fl
SEVENTEENTH CONGRESS OF THE 
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REPUBLIC OF THE PHILIPPINES 
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Second Regular Session 
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SENATE 
S.B. No. 1 G 2 3
Mt .1 ' 
-r f f
■17 
NOV 28 
P 6 -24
Prepared and subm itted jointly by the Committees on Energy; Public (Services 
and Ways and Means, with S en ato rs Pacquiao, G atchalian and E jercito, as
authors thereof
AN ACT REDUCING THE CAP OF RECOVERABLE SYSTEM LOSS RATE AND
FOR OTHER PURPOSES
Be it enacted by the Senate and the House of Representatives of the 
Philippines in Congress assem bled:
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SECTION 1. T itle. -  This Act shall be known as the “Recoverable System Loss 
Act”.
SECTION 2. D eclaration o f Policy. -  It is hereby declared the policy of the State 
to ensure the quality, reliability, security, and affordability of supply of electric 
power while taking into consideration the viability of all distribution utilities and 
the protection of rights of every consum er. 
Towards this end, the State shall 
ensure th at the imposition of electricity charges to the public is justifiable, 
equitable, and reflects the true cost of electricity.
SECTION 3. D efinition o f Term s. -  For purposes of this Act, the following term s 
shall be defined as stated below: Provided, That other term s used in this Act but 
not defined herein shall be understood to m ean the way they are defined in 
Republic Act No. 9136 or the Electric Power Industry Reform Act of 2001 and its 
Implementing Rules and Regulations:
a) D istribution U tility (DU) refers to any electric cooperative, private 
distribution utility, or government-owned or existing local government 
unit-owned utility, which has a franchise to operate a distribution system 
including those whose franchise covers economic zones;


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b) E lectric C ooperative (EC) refers to a distribution utility organized 
p ursuant to Presidential Decree No. 269, as am ended, or as otherwise 
provided in Republic Act No. 9136 otherwise known as the “Electric 
Power Industry Reform Act of 2001”;
c) D epartm ent of Energy (DOE) refers to the governm ent agency created 
p u rsu an t to Republic Act No. 7638 otherwise known as the “D epartm ent 
of Energy Act of 1992” whose expanded functions are provided in 
Republic Act No. 9136 otherwise known as the “Electric Power Industry 
Reform Act of 2001”;
d) Energy R egulatory C om m ission (ERC) refers to the regulatory body 
created p u rsu an t to Republic Act No. 9136 otherwise known as the 
“Electric Power Industry Reform Act of 2001”;
e) Energy In p u t refers to the energy, in kilowatt hour (kWh), delivered into 
the 
distribution 
system  
by 
the 
transm ission 
system , 
embedded 
generating plants, other distribution system s, and user system s with 
generating facilities;
f) Energy O u tp u t refers to the energy, in kWh, delivered by the DU to its 
custom ers’ m etering point, including energy for the DU’s own use, and 
energy sold by retail suppliers to their contestable custom ers th at are 
connected to the said DU;
g) N ational E lectrificatio n  A dm inistration (NEA) refers to governm ent 
agency created under Presidential Decree No. 269, as am ended by 
Republic Act No. 10531 or the “National Electrificaiton Adm inistration 
Reform Act of 2013”, and whose additional m andates are further set in 
Republic Act No. 9136 otherwise known as the “Electric Power Industry 
Reform Act of 2001”
h) N ational Pow er C orporation (NPC) refers to the governm ent corporation 
created under Republic Act No. 9136 otherwise known as the “Electric 
Power Industry Reform Act of 2001”;


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i) N on-Technical Losses refer to the com ponent of System Loss th at is not 
related to the physical characteristics and functions of the electrical 
system, and is caused primarily by hum an action, w hether intentional or 
not. Non-Technical Loss includes but shall not be limited to the energy 
lost due to pilferage, tam pering of m eters, and erroneous m eter reading. 
It shall be calculated in accordance with Section 7 of this Act;
j) Private D istribution U tility (PDU) refers to a distribution utility 
organized as a private corporation which has a franchise to operate a 
distribution system  including those whose franchise covers economic 
zones: Provided, That for purposes of this Act, government-owned and 
local government owned utilities as well as those operating within 
economic zones shall be classified as PDUs;
k) Sm all Power U tilities Group (SPUG) refers to the functional unit of the 
NPC created to pursue m issionary electrification function;
l) System  Loss refers to the difference between the electric energy 
delivered to the distribution system  (Energy Input) and the energy 
delivered to the end-users and other entities connected to the system  
(Energy Output): Provided, That it shall be calculated in accordance with 
Section 5 of this Act;
m) T echnical Losses refer to the com ponent of System Loss th at is inherent 
in the physical delivery of electric energy. It includes conductor loss, 
transform er core loss, and m etering equipm ent. It shall be calculated in 
accordance with Section 6 of this Act;
SECTION 4. R ecoverable S ystem  Loss R ate. -  For purposes of recoverable 
Systems Loss rate, the following System Loss caps are set:
a) For PDUs, a m axim um  of five percent (5%); and
b) For ECs, a m axim um  of ten percent (10%).
The ERC shall determ ine, every three (3) years, w hether the caps shall be 
reduced further on the basis of load density, sales mix, cost of service, delivery 
voltage, 
and 
other 
technical 
considerations, 
as 
well 
as 
international 
benchm arks, taking into account the viability of PDUs and ECs and the 
interest of the consum ers: Provided, That the ERC shall establish a timeframe


