Rules for Setting the Distribution System Loss Cap and ... · Rules for Setting the Distribution System Loss Cap and Establishing Performance Incentive Scheme for Distribution Efficiency

Rules for Setting the Distribution

System Loss Cap and

Establishing Performance Incentive

Scheme for Distribution Efficiency

Draft Version

May 2017

Rules for Setting the Distribution System Loss Cap and Establishing Performance Incentive Scheme for Distribution Efficiency

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Table of Contents

Table of Contents ............................................................................................................................................... 2

I. General Provisions ................................................................................................................................... 7

1.1 Background ............................................................................................................................................... 7

1.2 Purpose ....................................................................................................................................................... 8

1.3 Scope ............................................................................................................................................................ 8

1.4 Construction of the Rules .................................................................................................................... 8

1.5 Definition of Terms ................................................................................................................................ 8

1.6 Provision of Information .................................................................................................................. 11

II. Distribution System Loss Caps ......................................................................................................... 12

2.1 Distribution System Loss Assessment and Reporting ......................................................... 12

2.2 Technical Loss Caps ............................................................................................................................ 12

2.3 Non-technical Loss Caps ................................................................................................................... 15

2.4 Distribution System Loss recoverable through System Loss Charge ........................... 15

III. Performance Incentive Scheme... ..................................................................................................... 16

3.1 General Provisions .............................................................................................................................. 16

3.2 PIS for Private Distribution Utilities ........................................................................................... 16

3.3 PIS for Electric Cooperatives .......................................................................................................... 19

IV. Transition and Regulatory Period ................................................................................................... 21

4.1 Commencement and Duration ....................................................................................................... 21

4.2 Regular Review by the Regulator ................................................................................................. 21

V. Reportorial Requirements .................................................................................................................. 22

5.1 Regular Review by the Regulator ................................................................................................. 22

5.2 System Loss Reports Submission ................................................................................................. 23

VI. Final Provisions ....................................................................................................................................... 24

6.1 Exception from the Provisions of these Rules......................................................................... 24

6.2 Regulatory Costs .................................................................................................................................. 24

6.3 Effect of the New System Loss Cap Under These Rules on the DU’s Existing Cap ... 24

6.4 Repealing/Separability Clause ...................................................................................................... 24

6.5 Effectivity ................................................................................................................................................ 24


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ANNEX A: Determination of System Loss Caps .................................................................................. 25

A.1 Feeder Technical Loss ....................................................................................................................... 25

A.2 Sub-Transmission and Substation Technical Loss ................................................................ 27

A.3 Non-Technical Loss ............................................................................................................................. 28


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List of Tables

Table 1 Distribution Utilities Cluster 1 .................................................................................................. 13




Table 5 Feeder Technical Loss Cap for Each Cluster ........................................................................ 15

Table 6 Computation of the Performance Assessment Factor for Private DUs .................... 18

Table 7 Thresholds for the PIS Structure for Private DUs ............................................................. 18

Table 8 Computation of the Performance Assessment Factor for Electric Cooperatives 20

Table 9 Thresholds for the PIS Structure for Electric Cooperatives (in % System Loss) 20

Table 10 Implementation Schedule for Private DUs ........................................................................ 21

Table 11 Implementation Schedule for Electric Cooperatives .................................................... 21

Table 12 Coefficients for Estimating Feeder Technical Losses ................................................... 27


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List of Figures

Figure 1 Reward and Penalty Structure of the PIS for Private Distribution Utilities ........ 17

Figure 2 Reward and Penalty structure of the PIS for Electric Cooperatives ....................... 19


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I. General Provisions

1.1 Background

Section 38 of Republic Act No. 9136, otherwise known as the Electric Power Industry Reform Act of 2001 or EPIRA, created the Energy Regulatory Commission (ERC) as an independent quasi-judicial regulatory body.

Under Section 43 of the EPIRA, the ERC is tasked to promote competition, encourage market development, ensure customer choice and penalize abuse of market power in the electricity industry. To carry out this undertaking, the ERC shall promulgate necessary rules and regulations, including Competition Rules, and impose fines or penalties for any non-compliance with or breach of the EPIRA, its Implementing Rules and Regulations, and other rules and regulations which it promulgates or administers as well as other laws it is tasked to implement/enforce.

