PRESS RELEASE: ERC denies MERALCO's plea to defer new system loss cap
The Energy Regulatory Commission (ERC) denied on 23 November 2009 the request of the Manila Electric Company (MERALCO) to defer the effectivity of the new system loss cap of 8.5% starting in January 2010 or to increase the new cap to at least 9%.
The present system loss cap applicable to private distribution utilities (DUs), like MERALCO, is 9.5%. This will be brought down, however, to 8.5% beginning in 2010 pursuant to Resolution No. 17, which the ERC issued on 16 January 2008 in the exercise of its authority granted under Republic Act No. 9136 to set new system loss caps.
The system loss cap is the limit by which a DU is allowed to recover from its customers the cost of the energy that is delivered to its system by its power suppliers, but which energy is not actually metered as being sold to its customers, either because it is lost in the transmission through the power lines or is pilfered by unscrupulous persons. The lower system loss cap approved by the ERC for implementation starting next year directly translates to a lower system loss charge for end-users whose DUs are incurring system losses above the mandated cap.
MERALCO sought the deferment of the implementation of the new system loss cap of 8.5%, citing its difficulty in meeting this lower cap. It mentioned as among the reasons for this the economic slowdown that allegedly affected its sales to industrial customers and the expected increase in the propensity to pilfer under the current economic environment.
"It is true that the sharing of electricity consumption between the industrial consumers that are connected to high voltage and residential consumers that are connected to low voltage has an effect on the total system loss. However, it should be noted that both the existing and the proposed new caps were set regardless of whether or not the franchise area is highly urbanized," ERC Chairperson & CEO Zenaida G. Cruz-Ducut stated in her letter dated 23November 2009 to MERALCO.
As to MERALCO's concern on the increased incidents of pilferages, Chairperson Ducut also pointed out in her letter that the Commission's recent issuances have "given distribution utilities (DUs) like MERALCO, more than sufficient means and incentives to deter or curb the same.”
November 26 , 2009
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