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REGISTRATION UNIT
BILLS AND INDEX SERVICE

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

SEVENTEENTH CONGRESS
First Regular Session

42
HOUSE BILL No.9"

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
@ 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 (ie. 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).



In 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 exactly the evil things sought to be
prevented by this proposed measure. It was enshrined in the 1987
Philippine Constitution that the State shall free the people from poverty
through policies that provide adequate social services. Hence, legislators
are duty bound to help the consuming public.

In view thereof, the passage of this measure is eqrnestly urged.

TOBIAS “TOBY” M. TIANGCO



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

SEVENTEENTH CONGRESS
First Regular Session

Ao
HOUSE BILL No._9°2

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 2016".

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 5. Implementing Rules and Regulations. - The Department of
Energy, in consultation with TRANSCO and the ERC, shall promulgate the
Implementing Rules and Regulations that shall be necessary to carry out
and implement the provisions of this Act within sixty days (60) from the
effectivity of this Act.

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 unconstitutional, 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 in at least two (2) newspapers of general circulation
in the Philippines.

Approved,