MANILA - The Energy Regulatory Commission (ERC) has put on hold the appeal of power retailer Manila Electric Co. (Meralco) to defer the effectivity of the new system loss cap of 8.5% or to increase the new cap to at least 9% starting in January 2010.

In a statement, ERC said the present system loss cap applicable to private distribution utilities (DUs) like Meralco is already 9.5%.

ERC added it will proceed with bringing down the rate to 8.5% next year, pursuant to Resolution 17, which ERC issued on January 16, 2008. The move is in line with provisions under Republic Act 9136, or the Electric Power Industry Reform Act (Epira), which sets new system loss caps for the sector.

The system loss cap is the limit by which a DU is allowed to recover from its customers the cost of the energy that is delivered to the system by the power suppliers, but which energy is not actually metered as being sold to customers, either because it is lost in the transmission through the power lines or is pilfered by unscrupulous persons.

ERC added that the lower system loss cap set for implementation next year directly translates to a lower system loss charge for end-users whose DUs are incurring system losses above the mandated limit.

ERC said Meralco sought the deferment of the implementation of the new system loss cap of 8.5%, citing its difficulty in meeting this lower level. It mentioned as among the reasons for this the economic slowdown that allegedly affected its sales to industrial customers and the expected increase in the propensity to pilfer under the current economic environment.

“It is true that the sharing of electricity consumption between the industrial consumers that are connected to high voltage and residential consumers that are connected to low voltage has an effect on the total system loss,” Zenaida Ducut, ERC chairman and chief executive, stated in her letter.

The ERC executive pointed out that both the existing and the proposed new caps were set regardless of whether the franchise area is highly urbanized. As to Meralco’s concern on the increased incidence of pilferage, Ducut pointed out in her letter that ERC’s recent issuances have “given DUs like Meralco more than sufficient means and incentives to deter or curb the same.” Jose de Jesus, Meralco president and chief operating officer, earlier said Meralco’s systems loss as of April this year has significantly improved to 9.16% from 9.95% posted in the same period last year. The current system loss limits—set under Republic Act 7832—are at 9.5% for private utilities and 14% for electric cooperatives.

In the new law, the ERC is authorized to amend these caps—taking into consideration factors as load density, sales mix, cost of service, delivery voltage, and other technical considerations.

Under existing guidelines, distribution utilities are allowed recovery of company use through the system loss charge up to a maximum of 1% or the actual level, whichever is lower.

“We will continue striving to match, if not improve, on last year’s system loss performance of 9.28% which is the lowest in the last 28 years,” said De Jesus.