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for the compliance of all the DUs with the System Loss rate caps: Provided 
further, That such timeframe for compliance shall coincide with the next 
regulatory period of PDUs and ECs: Provided finally, That for ECs operating in 
SPUG areas, such timeframe shall concur with their rate filing.
SECTION 5. S ystem s Loss C alculation. -  For purposes of calculating the 
System Loss as defined in this Act and for any regulation in relation thereto, 
the following formula for System Loss shall be followed or as determ ined by the 
ERC:
System Loss,% = (Input Energies -  O utput Energies) xl00%
Input Energies
SECTION 6. T echnical Loss C alculation. -  The Technical Loss shall be 
calculated using the following formula or as determ ined by the ERC:
Technical Loss = Feeder Technical Loss + (Sub-transm ission Line Loss +
Substation Technical Loss)
Provided, That the Technical Loss shall be calculated using the following 
m ethod or as determ ined by the ERC:
a) By conducting a power flow sim ulation to segregate the various 
com ponents of the Technical Loss using a reliable software application 
acceptable to the ERC; and
b) By using the Coefficient and Network Param eters as well as the S ub­
transm ission and Substation losses.
SECTION 7. 
N on-Technical Loss C alculation. -  The Non-Technical Loss 
shall be calculated using the following formula or as determ ined by the ERC: 
Non-Technical Loss = Total System Loss -  Technical Loss
SECTION 8. A nnual Review of S ystem  Loss C harges. -  DUs shall quarterly 
subm it to the ERC a sworn statem ent containing their segregated System 
Losses indicating their Technical and Non-Technical Losses, and all docum ents 
pertinent to System Loss Charges. The ERC shall annually review and strictly 
verify the System Loss Charges to ensure th at only allowable costs within the 
System Loss caps are recovered. Failure to comply with this Section shall 
subject the DUs to adm inistrative penalties, including but not limited to 
suspension or revocation of licenses or perm its to operate, to be determ ined by 
the ERC.


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SECTION 9. P erform ance Incentive Schem e (PIS). -  The ERC shall devise a 
Performance Incentive Scheme for DUs to encourage System Loss reduction in 
furtherance of the objectives stated in this Act.
SECTION 10. Individualized S ystem  Loss Cap. -  A DU, in exceptional 
circum stances, may be allowed to use an an individualized System Loss cap: 
Provided, That the details and procedures on the individualized System Loss 
cap such as but not limited to rules and guidelines to qualify for its use, the 
m ethod for determ ination of the cap, and the data requirem ents to be 
subm itted shall be determ ined by the ERC: Provided further, That in 
determ ining the reasonable level of an individualized System Loss cap, a cost 
and benefit analysis m ust be provided and analyzed from the viewpoint of the 
consum er: Provided finally. That the no individualized System Loss cap shall be 
higher than the existing System Loss cap at the time of the effectivity of this 
Act.
SECTION 11. T im eline on Individualized S ystem  Loss Cap. -  The ERC shall 
issue a final decision on a DU’s application for the use of an individualized 
System Loss cap within one hundred and twenty calendar days (120) from 
subm ission of such application: Provided, That failure of ERC to comply with 
the 
time 
stated 
herein 
shall 
subject the 
persons 
concerned 
to 
the 
adm inistrative penalties stated in Section 12 of this Act.
SECTION 12. A dm inistrative O ffenses and P enalties. -  The following acts 
shall be considered adm inistrative offenses:
a) Failure to discharge the responsiblities stated in Sections 4, 8, 9, 10, and 
11 of this Act; and
b) Failure to comply with the m andated tim efram es in Sections 4, 8, and 11 
of this Act.
Any person found guilty of the offenses m entioned above shall be penalized as 
follows:
a) First offense -  Thirty days suspension w ithout pay and m andatory 
attendance in Values Orientation Program;
b) Second offense -  Six (6) m onths suspension without pay; and


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c) Third 
offense 
-  
Dism issal 
that 
shall 
carry 
with 
it 
perpetual 
disqualification from holding public office, and forfeiture of retirem ent 
benefits.
SECTION 13. Im plem enting R ules and R egulations. -  W ithin ninety (90) 
days from the effectivity of this Act, the ERC, in coordination with the 
D epartm ent of Energy and the National Electrification Adm inistration and in 
consultation with stakeholders, shall prom ulgate the necessary rules and 
regulations to im plem ent the provisions of this Act.
SECTION 14. S eparability Clause. -  If, for any reason, any provision of this 
Act is declared to be unconstitutional or invalid, the other sections or 
provisions hereof which are not affected thereby shall continue to be in full 
force or effect.
SECTION 15. R epealing Clause. -  All other laws, decrees, orders, rules and 
regulations or parts thereof which are inconsistent with or contrary to the 
provisions of this Act are hereby repealed, am ended or modified accordingly.
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SECTION 16. E ffectivity. -  This Act shall take effect fifteen (15) days after its
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publication in at least two (2) national new spapers of general circulation.
Approved,