ERC urged to provide perks for lower system loss
The distribution utility arms of the Aboitiz group are urging the Energy Regulatory Commission (ERC) to give out incentives instead of reducing the cap on system loss.
Davao Light & Power Co. (DLPC) vice president Bienamer Garcia said the proposed lowering of the system loss to eight percent from 9.5 percent will be “something that would be very hard to achieve and would entail a lot of cost.” DLPC’s system loss level as of end-June 2008 stood at 7.91 percent.
Garcia said the ERC should also be able to reconcile the proposed new cap on system loss on the performance-based rate (PBR) mechanism.
“The ERC should look at the PBR in relation to system loss limit reduction. The incentives should be able to compensate the investment of a distribution firm to be able to meet the system loss cap,” the DLPC official said.
On the other hand, Visayan Electric Co. (VECO), another distribution arm of the Aboitiz group, stands to lose about P100 million if the ERC will approve the reduction of system loss caps.
Aboitiz Power Corp. president Erramon Aboitiz said that while VECO is within the current system loss cap of 9.5 percent, the company will suffer if the level is reduced to eight percent.
“Veco’s system loss now at is 9.5 percent. If (the cap) is eight percent, that’s P100 million impact on us,” Aboitiz said.
According to Aboitiz, the regulator should not look just at system loss to lower the power rates.
“One could not just look at the system loss. You can reduce system loss by investing, but when you invest, you have to make a return,” he said.
Aboitiz echoed Garcia’s view that the ERC should give incentives instead of cutting down the limit on system loss.
“Let businesses figure out how to reduce those losses, then give incentives. When you give incentives, you start seeing what people can do. For me, it’s better to provide incentives to companies to reduce system loss,” Aboitiz said.
VECO is owned and managed by the Aboitiz and Garcia families of
Early this month, the ERC set the draft resolution adopting a new system loss cap for distribution utilities for public consultation after not adjusting the system loss caps for almost a decade.
Under the proposed ERC resolution, the electricity consumption of a DU is to be treated as an expense and not as part of system loss, and lowers the maximum recoverable rate of system loss from 9.5 percent to eight percent for private DUs, and from 14 percent to 11 percent for electric coops, based on the total kilowatt-hour (kWh) generated, purchased and distributed.
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