POWER utilities that have the means to reduce technical system losses should also bear their cost instead of automatically passing them on to consumers, Senate President Sherwin Gatchalian said on Thursday.
During a Senate Committee on Energy hearing, Gatchalian said that distribution utilities are in the best position to invest in equipment, substations, upgraded lines, and distributed energy systems that can bring down technical system losses.
‘Kung sino ang may kapangyarihan dapat siya ang sumalo dahil incentives iyan. Walang incentives na babaan at ipapasa mo rin, wala ka rin incentive na mag-invest sa mga technology [Whoever has the power should shoulder it because that creates incentives. If you can simply pass it on, there is no incentive to reduce it and no incentive to invest in technology],’ he said.
Gatchalian said system loss is inherent in transmitting electricity and cannot be eliminated, but utilities should be encouraged to minimize losses that can be reduced through better technology and infrastructure.
He proposed treating system loss as a cost of the distribution utility instead of part of its recoverable revenue, which is currently shouldered by consumers and subjected to value-added tax.
‘Kung parte yan ng cost, expense na iyan ng distribution utility [If that becomes part of the cost, then it becomes an expense of the distribution utility],’ he said.
Gatchalian cited options, such as upgraded substations and distributed energy systems, including rooftop solar, which could reduce the need for long line extensions and consequently lower line losses.
Sen. Erwin Tulfo, panel chairman, agreed that infrastructure investment should be examined beyond distribution utilities, pointing also to transmission facilities of the National Grid Corp. of the Philippines (NGCP).
‘Siguro po kailangan na rin mag-upgrade ang National Grid Corporation of the Philippines [Perhaps the NGCP also needs to upgrade],’ he said.
Tulfo later asked if some utilities had failed to modernize over the years because existing rules allowed them to recover system losses from consumers.
‘Hindi sila nag-invest through the years iyong capital expenditure expenses para to modernize. Dahil umasa lang po sila diyan sa systems loss na yan [They did not invest through the years in capital expenditures to modernize because they relied on that system-loss mechanism],’ he said.
He argued that consumers should not be made responsible for utilities’ failure to invest in better infrastructure.
The Energy Regulatory Commission (ERC), meanwhile, acknowledged that distribution utilities are required to meet technical and performance standards and may be penalized if they exceed allowable system-loss levels.
ERC Chairperson Francis Juan said utilities also have an incentive to undertake capital expenditure programs when their losses exceed regulatory caps, as they already have to absorb the excess.
‘Sila naman din ay mayroong natural na insentibo na mag-roll out ng mga capital expenditure programs upang mapababa halimbawa ang kanilang system loss.
Dahil nga kung sila ay above the cap na, mamabutihin nilang sila ay makapag-invest sa mga makabagong kagamitan nang sa ganoon ay mapababa nila ang kanilang system loss [They also have a natural incentive to roll out capital expenditure programs to reduce their system loss. If they go beyond the cap, it would be in their interest to invest in modern equipment so they can bring their system loss down],’ Juan said.
The Senate is studying several proposals to reform or remove system-loss charges as lawmakers determine which electricity losses may reasonably be passed on to consumers and which should instead be absorbed by companies capable of preventing or reducing them. With PNA