Likewise, Section 43 (f) of the EPIRA provides:

“Xxx. To achieve this objective and to ensure the complete removal of cross subsidies, the cap on the recoverable rate of system losses prescribed in Section 10 of Republic Act No. 7832, is hereby amended and shall be replaced by caps which shall be determined by the ERC based on load density, sales mix, cost of service, delivery voltage and other technical considerations it may promulgate. Xxx”

Pursuant to Section 43 (f) of EPIRA, the ERC shall establish and enforce a methodology for setting transmission and distribution wheeling rates and retail rates for the captive market of a distribution utility, taking into account all relevant considerations, including the efficiency and inefficiency of the regulated entities. To achieve the said objective, the cap on the recoverable rate of system loss prescribed in Section 10 of Republic Act No. 7832 is amended and shall be replaced by caps which shall be determined by the ERC based on load density, sales mix, cost of service, delivery voltage and other technical considerations it may promulgate.

In view thereof, the Regulatory Operations Service (ROS), specifically its Standards and Compliance Monitoring Division (SCMD), being at the forefront in recommending various standards and compliances to be promulgated and enforced by the ERC and to be followed and observed by stakeholders in the electric power industry, is tasked to determine the applicable distribution system loss caps.


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1.2 Purpose

These Rules for the Promulgation of the Distribution System Loss Cap and the Establishment of the Performance Incentive Scheme embody the new regulatory framework for all Distribution Utilities (DU). The said regulatory framework is designed to achieve the following:

a. Set out distribution system loss caps for all DUs based on technical criteria and objectives given in the EPIRA;

b. Establish separate loss caps for Technical and Non-technical loss; c. Introduce incentives and/or penalties based on total distribution

system loss cap to promote efficient operation and service of the DUs; and

d. Develop a regulatory framework that will ease regulatory burden and implementation.

1.3 Scope

These Rules shall apply to all DUs (On-grid ECs, Off-grid ECs, and Private DUs).

1.4 Construction of the Rules

These Rules shall be construed to promote the objective of securing a just, speedy, and inexpensive disposition of the proceedings for promulgating the distribution system loss caps and establishment of the performance incentive scheme for the DUs.

1.5 Definition of Terms

The following words and phrases as used in this Rules shall have the

meanings set forth below:

TERM DEFINITION

Customer A person or entity supplied with electric service under a contract with the Distribution Utility.

Distribution System The system of wires and associated facilities that belong to a franchised Distribution Utility, extending between the delivery points on the Transmission or Sub-Transmission System or generator connection and the point of connection to the premises of the End-User.

Distribution System Loss

The electric Energy Input minus the electric Energy Output for a specified billing period or set of billing periods.

Distribution Utility or DU Any Electric Cooperative, private corporation, government-owned utility, or existing local government unit, which has an exclusive franchise to operate a Distribution System in accordance with its franchise and EPIRA.


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TERM DEFINITION

Distribution Utility Use

The aggregate of energy used for the proper operation of the distribution system.

DSL Data The Distribution System data containing information that can be used to simulate the Technical Loss, and is described under Annex B of the Guidelines for the Application and Approval of Caps on the Recoverable Rate of Distribution System Losses.

Electric Cooperative or EC

A Distribution Utility organized pursuant to Presidential Decree No. 269, as amended, or otherwise provided in EPIRA.

Embedded Generator A Generating Plant that is connected to a Distribution System or a User System and has no direct connection to the Transmission System. For the purpose of this Rules, this term shall include a Generating Plant that is connected to an Isolated Distribution System.

Energy The integral of electrical power with respect to time and is measured in kilowatt-hours (kWh).

Energy Input Energy delivered to the Distribution System by the Transmission System, Embedded Generating Plants, other Distribution Systems, and User Systems with generating facilities.

Energy Output Energy delivered to the Users of the Distribution System, including the Energy for Distribution Utility Use.

Energy Regulatory Commission or ERC

The independent quasi-judicial regulatory body created under EPIRA.

Entrant Group A group of Distribution Utilities entering a regulatory program at the same time, as defined in ERC Resolution No. 10, Series of 2010 for Private DUs or in ERC Resolution No. 8, Series of 2011 for Electric Cooperatives.

EPIRA Republic Act No. 9136, otherwise known as the Electric Power Industry Reform Act of 2001.

Equipment All apparatus, machines, and conductors, among others, that are used as a part of or in connection with an electrical installation.

Feeder Technical Loss The sum of the Technical Losses associated with the Primary Distribution System and the Secondary Distribution System.

Generating Plant A facility consisting of one or more Generating Units.

Generating Units A conversion apparatus, including auxiliaries and associated Equipment, that function as a single unit and is used to produce electric Energy from some other form of Energy.

Higher Voltage Customer or HV Customer

A Customer that is connected to and served through the Sub-Transmission System or the Primary Distribution System.

Isolated Distribution System

The backbone system of wires and associated facilities that are not directly connected to any one of the national Transmission Systems of Luzon, Visayas, or Mindanao.

Low Voltage Customer or LV Customer

A Customer that is not a Residential Customer and is connected to and served through the Secondary Distribution System.


