distribution Code (PDC), the distribution system losses into three (3): technical loss, non-technical loss and administrative loss. The DUs are mandated to identify and report separately to the ERC their losses, as categorized. The ERC, after due notice and hearing, will prescribe the caps for the losses that the DUs can pass on to their electricity consumers.

The National Electrification Administration (NEA), the agency assisting the electric cooperatives (ECs) segregate their system losses, has reported that of the 120 ECs, only 57 have completed the segregation process. Of this total, 16 come from Luzon, 24 from the Visayas and 17 from Mindanao. The ERC is yet to receive the application from these ECs.

“The Guidelines provided by the ERC in the segregation of system losses, by itself, provides all the needed details for the DUs to prepare their application to the ERC. Be it as it may, the ERC prepared the template for the submission and sent it to the DUs. Let there be no further excuse for non-submission when the final deadline comes. The ERC will not sacrifice the interests of the stakeholders, especially the consumers. The ERC will impose the penalties for DUs who fail to comply with the guidelines. The ERC is even considering not entertaining any rate petition by a DU which has no ERC-approved caps on its segregated system losses,” Chairman Albano concluded.

November 7, 2006

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