QuestionsQuestions (ERC Resolution NO. 17, S. 2008)
It is anchored on Republic Act (RA) No. 7832 (Anti-Pilferage of Electricity Act), particularly Section 10 on recoverable system loss caps, and on RA No. 9136 (EPIRA) which amended Section 10 and authorized the ERC to determine new caps.
For PUs: 14% at the end of the 1st year, 13% at the end of the 2nd year, 11.34% at the end of the 3rd year, and 9.5% at the end of the 4th year following the Act’s effectivity.
For ECs: 22% at the end of the 1st year, 20% at the end of the 2nd year, 18% at the end of the 3rd year, 16% at the end of the 4th year, and 14% at the end of the 5th year following the Act’s effectivity.
Section 10 authorized determination at the end of the 4th (for PUs) and 5th (for ECs) years whether caps shall be reduced further, but in no case lower than 9%.
It required PUs to file an application for further system loss cap reduction before the end of the 4th year, and ECs before the end of the 5th year.
Their applications were to be dismissed.
Other DUs who did not submit applications were not required to file and no sanction would be imposed in the future.
ECs were required to file their respective applications using updated data after three (3) years from the resolution’s effectivity (i.e., by June 7, 2010 per the resolution), to use that deferment to build pertinent databases.
It referenced ERC’s 2004 Guidelines on segregation/calc methodology dividing distribution system losses into technical, non-technical, and administrative, with caps set by type or delivery voltage and by utility.
Because most PUs and ECs encountered difficulties complying with the required segregation of system losses; thus, ERC extended the deadline at least three (3) times.
The resolution adopted a new policy instead of proceeding with determinations based on insufficient data—most notably, it established a uniform maximum pass-through cap and treatment of administrative loss.
For PUs under Performance-Based Regulation (PBR), it shall be treated as Operation and Maintenance (O&M) expense in its next reset.
For PUs yet to enter PBR, it is treated as O&M expense in its PBR application; for ECs, it is treated as O&M expense in the benchmarking methodology.
It is the actual but not to exceed 8.5% for private utilities and 13% for electric cooperatives of the total kWh purchased and generated.
DUs were directed to submit to the ERC, through a Sworn Statement, the results of updated segregated system losses (ending June 7, 2010) by May 31, 2011 together with Annual Reports.
They were effective starting January 2010 billing.
For PUs, it would be addressed by the ERC in the Performance Incentive Scheme (PIS) under the PBR; for ECs, it would be considered in the new benchmarking methodology for the rate-making approach.