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TERM DEFINITION

Non-technical Loss The aggregate of Energy lost due to pilferage, meter reading errors, meter tampering, and any Energy loss that is not related to the physical characteristics and functions of the electric system.

Off-Grid EC An Electric Cooperative that operates an Isolated Distribution System.

On-Grid EC

An Electric Cooperative that operates a Distribution System that is connected to any one of the national Transmission Systems in Luzon, Visayas, or Mindanao.

Peak Power Demand The maximum value of power, measured in MW, required by the Distribution Utility for a specific billing period or set of billing periods.

Philippine Distribution Code or PDC

A compilation of rules and regulations that govern the Distribution Utilities in the operation and maintenance of their Distribution Systems, which includes, among others, standards for service and performance, and defines and establishes the relationship of the Distribution Systems with the facilities or installations of the parties connected thereto.

Primary Distribution System

A portion of the Distribution System delineated by the secondary side of the Substation transformer and the primary side of all Distribution transformers.

Private Distribution Utility or Private DU

A Distribution Utility that is operated by a private corporation.

Recovered Energy The amount of energy recovered from anti-pilferage activities of the Distribution Utility.

Regulatory Period A period of time over which the rates of the Distribution Utility is defined under a set of rules issued by the ERC.

Republic Act No. 7832 The law otherwise known as the Anti-electricity and Electric Transmission Lines/Materials Pilferage Act of 1994.

Residential Customer A Customer that is residential in nature and connected to and served through the Secondary Distribution System.

Secondary Distribution System

A portion of the Distribution System that is at the secondary side of a Distribution transformer.

Secondary Line A Distribution line connected at the Secondary Distribution System.

Sub-Transmission and Substation Technical Loss

The sum of the Technical Losses associated with the Sub-Transmission System and Distribution substations.

Sub-Transmission System

The portion of the Distribution System that is delineated by the connection point to the Transmission System and the primary side of all Substation transformers.

System A group of components connected or associated in a fixed configuration to perform a specific function.

System Loss Charge The component of the distribution rate that represents recovery of the cost of power due to technical and non-technical losses.

Technical Loss The component of Distribution System Loss that is inherent


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TERM DEFINITION

in the physical delivery of electric Energy. It includes conductor loss, transformer core loss, and technical error in meters.

Three-Phase Power Flow An analytical tool that simulates the power flows in an unbalanced three-phase Distribution System.

Transmission System The high voltage backbone System of interconnected transmission lines, substations, and related facilities, located in each of Luzon, Visayas, and Mindanao, or as may be determined by the ERC in accordance with Section 45 of the EPIRA.

User A person or entity that uses the Distribution System and related distribution facilities.

User System A System owned or operated by a User of the Distribution System.

1.6 Provision of Information

The results and findings presented in these Rules utilized information provided by the DUs through the ERC. For the purposes of these Rules, supplementary information, calculations, and data may be required as deemed necessary by the ERC.


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II. Distribution System Loss Caps

2.1 Distribution System Loss Assessment and Reporting

2.1.1 Distribution System Losses with Technical Loss and Non-Technical

Loss components shall be calculated monthly and shall coincide with

the Billing Cycle adopted by the Distribution Utility.

2.1.2 Distribution System Losses with Technical Loss and Non-Technical

Loss components shall be reported annually by the Distribution

Utility.

2.1.3 The Distribution Utility shall report Sub-Transmission and Substation

Technical Loss separate from Feeder Technical Loss.

2.1.4 Technical losses shall be calculated using three-phase power flow for

Unbalanced Systems using the network component models and load

models1.

2.2 Technical Loss Caps

2.2.1 In setting the caps for feeder technical loss, the following clusters of

Distribution Utilities are set as shown in Tables 1-4 (See Annex A).

1 Modeling and calculation are specified Guidelines for the Application and Approval of Caps on

the Recoverable Rate of Distribution System Losses.


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Table 1 Distribution Utilities Cluster 1

