Regulator reduces systems loss cap—but only in January 2010

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.

Taking electricity systems losses seriously--email from Romania

I found your two blogs on the Philippines caps for system losses very interesting, so thanks for providing them. Couldn’t agree with you more; negative incentives produce negative results. And I’ve always wondered about the Cooperatives being able to supply electricity efficiently.

You refer to pilferage as a factor in calculating system losses, and that is important. But I am in Utility Vegetation Management (UVM), and I am wondering if contact with vegetation is calculated into the equation in Philippines. My industry focuses on proactive UVM maintenance to control tree-caused outages, but there is not much focus on system losses through daily tree/powerline contact.

Trees can come into contact with powerlines and not cause an outage for years. The trees will simply brush against the lines day after day, burning the foliage as a result of electricity tracking down into the tree. I spent a number of years in New Zealand (I notice you were in Wellington when I was in Christchurch) and many of their DU networks have thousands of trees in this condition. They are not causing outages, so they are not prioritised – in reality, much of New Zealand UVM is reactive rather than proactive. But what I have always maintained is that if a tree is ‘burning’ on powerlines 24-hrs a day and for year after year, this has to be a large contribution to a DU’s system losses.
. . . . .
Just so that you know what I’m talking about, I’ve attached from my documents some pics of New Zealand trees in contact with 11kV conductors, as these are examples of what I’m speaking of. One pic is of fast-growing willow trees that have been burning for at least five years. The other is of slow-growing NZ native trees that have been burning for at least 10 years. I’m just trying to get a rough idea of that kind of contact multiplied by thousands of contacts in terms of systems loss.

Frank