THE government can prohibit or reduce the recovery of system loss costs, but completely shifting the burden to distribution utilities could put financially vulnerable electric cooperatives at risk, the Energy Regulatory Commission (ERC) said on Thursday.
ERC Chairman Francis Juan issued the warning during a Senate Committee on Energy hearing after Sen. Erwin Tulfo pressed the agency on whether the system loss charge could be totally eliminated, including technical and nontechnical losses.
Juan said the government could scrap the charge, but the financial impact would vary among utilities, particularly those already struggling with high system losses.
He said that while system losses can be reduced, they cannot be completely eliminated because some technical losses are unavoidable in the transmission and distribution of electricity.
Nontechnical losses, including electricity theft and errors, can be minimized but not entirely done away with, Juan said.
The ERC could consider lowering or completely waiving the allowable recovery of nontechnical losses for utilities that consistently perform within or below the prescribed limits. But electric cooperatives with high system losses could face greater financial difficulties if they are forced to absorb the entire cost, he said.
Tulfo asked Juan to give a direct assessment of whether distribution utilities, transmission companies and power generators would go bankrupt if system loss charges were abolished.
The senator said consumers should not continue shouldering costs arising from electricity theft and inefficiencies, particularly if these could be addressed through stronger regulation and enforcement.
He also questioned if the ERC was doing enough to ensure that distribution utilities maintain and upgrade aging infrastructure, which can contribute to technical system losses.
Tulfo cited complaints from some electric cooperatives that old power lines, poles and meters contribute to losses, likening deteriorating electricity infrastructure to pothole-ridden roads that slow down vehicles.
Juan said the ERC requires distribution utilities to comply with technical and performance standards, and can penalize those that exceed allowable system-loss limits.
He added that utilities are also encouraged to undertake capital expenditure programs to upgrade their facilities and reduce technical losses.
The discussion came amid Senate efforts to reduce electricity costs, including proposals to remove the 12-percent value-added tax on system loss charges and review the system-loss recovery mechanism under the Electric Power Industry Reform Act.
Tulfo called for a review of the system-loss policy, particularly the practice of passing costs from technical inefficiencies and nontechnical losses on to consumers.