Cluster 1

BANELCO MASELCO

BASELCO MOPRECO

BATANELCO OMECO

BISELCO ORMECO

CASELCO PALECO

CELCO PROSIELCO

DIELCO ROMELCO

FICELCO SIARELCO

IFELCO SIASELCO

KAELCO SULECO

LUBELCO TAWELCO

MARELCO TIELCO

MARIPIPI TISELCO


Cluster 2

ABRECO CASURECO I ILECO III NEECO II - AREA II SAMELCO II

AKELCO CASURECO II INEC NOCECO SOLECO

ALECO CASURECO III ISECO NONECO SORECO I

ANECO CASURECO IV ISELCO I NORECO I SORECO II

ANTECO CEBECO I ISELCO II NORECO II SUKELCO

ASELCO CEBECO II LANECO NORSAMELCO SURNECO

AURELCO CEBECO III LASURECO NUVELCO SURSECO I

BATELEC I CENPELCO LEYECO I PANELCO I SURSECO II

BENECO COTELCO LEYECO III PANELCO III TARELCO I

BILECO DANECO LEYECO IV PELCO I TARELCO II

BOHECO I DASURECO LEYECO V PELCO II ZAMECO I

BOHECO II DORECO LUELCO PELCO III ZAMECO II

BUSECO ESAMELCO MAGELCO PRESCO ZAMSURECO I

CAGELCO I FIBECO MOELCI I QUEZELCO I ZAMSURECO II

CAGELCO II FLECO MOELCI II QUEZELCO II ZANECO

CAMELCO GUIMELCO MORESCO II QUIRELCO CANORECO ILECO I NEECO I SAJELCO CAPELCO ILECO II NEECO II - AREA I SAMELCO I


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Cluster 3

BATELEC II

MORESCO I

PENELCO

SOCOTECO I

CENECO

LEYECO II

SOCOTECO II

ZAMCELCO


Cluster 4

AEC ILPI

BLCI LUECO

CEDC MECO

CELCOR MERALCO

CEPALCO PECO

CLPC OEDC

DECORP SFELAPCO

DLPC TEI

BELS VECO

IEC SUBIC EZ


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2.2.2 Feeder technical loss cap for each cluster of DU shall be as shown in

Table 5.

Table 5 Feeder Technical Loss Cap for Each Cluster

Cluster ID Feeder Technical Loss

Cap

Cluster 1 7.00%

Cluster 2 5.50%

Cluster 3 3.25%

Cluster 4 2.75 %

2.3 Non-technical Loss Caps

2.3.1 Non-technical Loss cap for Electric Cooperatives is set at 4.5% of

Energy Input.

2.3.2 Non-technical Loss cap for Private Distribution Utilities is set at 1.25%

of Energy Input.

2.4 Distribution System Loss recoverable through System Loss Charge

2.4.1 The level of distribution system loss that a distribution utility may

recover from its customer through System Loss Charge shall not

exceed the sum of:

a. Sub-Transmission and Substation Technical Loss, and

b. the minimum of :

i. sum of non-technical loss and feeder technical loss, or

ii. sum of non-technical loss cap and feeder technical loss cap

𝐃𝐒𝐋𝐒𝐲𝐬𝐋𝐨𝐬𝐬𝐂𝐡𝐚𝐫𝐠𝐞 = 𝐓𝐋𝐒𝐓+𝐒𝐒 + 𝐌𝐢𝐧{𝐓𝐋𝐟𝐝𝐫 + 𝐍𝐓𝐋, 𝐓𝐋𝐟𝐝𝐫,𝐜𝐚𝐩 + 𝐍𝐓𝐋𝐜𝐚𝐩} (Equation 2.1)

where DSLSysLossCharge = Total system loss that can be recovered through the System Loss Charge, in percent;

TLST+SS = Sub-Transmission and Substation Technical Loss, in percent;

TLfdr = Feeder Technical Loss, in percent; NTL = Non-technical Loss, in percent; TLfdr,cap = Feeder Technical Loss Cap, in percent; and NTLcap = Non-technical Loss Cap, in percent.

For non-submission of Distribution Utilities of their simulated Sub-

Transmission and Substation Technical Losses, TLST+SS will be set to

0.00.


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III. Performance Incentive Scheme

3.1 General Provisions

3.1.1 The goals of the PIS for distribution efficiency are to: (1) reduce the

costs of distribution system losses passed on to electricity consumers

and (2) promote efficiency in electric power distribution systems over

the long-term. The PIS is intended to motivate distribution utilities to

reduce the technical and non-technical losses in distribution systems.

3.1.2 The PIS for distribution efficiency shall involve a price-linked reward

or penalty for Distribution Utilities. The reward or penalty shall be a

percentage of the Distribution Charge.

3.1.3 The reward or penalty under the PIS for distribution efficiency is

separate from and does not affect the System Loss Rate that the

Distribution Utility can pass on to its customers through the System

Loss Charge.

3.1.4 The PIS for distribution efficiency shall consider only the total annual

value of the actual distribution system loss, computed as follows:

𝐃𝐒𝐋 = 𝐓𝐋 + 𝐍𝐓𝐋 (Equation 3.1)

where DSL = Total Distribution System Loss, in percent;

TL = Technical Loss, in percent; and NTL = Non-technical Loss, in percent.

