* This is my article in BusinessWorld last Wednesday.
BWorld 133, Dissecting Dutertenomics' overspending plan, June 01, 2017
BWorld 134, PPP vs ODA, June 08, 2017
When matter changes form, there are certain “system loss”
that occur. Like a one-kilo dressed chicken becomes less than one-kilo once it
is cooked into adobo or tinola. Or a one-kilo green mango or banana becomes
lighter than a kilo when it transforms into ripe, yellow mango or banana after
a few days.
When electricity is transported or transmitted from a
power generation company (genco) some 100+ kilometers away to a private
distribution utility (DU) or electric cooperative (EC), there is a transmission
system loss. Thus, a 1,000-MW output from a genco may become only 980 MW when
it reaches the DU or EC.
Then when electricity is distributed from a DU or EC to
houses and offices, there is also a distribution system loss. This loss is
divided into (a) Technical loss, inherent in the physical delivery of electric
energy including conductor loss, transformer core loss, and technical error in
meters, and (b) Nontechnical Loss, energy lost due to pilferage, meter reading
errors, meter tampering, others not related to the physical characteristics and
functions of the electric system.
The Philippines has a relatively high degree of transmission
loss + distribution loss while Singapore, South Korea and Japan have low
systems losses, based on World Bank data (see Table 1).
There are several attempts to limit or cap the
distribution system loss that is passed on to the consumers. One from the
Energy Regulatory Commission (ERC) draft “Rules for Setting the Distribution
System Loss Cap and Establishing Performance Incentive Scheme for Distribution
Efficiency,” and two from the Senate. Here is a summary of their provisions.
These three measures are problematic and Sen. Pacquiao’s
bill is the worst because of its populist posturing, disallowing private DUs to
charge any system loss while pampering the ECs to have their system loss. Check
again Table 1 above, it shows that none of the advanced countries like
Singapore and Japan have zero system loss.
Sen. Gatchalian’s bill is not as bad as Sen. Pacquiao’s
but like the ERC draft Rules,it suffers from some populism too, pampering the
ECs with higher loss cap compared to private DUs.
Giving differentiated loss cap is favoring the ECs while
penalizing private DUs and this is wrong. If the real purpose of the proposed
ERC regulation and Sen. Gatchalian’s bill is to protect the consumers from high
system loss charge in their monthly electricity bill, then they should slap a
uniform low cap for all players, whether private DUs or ECs.
The rule of law is explicit in reminding people that the
law applies equally to unequal players and people. Thus, a law against traffic
counterflow should apply to all vehicles, from buses to cars, jeepneys, armored
vans, tricycles and motorcycles. It should apply also to both private and
public/government vehicles.
A law with penalty against non-rehabilitation of
mined-out area should apply to all mining entities, whether big, medium, small
and artisanal mining.
And a law or regulation on system loss cap should apply
to all players, from big corporate DUs to medium or small electric
cooperatives.
By slapping differentiated system loss cap, new
government regulations will not be exactly protecting the consumers but more of
protecting certain ECs so that their inefficient if not outright wasteful
distribution system is rewarded with higher profit at the expenses of the
consumers.
Ultimately, all ECs should be corporatized. They should
be registered with and monitored by the Securities and Exchange Commission
(SEC) and not by the National Electrification Administration because SEC has
more transparent and realistic rules than NEA. But that will be another topic
in the future.
For now, the rule of law, of not making exemptions and
differentiation in the imposition of system loss cap, should prevail. And the
loss cap that government has in mind should be realistic that DUs and ECs
should not be burdened with additional high capital expenditures (CAPEX) and
operating expenditures (OPEX) which ultimately will be passed to the consumers
in the form of higher distribution charge.
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See also:
BWorld 131, Why the FiT-All is a burden to consumers, May 18, 2017
BWorld 132, Global commodity prices, trade and growth, May 27, 2017 BWorld 133, Dissecting Dutertenomics' overspending plan, June 01, 2017
BWorld 134, PPP vs ODA, June 08, 2017
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