Senate bill that will reduce system loss charges passed on 3rd reading

The Senate has approved on third and final reading a bill designed to reduce the amount of system loss charges passed on by electricity distribution utilities to consumers in their monthly electric bills.

The Recoverable System Loss Act (Senate Bill 1623) seeks to lower the present system loss caps prescribed by the Energy Regulatory Commission (ERC), in accordance with Republic Act (RA) 7832, from 8.5 to five percent for private distribution utilities (DUs), and from 13 to 10 percent for electric cooperatives (ECs).

Senator Sherwin T. Gatchalian, chairman of the Senate energy and economic affairs committees, lamented that power consumers were being forced to shoulder excessive charges from these losses, which electric companies should be taking care of in the first place.

“Reducing the Systems Loss cap to 5 percent could make a monthly savings for an average consumer of about R4.94, or a R59.28 annual savings,” he said. Gatchalian is the principal sponsor of the measure.

According to a 2017 World Bank report, the Philippines has one of the highest average system losses in East Asia at 9.4 percent in 2014, as compared to countries like Korea with 3.3 percent and Singapore with 2.0 percent..

Under this bill, the ERC will be mandated to conduct a periodic review every three years to determine whether the caps should be reduced further, based on load density, sales mix, cost of service, delivery voltage and other technical considerations. It shall also devise a Performance Incentive Scheme (PIV) for DUs to further encourage System Loss reduction.

Gatchalian said the ERC last reduced system loss rates in 2010.

Under the measure, the ERC shall also conduct an annual review of system loss charges to ensure that only allowable costs within the caps stipulated are being recovered. The review shall be based from the quarterly mandatory report submissions by the DUs to ERC, which should contain their Segregated System Losses.