3.2 PIS for Private Distribution Utilities

3.2.1 This Section 3.2 applies exclusively to private distribution utilities.

3.2.2 The reward and penalty structure for private distribution utilities

shall be as shown in Figure 1, with five regions, in order of improving

efficiency: (1)maximum penalty, (2) decreasing penalty, (3) deadband

region, (4) increasing reward; and (5) maximum reward.


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Figure 1 Reward and Penalty Structure of the PIS for Private Distribution Utilities

3.2.3 The system loss component of the performance incentive factor (St)

shall be computed in the following manner:

𝐒𝐒𝐲𝐬𝐥𝐨𝐬𝐬,𝐭 = 𝐖𝐒𝐲𝐬𝐥𝐨𝐬𝐬 × 𝐏𝐞𝐫𝐟𝐒𝐲𝐬𝐥𝐨𝐬𝐬,𝐭−𝟏 (Equation 3.2)

where 𝑆𝑆𝑦𝑠𝑙𝑜𝑠𝑠,𝑡 = Performance incentive for system loss for year t;

𝑊𝑆𝑦𝑠𝑙𝑜𝑠𝑠 = Weight assigned to system loss performance; and

𝑃𝑒𝑟𝑓𝑆𝑦𝑠𝑙𝑜𝑠𝑠,𝑡−1 = Performance Assessment Factor for system loss in the previous year.

3.2.4 Based on the value of the actual total Distribution System Loss and its

relationship with the various thresholds in the PIS structure for

private distribution utilities, the value of the performance assessment

factor (PerfSysloss,t-1) shall be determined in the manner shown in Table

6.


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Table 6 Computation of the Performance Assessment Factor for Private DUs

PIS Region (Private DUs)

Value of DSL Value of PerfSysloss,t-1

Maximum reward a ≥ DSL > 0 𝑃𝑒𝑟𝑓𝑆𝑦𝑠𝑙𝑜𝑠𝑠,𝑡−1 = +1.0

Proportional reward b ≥ DSL > a 𝑃𝑒𝑟𝑓𝑆𝑦𝑠𝑙𝑜𝑠𝑠,𝑡−1 = +1.0 × (

𝑏 − 𝐷𝑆𝐿

𝑏 − 𝑎)

Deadband region c ≥ DSL > b 𝑃𝑒𝑟𝑓𝑆𝑦𝑠𝑙𝑜𝑠𝑠,𝑡−1 = 0.0

Proportional penalty d ≥ DSL > c 𝑃𝑒𝑟𝑓𝑆𝑦𝑠𝑙𝑜𝑠𝑠,𝑡−1 = −1.0 × (

𝐷𝑆𝐿 − 𝑐

𝑑 − 𝑐)

Maximum penalty X > DSL > d 𝑃𝑒𝑟𝑓𝑆𝑦𝑠𝑙𝑜𝑠𝑠,𝑡−1 = −1.0

3.2.5 The values of the thresholds (a, b, c, and d) in the PIS structure for

private distribution utilities are shown in Table 7.

Table 7 Thresholds for the PIS Structure for Private DUs

Threshold % System Loss

a 2.75 + TLST+SS

b 4.00 + TLST+SS

c 8.50 d 9.50

Note: TLST+SS is the Sub-Transmission and Substation Technical Loss.

3.2.5.1 If the DU is unable to submit its simulated Sub-Transmission and

Substation Technical Loss (TLST+SS in Table 7), this shall have a

value of zero in the threshold computations.

3.2.6 The value of the weight assigned to system loss performance (Wsysloss)

shall be 5%.

3.2.7 The maximum price-linked reward and penalty is currently capped at

2.5% of allowed annual revenue. This means that:

3.2.7.1 The maximum price-linked reward for distribution efficiency

under this PIS shall not exceed 0.125% (5% of 2.5%) of the

allowed annual revenue.

3.2.7.2 The maximum price-linked penalty for distribution efficiency

under this PIS shall not exceed 0.125% (5% of 2.5%) of the

allowed annual revenue.


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3.3 PIS for Electric Cooperatives

3.3.1 This Section 3.3 applies exclusively to electric cooperatives.

3.3.2 The reward and penalty structure for electric cooperatives shall be as

shown in Figure 2, with three regions, in order of improving efficiency:

(1) deadband region, (2) increasing reward; and (3) maximum

reward.

Figure 2 Reward and Penalty structure of the PIS for Electric Cooperatives

3.3.3 The system loss component of the performance incentive factor (S)

shall be computed in the following manner:

𝐒𝐒𝐲𝐬𝐥𝐨𝐬𝐬,𝐭 = 𝐖𝐒𝐲𝐬𝐥𝐨𝐬𝐬 × 𝐏𝐞𝐫𝐟𝐒𝐲𝐬𝐥𝐨𝐬𝐬,𝐭−𝟏 (Equation 3.3)

where 𝑆𝑆𝑦𝑠𝑙𝑜𝑠𝑠,𝑡 = Performance incentive for system loss for year t;

𝑊𝑆𝑦𝑠𝑙𝑜𝑠𝑠 = Weight assigned to system loss performance; and

𝑃𝑒𝑟𝑓𝑆𝑦𝑠𝑙𝑜𝑠𝑠,𝑡−1 = Performance Assessment Factor for system loss in the previous year.

