NEW ERC SYSTEMS LOSS LIMITS MUST BE ABSOLUTE NOT AVERAGE TO TRULY BENEFIT MERALCO and CEBU CONSUMERS
David Celestra Tan, MSK
March 1, 2018
ERC’s announcement that it is reducing the Systems Loss allowance of Distribution Utilities should be a source of joy to electric consumers, especially those in the Meralco area. It will however be of little benefit if the Systems Loss limit remain to be average not absolute.
It is a little tricky on how the Meralco consumers have been confused and overcharged, so please follow closely.
Meralco’s systems loss allowance had been 8.5% but the captive consumers comprising 75% of Meralco’s customer base, are charged from 9.5% to as much as 12% 5 years ago. Cebuanos appear to be paying even higher at 14% based on electric bills we saw. How is that possible and how is that legal?
That is through the magic of systems loss averaging that the ERC, in their infinite wisdom, allowed as the methodology in computing systems loss charges. Meralco had been charging industrial and large commercial establishments only about 3.5% in systems loss and charging the captive consumers comprised mainly of residential and commercial customers up to 12%. Last month my systems loss charge is 9.5% not the legal limit of 8.5%. The very low systems charge on the industrial customers pulls down the average to 6.5% which is what Meralco likes to brag about.
In fact in an act of subtle trickery, Meralco’s bill likes to show in the front page that our systems loss is only 4.4% of the total bill which makes many consumers believe that Meralco systems loss charge is only 4.4% compared to the limit of 8.5%. (Our systems loss is a percentage of Meralco’s generation charge).
Meralco and ERC like to say that the systems loss must be based on the cost of service to particular groups of customers. They claim that the systems loss from technical and pilferage of power from industrial customers are lower and the cost of service and systems losses to residential customers are much higher. Comparatively three (3) times higher than industrial.
Even this “cost of service” philosophy is inconsistent with reality. Everyone knows that the bigger pilferage of power comes from the industrial and larger consumers. Because they consume more, the incentive for pilferage is bigger. What is harder to explain is why in the modern and highly dense service areas of Makati, Ortigas, Quezon City where Meralco’s power systems are supposed to be modern and where the customer base is dense and high energy consumers, the systems loss charge is 9.5 to 12%, much higher than the supposed limit of 8.5%.
At an average consumption of 1,200 kwh a month and a P5.25 per kwh generation charge, the systems loss overcharge is p0.05 to 0.18 per kwh. If that is P0.10 per kwh, it is P120 per month overcharge.
Meralco sells approximately 30 billion kwh a year, 60% to these captive consumers. The systems loss overcharge is about P2 billion a year, about 10% of its announced annual profits of P20 billion.
We had a chance to ask some ERC commissioners why Makati consumers and businesses are being charged the same systems loss as those in rural Quezon and Laguna provinces. Their answer? Because they are the same class of customers. But they are not. One is rural and the other one is highly dense and modern cities. I mean if they are going to be true to the philosophy of cost of service, ERC must distinguish rural and highly modern metropolis.
ERC announced that it is reducing the systems loss allowance of private distribution utilities like Meralco and Veco to 6.5% from 8.5% and to 5.5% within 4 years. If that limit remains to be average, the ERC reduction will not benefit Meralco consumers because Meralco’s average systems loss is already at 6.5%. And since it is averaging, those of us captive consumers will remain to be paying 9.5% to 12%. It will make us feel worse because this time, we are being overcharged 3% (9.5 minus 6.5%) or about P0.1575 per kwh!
How to cure? ERC must establish the new 6.5% systems loss limit as the absolute limit which means NO ELECTRIC CONSUMER SHOULD BE CHARGED HIGHER ABSOLUTELY THAN 6.5%. If Meralco wants to charge the contestable customers like industrial lower systems losses then it is their right. But they should not be allowed to effectively recover that from residential and commercial customers by charging them higher than the systems loss allowance.
This could even be a form of inter-class subsidy, something prohibited by the EPIRA Law of 2001. There are legitimate systems losses like technical losses and a level of non-technical, mainly pilferage. The problem is not that there are systems loss charges. It is the excessive charge that the current ERC methodologies are not comprehensive enough to protect consumers from abuse.
Our fast modernizing country demand that ERC differentiate captive customers in the rural areas and captive customers in the modern cities. The systems losses in the modern cities should be much less, unless Meralco is admitting that with all their propaganda of modern facilities and big investments, that they are still losing 10% in Makati, Forbes Park, BGC, Ortigas where the losses should not be more than 3.5%.
On top of these, the ERC systems loss rules allow Meralco to only certify that the charges are accurate. It is like fox swearing that he is not attacking the chicken house!
Your association, MatuwidnaSingilsaKuryente Consumer Alliance, had actually filed a petition with the ERC a year ago to correct these anomalous rules. The petition had fallen on deaf ears.
MatuwidnaSingilsaKuryente Consumer Alliance
matuwid.org
david.mskorg@yahoo.com
