May electricity bills to reflect reduced system-loss charge

By Lenie Lectura – February 21, 2018
from Business Mirror

Workers connect electricity cables to a transmission pole. (Bloomberg)

Consumers will start feeling the impact of the modified cap on the allowable rate of system losses that can be passed on to consumers in their May electricity bills.

Under the newly approved resolution “Adopting the ERC Rules for Setting the Distribution System Loss [DSL] Cap and Establishing Performance Incentive Scheme for Distribution Efficiency,” distribution utilities, like the Manila Electric Co., will have a 6.5-percent DSL cap for 2018.  This will be gradually reduced annually until it reaches the 5.5-percent DSL cap level by 2021.

Meanwhile, electric cooperatives (ECs) are grouped into three clusters based on similar technical considerations and will have a 12-percent DSL cap in 2018.  ECs can only charge within the range of 12 percent to 8.25 percent until 2022 onward, based on the cluster grouping that they were assigned in.

“The lowering of the system-loss caps is a move to bring down the power rates and help electricity consumers mitigate the impact of rising costs of commodities and services. This will encourage distribution utilities [DUs] to improve their distribution system and facilities so that they adhere to the newly prescribed system-loss cap,” Energy Regulatory Commission Chairman Agnes VST Devanadera said.

The rules also specified a particular methodology in computing the technical loss and nontechnical loss or pilferages.  Distribution utilities’ (DUs) electricity usage will be treated as an operation and maintenance expense under the appropriate rate-setting methodology.

A Performance Incentive Scheme was also devised to motivate the DUs to reduce the technical and nontechnical losses in their distribution systems.

The ERC, pursuant to Section 43 (f) of the Electric Power Industry Reform Act (Epira), is mandated to establish and enforce a methodology for setting transmission and distribution wheeling rates and retail rates for the captive market of a distribution utility, taking into account all relevant considerations, including the efficiency and inefficiency of the regulated entities.

To achieve the objective, the cap on the recoverable rate of system loss prescribed in Section 10 of Republic Act (RA) 7832, or the Anti-Pilferage of Electricity Act, is amended
and will be replaced by caps to be determined by the ERC based on load density, sales mix, cost of service, delivery voltage and other technical considerations it may promulgate.

“The ERC is mandated to study and update the distribution system-loss caps charged by the DUs to electricity consumers.  The newly prescribed system-loss cap is a by-product of a well-thought study taking into account the relevant technical criteria and will promote the DUs’ efficient operation and service.  The ERC will keep on looking for measures to bring down the electricity rates which are considered as among the highest in Asia,”  Devanadera said.

Meantime, the agency approved and issued certificates of compliance (COCs) and provisional authorities to operate (PAOs) to some generation companies (gencos).

COCs were issued to the Circulating Fluidized Bed Coal-Fired Power Plant (Unit 3) of Panay Energy Development Corp., with 150-megawatts (MW) capacity in Barangay Ingore, La Paz, Iloilo City; and the Silay Power Plant of the Silay Solar Power, Inc., with 25-MW capacity in Barangay Rizal, Silay City, Negros Occidental.

PAOs were issued to the following gencos:

■  Palm Concepcion Power Corp.’s Concep-cion Coal-Fired Power Plant (Unit 1), with 135-MW capacity in Sitio Puntales, Barangay Nipa, Concepcion, Iloilo.

■  Nickel Asia Corp.’s Surigao Diesel Power Plant, with 10.944-MW capacity at Quezon, Surigao City.

■  EDC Siklab Power Corp.’s Gaisano Balasan Solar Rooftop Project, with 0.6144 MW at Balasan, Iloilo, and the Gaisano Oton Solar Rooftop Project with 0.6144 MW at Oton, Iloilo.

■  EDC Bago Power Corp.’s Bago Solar Rooftop Project, with 1.0304 MW at Gaisano Mall, Luna Street, Barangay Luna La Paz,
Iloilo City.

■  SMC Consolidated Power Corp.’s  Limay Power Plant (Unit 2), with 150-MW capacity in Barangay Lanao, Limay, Bataan.

COCs are issued by the ERC in favor of a person or entity to operate a power plant or other facilities used in generation of electricity pursuant to Section 6 of RA 9136, or the Epira, and Section 4 of the implementing rules and regulations of the Epira.

On the other hand, pending the issuance of the COC, the PAO may be issued by the ERC to enable a generation company to operate its generation facility. The PAO shall be issued in the form of a notification and shall be valid for a period of six months from issuance thereof.

The six-month validity period shall be included in the five-year term of the COC that may be issued by the ERC.

“It is imperative for a genco to secure a COC or a PAO from the ERC prior to its commercial operation. The ERC recognizes the need for the immediate issuance of the COCs and PAOs to gencos in order to ensure a reliable and sustainable power supply, especially that there is an upsurge in power demand during the summer months,” Devanadera said.