The Energy Regulatory Commission (ERC), the government body which regulates the electricity business, has recently issued an order lowering the cap on electricity system loss to 8.5% down from the present mandated 9.5%--but only starting January 2010. In the same order, the limit for electric cooperatives is reduced to 13% from 14%.
The systems loss, which includes electricity lost to pilferage, antiquated equipment, design faults, administrative inefficiency and actual physical losses in the conductors, is currently passed on to the customers as added cost by distribution utilities at the allowed rate.
Charging of systems loss to the users has been under attack as being unfair from consumer groups, businesses and some government officials.
The recovery of a portion of systems loss by power utilities is allowed under Republic Act 7832 which also penalizes electricity theft.
In a statement, the ERC is also “reviewing other existing policies pertaining to rate-setting, including efficiency models [and] lifeline components of other distribution utilities and the different cost-recovery adjustment mechanisms”.
Republic Act 7832 or the law penalizing electricity theft allows power utilities to recover a portion of their system losses from consumers.
The current loss cap of 9.5% for private utilities and 14% limit for electric cooperatives have been implemented since 1999 and 2000, respectively, without adjustment.
This corner has maintained that a systems cap loss of 7% is fair, achievable and already generous under present inefficiencies, and distribution companies should strive for a systems loss of only 5%. The former figure is the average systems loss in EU countries, which is already high because it is inflated by the inefficient utilities in new member countries from Eastern Europe.
Some distribution companies in the Visayas and one or two cooperatives have actually claimed that they have achieved systems loss of below the mandated 9.5%.
The reduced cap for electric cooperatives is more of a token gesture than a real attempt at forcing more efficiency on these energy dodos. The cap for them should be ultimately aligned with those of the private distribution utilities. A viable option would be to require them to have a systems loss reduction by 1% every year until they achieve parity with the private sector. That could be done in four or five years. A carrot in terms of tax breaks and incentives for equipment upgrade should also be dangled to them.
In summary, the proposed reduction is systems loss cap that could be passed on to consumers is way too high and would unlikely to be felt by the average consumer.
Dr. Ruya - I've been wrestling with the technical system loss issue up close with a number of cooperatives recently. We have a wide diversity of utilities here in the Philippines when it comes to customer density along a feeder. There are some ECs with feeders that have 2 or 3 customers per km of line and there are some utilities that have feeders with well over 200-300 customers per km of line. Clearly, the technical loss will be different for such configurations at equal levels engineering design using best practices.
ReplyDeleteIf a utility is blessed with the majority of it's feeders having high customer density (like most of the private utilities serving metropolitan areas), its technical loss will be much lower than a utility that has primarily low density feeders (like many, but not all ECs) - almost regardless of the engineering and investment practices used.
Also, some utilities that own 69 kV sub-transmission are able to dial-in the weighted effects of using high voltage conductor in their loss calculations - which distorts the comparison to a utility that is all 12kV distribution.
There are other (engineering) reasons that technical loss may differ between two utilities even if both utilities are using the same "best practices".
So I'm finding this a complex issue, in general. And that's just related to technical losses - and assuming one is able to reliably segregate technical losses from non-technical - a whole 'nother issue that hasn't been resolved here in the Philippines well.
None of this says anything about the validity of the ERC caps or the 5%-7% range you support. That seems about right to me, on average, across all utilities. But we're still left with how to discriminate between other physical characteristics of utilities - something that ERC totally ignores, it seems.