3.3.4 Based on the value of the actual total Distribution System Loss and its

relationship with the various thresholds in the PIS structure for

Electric Cooperatives, the value of the Performance Assessment Factor

(PerfSysloss,t-1) shall be determined in the manner shown in Table 8.


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Table 8 Computation of the Performance Assessment Factor for Electric Cooperatives

PIS Region (ECs) Value of DSL Value of PerfSysloss,t-1

Maximum reward

a ≥ DSL > 0

𝑃𝑒𝑟𝑓𝑆𝑦𝑠𝑙𝑜𝑠𝑠,𝑡−1 = +1.0

Proportional reward b ≥ DSL > a 𝑃𝑒𝑟𝑓𝑆𝑦𝑠𝑙𝑜𝑠𝑠,𝑡−1 = (

𝑏 − 𝐷𝑆𝐿

𝑏 − 𝑎)

Deadband region X > DSL > b 𝑃𝑒𝑟𝑓𝑆𝑦𝑠𝑙𝑜𝑠𝑠,𝑡−1 = 0.0

3.3.5 The values of the thresholds (a and b) in the PIS structure for each

cluster of electric cooperatives are shown in Table 9.

Table 9 Thresholds for the PIS Structure for Electric Cooperatives (in % System Loss)

Threshold Cluster I Cluster II Cluster III

a 8.00 + TLST+SS 7.00 + TLST+SS 5.50 + TLST+SS b 11.50 + TLST+SS 10.00 + TLST+SS 7.75 + TLST+SS

Note: TLST+SS is the Sub-Transmission and Substation Technical Loss.

3.3.5.1 If the DU is unable to submit its simulated Sub-Transmission

and Substation Technical Loss (TLST+SS in Table 9), this shall

have a value of zero in the threshold computations.

3.3.6 The value of the weight assigned to system loss performance (Wsysloss)

shall be 20% for the first Regulatory Period and 10% for succeeding

Regulatory Periods.

3.3.7 The maximum price-linked incentive and penalty for distribution

efficiency shall be as follows:

3.3.7.1 The maximum price-linked incentive for distribution efficiency

shall not exceed the following percentages of the distribution

rate of the electric cooperative: (1) 0.9% for the first

Regulatory Period and (2) 0.45% for succeeding Regulatory

Periods.

3.3.7.2 The maximum price-linked penalty for distribution efficiency

shall be zero.


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IV. Transition and Regulatory Period

4.1 Commencement and Duration

4.1.1 For each distribution utility, the Distribution System Loss Caps and

the PIS for distribution efficiency contained herein shall apply to the

entrant groups of private distribution utilities starting on the

corresponding date in Table 10.

Table 10 Implementation Schedule for Private DUs

Entrant Group Implementation Date

A 01 July 2019 B 01 April 2021 C 01 July 2022 D 01 October 2023

Note: Entrant Groups as defined in ERC Resolution 10 Series of 2010.

4.1.2 For each distribution utility, the Distribution System Loss Caps and

the PIS for distribution efficiency contained herein shall apply to the

entrant groups of private distribution utilities starting on the

corresponding date in Table 11.

Table 11 Implementation Schedule for Electric Cooperatives

Entrant Group Implementation Date 1 01 January 2020 2 01 January 2021 3 01 January 2022

Off-grid 01 January 2023

Note: Entrant Groups as defined in ERC Resolution 8, Series of 2011.

4.2 Regular Review by the Regulator

The ERC shall regularly review the system loss caps and PIS. The new

system loss caps and PIS that result from these regular reviews shall take

effect in the succeeding Regulatory Period.


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V. Reportorial Requirements

5.1 Regular Review by the Regulator

All Distribution Utilities shall annually submit Distribution Network data as

prescribed by the ERC such as:

1. Monthly DSL data per feeder for the whole coverage area encoded

according to the ERC-prescribed template [Refer to Annex B:

Instructions of Guidelines for the Application and Approval of Caps

on the Recoverable Rate of Distribution System Losses].

2. Monthly DSL data containing the Sub-Transmission network, the

Sub-Transmission customers and their hourly load curves, and

the distribution substations and their hourly load curves.

