Imagine you have a full lorry of yams to sell at the market. On the way to the market, many yams fall due to bad roads and lack of coverage to protect them. You also end up selling for less than the intended price because some of the yams became rotten before arriving at the market. Worse still, your buyers end up paying only some of the agreed lower price before absconding! The fallen and spoilt yams, as well as the cheating customers, can be likened to the Aggregate Technical Commercial and Collection (ATC&C) losses in the power sector.
The previous article discussed the components of the cost of electricity, and ATC&C loss was mentioned as a factor that adds to the cost of power supply. It is essential to understand what causes these losses, what they are made of, the effects on the quality of power supplied and money available to produce more energy.
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Power System Losses
Most, if not all, input-output systems have losses, where some of the inputs are lost in conversion and do not come out as output. Electric power systems are not an exception as losses are inherent in the electricity value chain. Energy is lost during the transportation of electricity from generation through transmission, to distribution.
Losses in power systems can be either technical or non-technical. Technical losses occur due to the design and the state of the physical infrastructure used to generate, transmit and distribute electricity. Unlike their technical counterparts, non-technical losses are not a result of the design and operating characteristics of the components of the system. Instead, non-technical losses are usually caused by deliberate human actions or errors.
Generation and Transmission Losses
Losses in the power systems begin to build up from the point of energy generation, where some of the energy is lost in the process of converting stored thermal or mechanical to electrical energy. Loss levels are determined by the rated efficiencies of generating turbines in converting energy stored as fuel to electrical power.
Losses continue to build up in the transmission system as power flows to the distribution system. Transmission losses are mostly technical. They occur due to unavoidable heating effects associated with the operations of transmission lines, transformers and other equipment as they transport power. These losses are intensified by poor maintenance and inadequate sizing of equipment. Insufficient and inaccurate metering, inaccurate record-keeping and theft of electricity at the transmission level are the major causes of non-technical losses in a transmission system.
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Distribution Losses
In the Nigeria Electricity Supply Industry (NESI), distribution losses are the difference between the amount of energy delivered by the transmission system and that which was billed to and paid for by consumers. Distribution losses are classified into three: technical, commercial and collection, where the latter two are non-technical. The three types of losses are cumulated into a variable called the Aggregate Technical Commercial and Collection (ATC&C) losses.
Distribution Technical Losses
Losses occur in distribution systems as energy moves through the various equipment that make up the network. These losses are due to the physical characteristics of distribution lines, transformers and other devices in the distribution system. They occur as heat dissipates from transformers when voltage is stepped down from one level to other. Losses also occur in distribution lines and other apparatuses due to heating and other physical phenomena.
Technical losses cannot be eliminated but can be controlled and minimised. They are usually worsened by poor maintenance, ageing equipment, poor planning and design, poor operational practices, overloading of lines and transformers and use of sub-standard equipment. Consequently, adequate distribution planning and design, coupled with efficient operation and maintenance practices, help in reducing technical losses.
Distribution Commercial Losses
Commercial losses are caused by other factors that have nothing to do with the network characteristics. Commercial losses are expected revenue from electricity sold that cannot be accounted for due to:
• Electricity theft
• Error in metering and inadequate metering
• Lack of consumer meters
• Misapplication of tariff categories/class; and
• Sub-optimal accounting and recording practices.
Commercial losses can be curbed by adequate metering, monitoring of customers for tampering, optimal accounting and record-keeping, and proper tariff classification.
Distribution Collection Losses
Collection losses are incurred when a distribution company (DisCo) is not able to collect the full amount it bills its customers for energy. Such losses occur because some customers do not pay their bills, while others pay partially. This loss occurs at the financial level, unlike others which occur at the level of physical flow of electricity. These loss levels are relatively high in the Nigeria Electricity Supply Industry. According to the Nigeria Electricity Regulatory Commission, collection losses for 2019 was at an average of 32.2%. It has, however, been argued that such loss should not exist or be at the barest minimum, since the DisCos can easily disconnect debtors from the network.
Economic Impact of ATC&C
Losses in the power industry are recognised and regulated. Losses impose additional costs on billed and paying customers because transmission and distribution companies are allowed to take into account regulated levels of losses in their cost. Therefore, the higher the permitted regulated ATC&C losses, the higher consumers have to pay as tariffs to cover these losses. On the other hand, transmission and distribution companies bear the cost of losses that are above what the Regulator allows. High ATC&C loss levels hinder the DisCos from performing their financial obligations to their suppliers, the transmission company, its lending banks and employees. In other words, their debts continue to increase. Too high losses can eventually lead to the bankruptcy of the utility if they are not controlled.
ATC&C Losses in NESI
In the NESI, technical and commercial losses cannot be easily separated; therefore, they are aggregated into a loss value known as billing losses. This term is so because both technical and commercial losses are energy produced but not billed. The diagrams displayed show:
Top diagram: Energy Received, Energy Billed and Billing Efficiency of DisCos for 2019.
Bottom diagram: Billing losses, Collections and ATC&C Losses of DisCos for 2019
Source: Nigerian Electricity Regulatory Commission (NERC) 2019 4th Quarterly Report
