Manila: Power utilities that possess the capability to reduce technical system losses should also bear their cost rather than automatically passing them on to consumers, Senate President Sherwin Gatchalian stated during a recent Senate Committee on Energy hearing.
According to Philippines News Agency, Gatchalian emphasized that distribution utilities are in the prime position to invest in equipment, substations, upgraded lines, and distributed energy systems that can help reduce technical system losses. He argued that if utilities can simply pass these costs onto consumers, there would be no incentive for them to lower losses or invest in new technologies.
Gatchalian noted that while system loss is an inherent part of electricity transmission and cannot be entirely eradicated, utilities should be motivated to minimize those losses that are manageable through technological improvements and infrastructure upgrades. He suggested that system loss should be considered a cost for distribution utilities rather than a part of their recoverable revenue, which is currently passed on to consumers and is subject to value-added tax.
To address the issue, Gatchalian mentioned several options, including upgraded substations and distributed energy systems like rooftop solar, which could help reduce line losses by minimizing the need for extensive line extensions.
Senator Erwin Tulfo, who chairs the committee, concurred with the need for infrastructure investment, extending the focus beyond distribution utilities to include the transmission facilities of the National Grid Corp. of the Philippines (NGCP). Tulfo raised concerns that some utilities had neglected modernization efforts because the existing system allowed them to recover system losses from consumers.
Tulfo argued that the responsibility for such costs should not fall on consumers, given the utilities' lack of investment in infrastructure. The Energy Regulatory Commission (ERC) acknowledged that distribution utilities must adhere to technical and performance standards and may face penalties if they exceed allowable system-loss levels.
ERC Chairperson Francis Juan noted that utilities have a natural incentive to undertake capital expenditure programs when their losses surpass regulatory caps since they must absorb the excess. This creates a motivation to invest in modern equipment to reduce system loss.
The Senate is currently evaluating various proposals to reform or eliminate system-loss charges, as lawmakers work to define which electricity losses may justifiably be transferred to consumers and which should be absorbed by companies capable of mitigating them.
