THE removal of systems loss charges from consumers’ electricity bills may reshape the power sector by forcing distribution utilities (DUs) and electric cooperatives (ECs) to absorb these costs which serve as a financial buffer against power theft and operational inefficiencies.
During his fifth State of the Nation Address (Sona), President Ferdinand Marcos Jr. demanded the immediate removal of systems loss charges by amending the Electric Power Industry Reform Act (Epira).
System loss accounts for electricity lost due to technical and non-technical factors. The Energy Regulatory Commission (ERC) has set a system loss cap of 6.5 percent for DUs and any losses beyond this limit cannot be passed on to consumers. This is part of the generation and transmission costs paid to generation companies and NGCP (National Grid Corporation of the Philippines).
Meralco’s system loss in the first quarter of the year stood at 5.72 percent, down from 5.85 percent year on year. Systems loss make up five percent of Meralco’s electric bill.
The numbers will be updated when Meralco releases its first half financial results on Wednesday.
‘I defer making a statement yet,’ said Meralco chief operating officer Ronnie Aperocho when sought for comment. He acknowledged that all DUs and even the NGCP will be affected. ‘Not only Meralco but the entire power industry including NGCP because there are transmission losses too. No utility will be spared,’ said Aperocho in an interview.
ERC chairperson Francis Saturnino Juan said via Viber that his office will comply with the law. ‘We will follow what is in the law. If it already prohibits the charging of system loss or recovery of costs associated with it, we will comply. The question is, are the utilities ready? Will their operations not suffer?’
Energy expert Atty. Jay Layug, president of the Developers of Renewable Energy for Advancement, Inc. (DREAM), said that while his group supports the President’s proposal to reduce electricity rates, an in-depth and calibrated study must be undertaken before considering eliminating systems loss.
He explained that systems loss has two components: Non-technical losses due to electricity theft and illegal tapping, jumper wires; and technical losses as energy turns into heat as electricity flows through long wires and transformers.
‘To eliminate the non-technical component, government-both local and national-must be vigilant and proactive in enforcing laws to avoid theft. On the technical part, any reduction will just likely result in higher per kilowatt hour price of electricity. But we should continue to consider all measures to reduce cost of electricity,’ he said.
The Power for People Coalition (P4P) said the elimination of system loss charges is a good step. ‘Epira must not only be amended in relation to system loss-its the whole policy landscape regulatory environment for electricity that needs overhauling.
‘We welcome the President’s declaration that renewables are a solution for our energy woes, with the energy crisis and our reality of frequent calamities just how critical solar-powered rooftops are for our people,’ it said.
NGCP doesn’t charge
The NGCP, for its part, does not charge consumers for technical system losses, which are unavoidable, natural losses minimized through specialized equipment. ‘NGCP minimizes these losses by installing and maintaining equipment such as capacitor banks and statcom,’ it said.
The grid operator also reiterated that non-technical losses, such as electricity theft, occur at the distribution level and are managed by distribution utilities, not NGCP.
In a separate development, the Philippine Resilient Electric Cooperatives and Consumers Alliance (PhilRECA) Party-List said: ‘We support proposals to eliminate VAT on system loss charges, as consumers should never be taxed on unutilized energy that never reached their homes.
‘However, we can support the complete elimination of system loss charges from electricity billing if and only if the national government directly shoulders these costs through a dedicated subsidy mechanism.’