Distribution utilities explain ‘system loss’

posted September 02, 2017 at 08:05 pm
by  Manila Standard Business
Distribution utilities such as Manila Electric Co. said electricity consumers have the right to know the different charges included in the electricity bill, including what is referred to as ‘system loss’.  According to Meralco’s data, the system loss charge accounted for around 3 percent of the electricity bill of a household using 200 kilowatt-hours a month.  While relatively small, the consumer still deserves to know what exactly the system loss is, how it is calculated and if it could be brought down.

Two types of system loss

There are two types of system loss, the first being technical loss arising from the characteristics of electrical equipment and materials in the physical delivery of electric energy, including conductor loss and transformer core loss.

In the energy industry, when electricity is transported or transmitted through high power lines from a power generation company 100 kilometers away to a private distribution utility or electric cooperative, there is transmission system loss. Thus, a 1,000-MW output from a generator may become only 980 MW once it finally reaches the DU or EC.  When electricity received by the DU or EC is converted for distribution to houses, factories and offices, there is also distribution system loss.

System loss is inherent in the delivery of electric service—it is not possible to provide electric service without the distribution system incurring some form of energy loss. A proportion of the energy being delivered will always be dissipated as heat and noise. As the distribution system stands ready to deliver power at the moment needed, the distribution system incurs losses even when no electric energy is actually being drawn by a customer.  The only way to zero-out system loss in the power system is to turn the power off.

Such losses cannot be eliminated and there are technical and economic limits to the level to which it can be reduced. Solutions for technical loss reduction include using bigger wires in bringing electricity to households. However, projects like these are capital intensive so DUs have to seek the approval of the Energy Regulatory Commission first before implementation. 

The second type of system loss is referred to as non-technical loss caused by actions external to the power system and consists primarily of electricity theft or pilferage. These losses are highly dependent on the country’s socio-economic situation, and thus, not entirely within the utility’s control. 

DUs and ECs continue to fight electricity theft and pilferage because of its negative effects. Illegal connections, especially in depressed areas, can oftentimes lead to electrical accidents and fires. Overloaded power lines and transformers due to unregistered consumption could also lead to accidents and brownouts that affect everybody in the community. 

DUs and ECs have taken to elevating electric meters on high installations just to keep them away from power pilferers. However, this has reportedly been not enough to prevent a determined power pilferer. Even the threat of imprisonment for violation of Republic Act No. 7832 (Anti-Electricity Pilferage Act of 1994) has not deterred those pilferers. Electricity pilferage has become an attractive business venture for professional pilferers who have managed to transform themselves into big syndicates offering illegal services to big businessmen who want to steal electricity and save on costs at the expense of honest and paying consumers.

Despite the enactment of Republic Act No. 7832, pilferage of electricity has not stopped, albeit, has become more sophisticated, and the combined efforts of law enforcement agencies and utilities are certainly not enough to curb it, leaving consumers practically helpless. 

In a recent Senate committee on energy hearing on system losses of DUs, committee chairman Sen. Sherwin Gatchalian said: “After two hearings and all the briefings, it became apparent that the non-technical losses cannot be zero.  It can be reduced but looking forward maybe 10 years or even 20 years down the road, it’s impossible to make it zero.”

“I think that’s because of culture and also economics,” the senator said.

Since losses are inherent in the delivery of electric energy, it is common practice for electricity-regulating agencies around the world to allow utilities to include compensation for system losses as part of their regulated charges. 

Setting caps on system loss

There have been several attempts over the years to limit or cap the distribution system loss that is passed on to consumers. In the 1990s, Congress enacted the Anti-Electricity Pilferage Act of 1994, which set an initial cap on losses that was gradually reduced over time.  In 2008, the ERC issued a resolution further reducing the cap to its present level of 8.5 percent for DUs and 13 percent for ECs.

Now, there are proposed legislation in both Houses of Congress that want to bring down the cap still further.  In fact, in the bills of Sen. Manny Pacquiao and Reps. Tiangco and Rodriguez, the proposal is to set the cap at zero percent for DUs and five percent for ECs.  These measures are currently being deliberated upon by the energy committees of each House.

The ERC also engaged the services of PowerSolv, an engineering consultancy consisting of University of the Philippines professors and experts in the field of electrical engineering, to develop a plan to bring down system loss for all DUs and ECs.  According to PowerSolv, “the conversion or transport of energy cannot achieve 100-percent efficiency”.  Hence, system loss cannot be totally eliminated.

PowerSolv recommended to ERC a gradual reduction in caps from 2018 to 2021, after which a review will be made to determine the appropriate caps going forward.  The recommendations are now undergoing public consultations nationwide.

Bringing down system loss

In order to meet more stringent system loss caps, DUs and ECs need to go on an intensive loss reduction program that would require massive capital and operational expenses. DUs and ECs will be forced to implement absurd projects just to meet an arbitrary lower cap, like the replacement of distribution lines and equipment with bigger facilities even though these are still working perfectly.

Based on documents submitted to the Senate, Angeles Electric Corp., the utility serving Angeles City, will need to spend P892 million if it is required to lower its system loss to just 5 percent. 

For Cagayan Electric Power and Light Company (serving Cagayan de Oro City), the cost would be P1.84 billion, and for Meralco, the cost would be a whopping P65.53 billion. These additional costs will more than offset any reduction in the system loss charge and, in fact, lead to power rate increases to customers.

At the same time, additional government resources will be needed as more law enforcement agencies are called upon to conduct anti-electricity pilferage operations and clearing of illegal connections. 

Prof. Rowaldo Del Mundo of the University of the Philippines College of Engineering, during a Senate technical working group meeting on system losses, said that: “DUs will have to prepare a special capex plan specifically targeting how to [bring down losses]. And then they will go to the ERC for the approval of this capex plan and [it] will take a little bit of time for ERC to approve them all. And then after that, maybe all of them may be implemented in one year. But the impact cannot be immediately felt.”

The 2016 “Power Statistics” of the Department of Energy show that the Philippines has gone a long way in lowering its transmission and distribution system losses. From as high as 12.9 percent in 2004, it went down to 9.1 percent in 2016.  

Further reductions will require a balance between the benefits of a lower system loss charge and the additional costs to be incurred in actually bring down the losses.  The issue is complex, surrounded by numerous technical, economic, and social considerations.  Experts in this field are expected to find the right balance “to ensure the quality, reliability, security and affordability of electric power” that consumers deserve.

Topics: Distribution utilities , Manila Electric Co. , system loss
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