How to reduce system loss

There have been several attempts over the years to limit or cap the distribution system loss that is passed on
to consumers. In the 1990s, Congress enacted the Anti-Electricity Pilferage Act of 1994, which set an initial
cap on losses that was gradually reduced over time. In 2008, the ERC issued a resolution further reducing
the cap to its present level of 8.5 percent for DUs and 13 percent for ECs.

Now, there are proposed legislation in both Houses of Congress that want to bring down the cap still
further. In fact, in the bills of Sen. Manny Pacquiao and Reps. Tiangco and Rodriguez, the proposal is to set
the cap at zero percent for DUs and five percent for ECs. These measures are currently being deliberated
upon by the energy committees of each House.

The ERC also engaged the services of PowerSolv, an engineering consultancy consisting of University of the
Philippines professors and experts in the field of electrical engineering, to develop a plan to bring down
system loss for all DUs and ECs. According to PowerSolv, “the conversion or transport of energy cannot
achieve 100-percent efficiency”. Hence, system loss cannot be totally eliminated.

PowerSolv recommended to ERC a gradual reduction in caps from 2018 to 2021, after which a review will be
made to determine the appropriate caps going forward. The recommendations are now undergoing public
consultations nationwide.

In order to meet more stringent system loss caps, DUs and ECs need to go on an intensive loss reduction
program that would require massive capital and operational expenses. DUs and ECs will be forced to
implement absurd projects just to meet an arbitrary lower cap, like the replacement of distribution lines and
equipment with bigger facilities even though these are still working perfectly.
Based on documents submitted to the Senate, Angeles Electric Corp., the utility serving Angeles City, will
need to spend P892 million if it is required to lower its system loss to just 5 percent.
For Cagayan Electric Power and Light Company (serving Cagayan de Oro City), the cost would be P1.84
billion, and for Meralco, the cost would be a whopping P65.53 billion. These additional costs will more than
offset any reduction in the system loss charge and, in fact, lead to power rate increases to customers.

At the same time, additional government resources will be needed as more law enforcement agencies are
called upon to conduct anti-electricity pilferage operations and clearing of illegal connections. Further
reductions will require a balance between the benefits of a lower system loss charge and the additional costs
to be incurred in actually bring down the losses. The issue is complex, surrounded by numerous technical,
economic, and social considerations. Experts in this field are expected to find the right balance “to ensure the
quality, reliability, security and affordability of electric power” that consumers deserve.