3. Annual summary of energy quantities and relevant network

parameters such as the following:

a. Total Energy Input (Purchased plus Generated), in kWh;

b. Total Energy Sales, in kWh;

c. Total Energy Sales for each customer class, in kWh (e.g.,

HV Customers, LV Customers, and Residential Customers);

d. Total Number of Customers;

e. Total Number of Customers per customer class, in kWh

(e.g., HV Customers, LV Customers, and Residential

Customers);

f. Peak Demand, in MW;

g. Total Circuit Length of Primary Lines, in meters;

h. Total Circuit Length of Secondary Lines, in meters;

i. Distribution Utility Use, in kWh;

j. Technical Loss, in kWh;

k. Non-Technical Loss, in kWh;

l. Total Distribution No-Load Loss, in kWh;

m. Simulated Sub-Transmission Lines and Equipment Losses,

in kWh; and

n. Simulated Substation Equipment Losses, in kWh.

4. List of CAPEX and OPEX programs related to the technical and

non-technical loss reduction programs.


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5.2 System Loss Reports Submission

5.2.1 The Distribution Utility shall submit to the ERC, through a Sworn

Statement, quarterly system loss reports (exhibiting monthly data), on

or before the end of the month following the quarter, using the

standard format prescribed in Annex B of the Guidelines for the

Application and Approval of Caps on the Recoverable Rate of

Distribution System Losses.

5.2.2 The Distribution Utility shall also submit to the ERC annually, through

a Sworn Statement, the results of their updated annual segregated

system loss as prescribed in Annex A of Resolution 11 Series of 2011

every end of the month of May.


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VI. Final Provisions

6.1 Exception from the Provisions of these Rules

Where good cause appears, the Commission may allow an exception from any provision of these Rules, if such exception is found to be in public interest and is not contrary to the law, rules and regulations.

6.2 Regulatory Costs

All Distribution Utilities shall bear the regulatory implementation costs or costs associated with the implementation of these Rules, including but not limited to, costs attendant to the public hearings in the DU’s localities.

6.3 Effect of the New System Loss Cap Under These Rules on the DU’s

Existing Cap

The system loss caps determined under these Rules shall supersede the existing approved cap of the DUs and mandatory bind them to adopt this new loss cap, except as otherwise provided herein.

6.4 Repealing/Separability Clause

6.4.1 All existing Rules or any part thereof which are inconsistent with

these Rules are hereby repealed, amended or modified accordingly.

6.4.2 If any provision or part of a provision of these Rules is declared

invalid or unconstitutional by a court of competent jurisdiction, those

provisions which are not affected thereby shall continue to be in full force

and effect.

6.5 Effectivity

These Rules shall take effect fifteen (15) days following its complete publication in a newspaper of general circulation. Pasig City, Philippines, _____________________


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ANNEX A: Determination of System Loss Caps

This Annex presents a summary of the procedure taken to determine the Distribution

System Loss Caps. For this discussion, the following components of Distribution System

Losses were taken into account:

1. Feeder Technical Loss;

2. Sub-Transmission and Substation Technical Loss; and

3. Non-Technical Loss.

A.1 Feeder Technical Loss

The most significant portion of Technical Loss in a Distribution System is

incurred in the feeder, specifically from the feeder through Primary Distribution

Lines, Distribution transformers, Secondary Distribution Lines and Service

Drops. In addition, the DSL data of the Distribution Utilities provided by the ERC

allows detailed modeling and power flow simulations on a per-feeder basis.

The objective of this part of the project is to benchmark feeder performance in

terms of Technical Loss incurred in the delivery of power. However, in doing so,

we posed the requirement that reasonable level of losses will be incurred when

the voltage quality meets the requirement of the PDC, that is, that the voltages at

all the delivery points meet the Long Duration Voltage Variation criteria of being

within ±10% of the nominal voltage. To achieve this, using the DSL Data

submitted to the ERC by all Distribution Utilities, the following steps were taken:

A. For each feeder, initial power flow simulation was performed.

1. Network parameters such total energy for various voltage level

connections, total primary and secondary line lengths, total

transformer load and no-load losses, among others, were collected.

B. Voltage quality was assessed at all delivery points.

1. When the voltage at the delivery point falls outside the allowed range,

the delivery point was trimmed from the network; a trimmed network

was produced from the original network.

C. For each trimmed feeder, another power flow simulation was performed.

1. New network parameters such as total energy for various voltage level

connections, total primary and secondary line lengths, total load

losses across lines and transformers, among others, were collected.


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D. After completing steps (A) to (C) for all feeders, statistical modelling and

benchmarking was performed.

1. After a few thousand feeder simulations, data on total technical loss

with corresponding network parameters were analyzed.

2. Multiple Linear Regression was performed to analyze which set of

network parameters can linearly predict Feeder Technical Loss.

