Why Philippine utilities are not financially motivated to solve power theft

Why Philippine utilities are not financially motivated to solve power theft

Asian Power reported early August that the Philippines' energy agency is
studying the charges on consumers' power bill and trying to probe how to
revise it. One of the changes they're looking at is the possibility of
eliminating system loss charges. According to DOE spokesperson Pete Ilagan,
the decision to carry out the study was a result of excessive system loss
reported by DUs.

He added that the agency will probe whether the system loss cap, 9.5% for
private DUs and 13% for electric cooperative, is being followed by power
distributors.

We spoke with Dr. Bikal Pokharel, principal analyst for power at Wood
Mackenzie's Asia Primary Fuel Fundamentals and asked his thoughts on the
matter.

If implemented, how will this revision affect Philippine utilities?

This refers to the system loss charge in the electricity bill. The maximum
recoverable losses for distribution utilities is regulated by ERC and
currently stands at 8.5%. If the distribution utilities are asked to
shoulder the burden of this, it will have an immediate impact on their
bottom line.

Other countries are having their utilities shoulder system losses. Is it
high time for the Philippines to do it too?

The system losses are almost always paid by the electricity ratepayers. It's
usually a question of accountability. As 'line losses from heating' occur in
the process of making electricity available to the consumers, the ratepayers
are deemed accountable for the charge. Its almost like the cost of
electricity delivery. However, it can be argued who should pay for losses
arising from electricity pilferage. In most jurisdictions, if not all,
consumers pay for pilferage because it is generally lumped within the system
losses.

Who do you think must shoulder system losses, consumers or utilities?

I think the ratepayers should pay for the line losses. However, the level of
recoverable losses should be mandated by the regulators as is currently done
in the Philippines. Without capping losses, the utilities won't have much
incentive to curb inefficiency.

How should Philippine-based utilities deal with losses due to pilferage?

As long as the utilities are able to pass on the cost to the consumers, they
wont be financially motivated to solve the problem of power theft. Normally,
it comes down to the government to place policy measures to tackle with
power theft. The first step to deal with losses from pilferage is to
identify the place of origination. Utilities, in countries like Brazil, have
used smart meters to identify the location of system loss.

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Ref:
http://asian-power.com/ipp/exclusive/why-philippine-utilities-are-not-financ
ially-motivated-solve-power-theft

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John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com