Reduced System Loss Equals Reduced Electricity Rates – GATCHALIAN


Senator Win Gatchalian wants the Energy Regulatory Commission (ERC) to put in place a periodic review of the system loss program to encourage power supply stakeholders to engage in more efficient processes.

Gatchalian, who is the chairman of the Senate Committee on Energy, at the same time pushed the ERC to fast-track its assessment of the program to facilitate the early implementation of new system loss caps that will reduce the charges that private distribution utilities and electric cooperatives can pass on to their consumers.

“The ERC should have a regular mechanism that will study the system loss every so often,” the legislator said, as he noted the long gap in-between the last ERC regulation of the recoverable system loss charges, which was in 2008, and its ongoing review of the program.

“The last caps are still in the 2008 levels. The ERC can do a review of the program at shorter intervals. The utilities are now more efficient in power generation and distribution because they are already equipped and very knowledgeable on how to reduce their system losses,” the lawmaker added.

The ERC told senators that it is currently assessing the system loss program, and is set next month to start public consultations and group discussions on the proposed new caps submitted by a third party that reviewed documentary submissions of distribution utilities and electric cooperatives.

The new caps, once approved, will take effect in 2019 for private distribution utilities, and in 2020, for electric cooperatives. After that, the next scheduled assessment will be after 4 years for private utilities, and 6 years for rural cooperatives.

“I find this too long. It is only 2017, that’s 2 more years. There must be a way that the caps can be changed more regularly. Remember that a day saved is a day advantage to the consumers. Consumers should not continue to be burdened with a high cost of system inefficiency,” the senator said.

Gatchalian has filed Senate Bill No. 1188, which seeks to reduce the existing system loss cap for private distribution utilities to 5% (from 8.5%), and to 10% (from 13%) for electric cooperatives. The measure likewise proposes the exemption of system loss charges from value added tax (VAT).

Noting that Meralco has maintained a system loss charge of 6.5%, Gatchalian said lowering this to 5% can possibly reduce the current cost of electricity by 12 centavos per kilowatt hour, or consumer savings of approximately P3.38 billion per year. On the other hand, lowering the system loss cap for the worst performing electric cooperatives will lead to reduced costs of 26 centavos per kWh, or annual savings of P2. 8 billion for consumers in covered jurisdictions.



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