Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila

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K REPRESE.

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SIXTEENTH CONGRESS
First Regular Session
709

HOUSE BILL NO.

INTRODUCED BY REPRESENTATIVE TOBIAS “TOBY” M. TIANGCO

EXPLANATORY NOTE

Unburden the general public from shouldering the costs of losses it had nothing to do
with, this is the intention of this Proposal by completely removing the recoverable systems
loss allowed to be charged by private electric distribution utilities and restrict recoverable
composition of system losses into losses due to design fault and technical loss from
fourteen percent (14%) to five Percent (5%) for rural electric cooperatives, as well as
remove the value added tax being charged on systems loss from VATable items in every
electric bill.

Republic Act No. 7832 otherwise known as an “Act Penalizing the Pilferage of
Electricity and Theft of Electric Power Transmission Lines/Material, Rationalizing system
losses by phasing out pilferage losses as a component thereof, and ‘for other purposes” was
enacted in 8 December 1994, R.A. No. 7832 rationalizes the recoverable system losses of
electric distributors by authorizing private utilities and rural electric cooperatives to pass
on to consumers their respective system losses subject only to the ceiling rate.
Subsequently, Congress enacted Republic Act No. 9136 otherwise known as the Electric
Power Industry Reform Act of 2001, which authorized the Energy Regulatory Commission
(ERC) to determine the just and reasonable caps on the imposition of systems loss.

Presently, private distribution utilities and rural electric cooperatives are allowed
to pass on as much as nine and a half percent (9.5% ) and fourteen (14%), respectively,
of their total system losses to the consumers, Systems losses may be non-technical
(i.e. loss of electricity due to pilferage) or technical (i.e. loss of electricity in the form of
heat due to design fault, administration inefficiencies as well as the electric consumption of
the distributors for their operation). It comprises not less than five percent (5%) of the
monthly electric bill and is likewise subject to the 12% Value-Added Tax (VAT).

{n spite of all these measures, electricity prices in the Philippines keep rising, so
much so that in Southeast Asia, electricity costs in the Philippines are second highest.
Unfortunately, instead of Protecting the consumers against continuous increase of
electricity prices, this provision of the EPIRA law is being taken advantage of by the big
companies in the power industry in the guise of systems loss. In fact, MERALCO has
admitted that it had charged consumers 11% or 1.5% higher than the recoverable cap for
system loss provided by the ERC for the private distribution utilities.


These kinds of abuses are exact
Proposed measure. It was enshrined in

'n view thereof, the passage of this measure is earnestly urged.

TOBIAS “TOBY” M. TIANGCO


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila

SIXTEENTH CONGRESS
First Regular Session
703
HOUSE BILL NO. Z

INTRODUCED BY REPRESENTATIVE TOBIAS “TOBY” M. TIANGCO

AN ACT REMOVING THE ALLOWABLE SYSTEMS LOSS FROM PRIVATE UTILITY
COMPANIES AND REDUCING THE CAP OF RECOVERABLE SYSTEM LOSSES OF RURAL
ELECTRIC COOPERATIVES FROM FOURTEEN PERCENT (14%) TO FIVE PERCENT
(5%), AMENDING FOR THE PURPOSE REPUBLIC ACT NO. 7832, AS AMENDED BY
SECTION 43(f) OF REPUBLIC ACT NO. 9136, AND REPUBLIC ACT NO. 8424, AS
AMENDED BY REPUBLIC ACT NO. 9337, AND FOR OTHER PURPOSES

Be it enacted by the Senate and the House of Representatives of the Philippines in Congress
assembled:

Section 1. Title of the Act - This Act shall be known as the “Allowable System Loss Act of
2013".

Section 2. Declaration of Policy - It shall be the policy of the State to protect the rights of
every electric consumer without compromising the State’s assistance to the viability of
every electric distributors’ operations. Electricity is an indispensable commodity in the
economic growth. The supply and demand of the populace must be harmoniously
reconciled and considered to attain justifiable and equitable imposition of the electric
distribution expenses to the consuming public.

Section 3. Allowable System Loss that may be passed-on to the Consumers. - Only rural
electric cooperatives are hereby allowed to pass-on systems losses to their consumers and
only to the extent that these system losses result from design fault and technical loss as
defined by the Energy Regulatory Commission (ERC), which in no case shall be more than
five percent (5%). A systems loss charge shall be determined annually based on the
previous year’s costs and revenues of the distribution utilities which shall be verified by
the ERC to ensure that only legitimate costs are borne by consumers.

For purposes of this Act, systems loss shall mean the difference between (kilowatt-hour)
kWh purchased and/or generated and kWh sold by a rural electric cooperative expressed
as a percentage of kWh purchased and/or generated excluding costs due to pilferage,
administration inefficiencies and administrative cost.

Section 4, Exemption from Value-Added Tax (VAT). - The imposition of system loss in the
consumers’ bills, although forming part of a rural cooperative’s operating expenses, shall
not be made subject to any value-added tax (VAT) as provided in Section 108 of Republic
Act No. 9337 or any amendments thereto.


Section 6. Repealing Clause. - All laws, acts, decrees, executive orders, issuances, and
rules and regulations or parts thereof which are contrary to and inconsistent with any
Provisions of this Act are hereby repealed, amended, or modified accordingly.

Section 7. Separability Clause. - If any provision of this Act is subsequently declared
ajcarpututional, the validity of the remaining provisions hereof shall remain in full force
and effect.

Section 8. Effectivity. - This Act shall take effect fifteen days (15) after its complete
Publication either in the Official Gazette or in a newspaper of general circulation Wr the
Philippines.

Approved,