‘A MATTER OF PHYSICS’: MORE Power will not oppose system loss charge removal

By Rjay Zuriaga Castor

ILOILO CITY – MORE Electric and Power Corp. (MORE Power), the electric distribution utility serving Iloilo City, said it will not oppose government efforts to remove system loss charges from consumers’ power bills.

Niel Parcon, vice president for corporate energy sourcing and regulatory affairs at MORE Power, said the company collects about PHP 21 million to PHP 23 million a month in system loss charges but does not profit from the fees.

“[It’s around] PHP 21 to PHP 23 million a month. But it is collected (system loss) to cover for whatever shortfall,” Parcon said during the Iloilo City Council session on Wednesday, Aug. 5.

He said the collections are intended solely to recover allowable system losses.

System loss refers to electricity that a distribution utility purchases or receives from power suppliers but cannot bill to customers, because part of the energy is lost before it reaches homes and businesses.

Under the Electric Power Industry Reform Act (EPIRA), system losses are classified as either technical or non-technical.

Technical losses occur naturally as electricity dissipates as heat while passing through transmission and distribution lines, transformers, and other electrical equipment.

These losses are considered unavoidable because they result from the physical properties of electrical systems.

Non-technical losses arise from electricity theft, illegal connections, defective or tampered meters, metering inaccuracies, billing errors, and other operational inefficiencies.

Distribution utilities, including MORE Power, are allowed to recover a portion of these losses from consumers through the system loss charge, subject to caps set by the Energy Regulatory Commission (ERC).

Parcon said both technical and non-technical system losses are currently passed on to consumers across all customer classes, including residential, commercial, and industrial users.

“Right now, our system loss is 4.23 percent, and the cap is 5.5 percent. We are only charging you (customers) 4.23 percent. Nationwide, that is around the top 3 lowest in the country,” he said.

The ERC has held the recoverable system loss cap for private distribution utilities at 5.5 percent since 2021, down from 6.5 percent in 2018. Electric cooperatives operate under a higher ceiling, which consumer groups have placed at up to 12.5 percent.

Utilities must absorb any system loss that exceeds the applicable regulatory cap.

Parcon said about 4 percentage points of MORE Power’s 4.23 percent system loss are technical losses, while 0.23 percentage point represents non-technical losses, including pilferage and metering errors.

He said technical losses cannot be eliminated because they are governed by the physical properties of electricity transmission.

“Four percent is the law of physics. We cannot eliminate that. We cannot do something about it. That is the law of physics. If you charge us with something that is the law of physics, you’re asking for something impossible,” he said.

Parcon said non-technical losses can be reduced through anti-pilferage campaigns and improved metering systems, but he acknowledged that they remain an industry-wide concern.

He reiterated that MORE Power does not profit from the system loss charge.

“We can have the Commission on Audit audit. It is being regulated. We are a very highly regulated industry,” he said.

‘We will comply’

In his fifth State of the Nation Address on Monday, July 27, President Ferdinand Marcos Jr. urged Congress to amend the EPIRA to prohibit distribution utilities from passing system loss charges on to electricity consumers.

Marcos said consumers should not shoulder the cost of electricity losses, which appear in monthly power bills and are also subject to the 12 percent value-added tax.He said it is unfair for consumers to pay for losses they did not cause, and he called for the removal of both the system loss charge and the value-added tax imposed on it.

The proposal has yet to be enacted into law and will require amendments to the EPIRA and corresponding regulatory issuances before it can take effect.

MORE Power said it will abide by whatever policy the Department of Energy (DOE) and the ERC adopt on the proposed removal of system loss charges.

“We are not opposing it. We will comply with government policy on the treatment of system loss as far as the consumers are concerned,” Parcon said.

Richard Nethercott, corporate chief operating officer of Primelectric Holdings Inc., MORE Power’s parent company, echoed the company’s position.

“We are aware that the ERC and DOE are already looking at it. Our role as a distribution utility is just to wait for the policy direction and the regulatory issuances relating to the topic. We do not want to preempt what will happen,” he said.

Nethercott said the company’s priority remains providing reliable electricity service while working to reduce power costs within the existing legal and regulatory framework.

MORE Power took over the Iloilo City distribution franchise from Panay Electric Co. in 2020 under Republic Act 11212. PECO had recorded system losses of 9.03 percent in 2019, well above the regulatory cap then in force.