3. The following set of parameters were identified as good predictors for

Feeder Load Technical Loss, in kWh:

(i) Energy Sales to HV Customers in kWh;

(ii) The aggregate of Energy Sales to LV Customers and Energy

Sales to Residential Customers in kWh; and

(iii) Total Secondary Line Lengths in km.

E. Feeder No-Load Technical Loss, that is, Distribution Transformer no-load

loss was presented better from the result of the power flow simulation on

the original (untrimmed) network.

1. It was identified that Peak Demand in MW is a good predictor of

Feeder No-Load Technical Loss.

F. Taking together the results of steps D and E, the following set of

parameters when taken together were identified as good predictors of

Feeder Technical Loss in kWh:

(i) Energy Sales to HV Customers, in kWh;

(ii) The aggregate of Energy Sales to LV Customers and Energy Sales to

Residential Customers in kWh;

(iii) Total Secondary Line Lengths in km; and

(iv) Peak Demand in MW.

1. The following linear approximation was obtained:

𝑇𝐿𝑓𝑒𝑒𝑑𝑒𝑟 ≈ 𝐴1 × 𝐸𝑛𝑒𝑟𝑔𝑦𝑆𝑎𝑙𝑒𝑠𝐻𝑉 + 𝐴2 × 𝐸𝑛𝑒𝑟𝑔𝑦𝑆𝑎𝑙𝑒𝑠𝐿𝑉 +

𝐴3 × 𝐿𝑒𝑛𝑔𝑡ℎ𝑆𝑒𝑐𝐿𝑖𝑛𝑒 + 𝐴4 × 𝐷𝑒𝑚𝑎𝑛𝑑𝑃𝑒𝑎𝑘,𝑀𝑊#(𝐴. 1)

G. In order to further improve the prediction of Feeder Technical Loss,

Distribution Utilities were grouped according to Energy Sales per

Customer, as described in the Proposed Reforms to the Rules for Setting

Electric Cooperatives’ Wheeling Rates (RSEC-WR) prepared by Castalla.

1. Multiple Linear Regression coefficients for each group were

generated. That is, coefficients A1, A2, A3, and A4 are now generated

for each group.

2. Table 12 shows the coefficients.


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Table 12 Coefficients for Estimating Feeder Technical Losses

Group ID A1 A2 A3 A4

Off-Grid DU 0.03124 0.02102 0.01922 0.01707

EC Group A 0.04653 0.03906 0.00742 0.01315

EC Group B 0.03352 0.02583 0.02934 0.00936

EC Group C 0.01163 0.02469 0.01603 0.01107

EC Group D 0.03058 0.03352 0.01870 0.00809

EC Group E 0.02707 0.03653 0.00787 0.00950

EC Group F 0.00943 0.03048 0.02150 0.00507

EC Group G 0.02707 0.02016 0.05179 0.00608

Private DU 0.00943 0.02016 0.00742 0.00507

H. Having Eqn. A1 with a unique set of coefficients for each group, and using

total Network Parameters for every Distribution Utility (DU), an estimate

Feeder Technical Loss, both in kWHr and percent of Energy Input, was

computed for each DU.

I. Based on the distribution of estimate Feeder Technical Loss, among DUs

of the same groups, Feeder Technical Loss caps were set.

J. Across groups with the same Feeder Technical Loss caps, clusters of DUs

were identified. Feeder Technical Loss Caps for each cluster is shown in

Table 5 (See main document)

A.2 Sub-Transmission and Substation Technical Loss

Every Distribution Utility is expected to conduct power flow simulation for the

Sub-Transmission network including substation equipment with substation

loads.

Although technical losses are incurred in this section of the Distribution System,

substantial effort is already being conducted by DUs to design and optimize this

network of lines and power equipment to justify capital expenditures. Hence, it

is proposed that technical loss incurred in this section may be passed on to

consumers.


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Due diligence in designing, analyzing, operating and developing this section of

the Distribution Network is expected and proper reporting to the Regulator is

likewise expected.

A.3 Non-Technical Loss

Distribution Utilities have been required to submit summary of Non-technical

Loss in an annual basis. Aside from this, no other set of data were collected from

Distribution Utilities that will allow analysis of Non-Technical Loss.

For now, Non-Technical Loss caps were set based on the average Non-Technical

Loss reported by Distribution Utilities from 2011 to 2015. The averages were

significantly different between Electric Cooperatives and Private DUs. Hence as

stated in Section 2.3, separate caps were set for these two types of DU.

Documents

Rules for Setting the Distribution System Loss Cap and ... · Rules for Setting the Distribution System Loss Cap and Establishing Performance Incentive Scheme for Distribution Efficiency