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Thank
you very much, Rep. Amado Bagatsing of Manila. Manila
residents should now be grateful that someone like you
in Congress has finally bothered to look into the plight
of hapless consumers, including them, who are forced by
law to shoulder the burden of paying for the
inefficiency of electricity producers and distributors.
Just a
couple of days go you reportedly filed House Bill 4073,
as you proposed to repeal Republic Act 7832, or the
Anti-Electricity and Electric Transmission
Lines-Materials Pilferage Act of 1994. While people are
not necessarily for encouraging pilferage, many favor
your proposal because, as you correctly pointed out,
that law has resulted in inexplicable inequities that
invariably, but wittingly, benefit the electricity
industry at the expense of consumers.
In your
bill’s explanatory note, you recognized the fact that RA
7832 expressly allowed distribution utilities like the
Manila Electric Co., or Meralco, to charge to consumers
a percentage of their so-called system losses. But you
also correctly noted, as others have similarly done in
the past, that honest consumers were being unduly
penalized by this, considering that “this component is a
big percentage of their monthly bills.”
As you
correctly pointed out, “we now feel that distribution
utilities have been unjust and unreasonable in
continuously passing on their losses to the consumers
while they remain remiss in putting up controls to plug
pilferage. This even has the effect of class
legislation, giving such distribution utilities to
recover their loss by passing it on to consumers.” You
even noted that other public utilities were also
suffering such losses, but were never given the chance
to charge or pass on that loss to end-users. Why should
the electric industry be any different?
The
worse inequity is the fact that while the system-loss
charge is seemingly unfair, that same charge is even
imposed a value-added tax, or VAT, which is likewise
shouldered by the hapless consumer. Perhaps, this is
something that Congress needs to look into as well.
Although it is logical for one to assume that if the
system-loss charge is repealed through the Bagatsing
bill, then the VAT on it is junked as well.
It is
the state-run Energy Regulatory Board that reviews and
approves electricity prices using a formula that allows
a reasonable profit for companies that produce and sell
electricity (like the government-owned National Power
Corp. [Napocor] and so-called independent power
producers), and for companies that distribute that
electricity to factories and residences (first through
the state-run National Transmission Corp., or Transco,
and then through the partly government-owned Meralco).
Under
the law, that pricing formula also provides for a way
for these power producers and distributors to be
compensated even for so-called system losses or system
inefficiencies—seemingly the difference between the
kilowatt-hours of electricity sold by Napocor and
privately owned power plants and delivered by Transco to
Meralco, and the actual kilowatt-hours of electricity
sold by Meralco to consumers.
Obviously, one cannot begrudge Meralco for charging to
consumers its system losses. And such losses are not
something that Meralco or consumers actually desire. But
RA 7832 allows it. And no right-minded business will
readily shoulder any loss if it can recover the same by
charging it to its customers. But through Representative
Bagatsing’s bill, perhaps things can now be put right.
Maybe
the logic behind allowing utilities to pass on to
consumers their system losses is that it is not the
power industry’s fault that its business has inherent
inadequacies or imperfections that result in such
operating losses. But given their large investments,
there should be some way to compensate them for their
effort to serve the public.
As
previously explained to this column by some “experts,”
this system loss can come in at least three forms:
•
Technical: Transformers and electric lines, as
conductors of electricity, generate and then throw off
heat, and this inherent characteristic affects the
stability of electricity supply. As such, what comes out
at the other end is usually less than what originally
went in.
•
Nontechnical: A clear example of nontechnical system
loss is loss from pilferage.
•
Administrative: This includes nonrevenue electricity
consumed by power producers and distributors themselves.
Power
producers, as well as distributors like Meralco, are
supposedly allowed by RA 7832 to recover a system loss
of no more than 9.5 percent. Why they should be allowed
such recovery, only the previous Congress can fathom. As
with all businesses, all operating inefficiencies,
inherent or otherwise, are to the business’s account and
are not passed on to customers. But with the electricity
industry, with RA 7832, a company like Meralco can
unwittingly lose up to about a tenth of the electricity
it buys and distributes but still charge its clients for
the full 100 percent. And it need not have an incentive
to address the inefficiency, whether because of
pilferage or other reasons. The loss can be charged to
customers anyway.
To
exemplify: Meralco buys 10 units of electricity from
Napocor and gets this through Transco. As the
electricity gets delivered, it suffers from “technical
system loss,” thus Meralco ends up with only 9.5 units
of electricity. In turn, as Meralco distributes the 9.5
units of electricity to its clients, it again suffers
from “nontechnical and administrative system losses,”
and thus manages to deliver only 9.05 units of
electricity to factories and residences. Under the law
that Bagatsing proposes to repeal, Meralco will still
have to pay Napocor and Transco for 10 units of
electricity. Then this cost plus Meralco’s own
distribution expenses get charged to consumers in full.
Thus, even if consumers receive only 9.05 units of
electricity because of “system losses” totaling 9.5
percent (of 10 units), then people will still have to
pay Napocor, Transco and Meralco for 10 units of
electricity. No questions asked, no matter what.
At the
end of the day, despite all inherent inefficiencies,
state-run Napocor still gets paid in full for the
electricity it generates and sells. State-run Transco
also gets paid in full for the electricity it transmits
and delivers through its transmission lines. And partly
state-owned Meralco, meanwhile, collects all the
charges, including that for “system losses” from
consumers. Ultimately, Meralco does not profit from
such, but the same helps cut its own losses.
The sad
part is that under the VAT law, electricity sales are
now subject to the tax. Unfortunately, that law made no
distinction between what was actually sold to consumers
and what was lost through line resistance, pilferage,
etc. In short, any “system loss” is still considered
part of the sale. As such, people are forced to pay for
electricity in full, and the VAT on that electricity
also in full, including the tax on system loss. One can
only hope Mr. Bagatsing will succeed in his quest for
justice.
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