NINETEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
Second Regular Session
l&l
ICf* of tljo ^.'Ci
23 JUL 12 P3 *07
SENATE
RECEIVED 3V
Introduced by Senator Francis G. Escudero
AN ACT
INSTITUTIONALIZING THE RULES ON SYSTEM LOSS CAP FOR ELECTRIC 
DISTRIBUTION UTILITIES
EXPLANATORY NOTE
System loss is an inherent feature of our energy system, given that the 
conversion and transportation of energy resources are not completely efficient. While 
system losses can come from the physical properties of the energy system 
components, it can also result from human Interventions. As such, while distribution 
utilities may be allowed to recover the costs of system losses, they should also be 
encouraged - if not obliged - to mitigate system losses emanating from ill-maintained 
facilities and electricity pilferage, among others.
Taking cue from House Bill No. 3431 filed by Representatives Dagooc and De 
Jesus last August 9, 2022, this bill seeks to advance the institutionalization of a 
reasonable and quantifiable cap on system losses that could be passed on by private 
distribution utilities and electric cooperatives to consumers. It is submitted that 
through this intervention, the viability of distribution utilities and electric cooperatives, 
and the efficient delivery of affordable electricity to households and industries, thus 
cushioning the impact of the price of electricity, would be sustained.
Respectfully submitted.
FRAN
DERO


NINETEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
Second Regular Session
(fj. Senate
oC ft)?
23 JUL 12 P3 *07
SENATE
s. N(23Q0
Introduced by Senator Francis G. Escudero
AN ACT
INSTITUTIONALIZING THE RULES ON SYSTEM LOSS CAP FOR ELECTRIC 
DISTRIBUTION UTILITIES
Be it enacted by the Senate and House of Representatives of the Philippines in 
Congress assembled:
1 
Section 1. Short Title. - This Act shall be known as the Distribution System
2 
Loss Act.
3 
Sec. 2. Declaration of Policy. - It shall be the policy of the State to protect the
4 
rights of every electric consumer without compromising the State's obligation to
5 
ensure the viability of electric distribution utilities. Towards this end, the State shall
6 
ensure that the imposition of electricity distribution charges to electricity end-users is
7 
justifiable and equitable, and that no unnecessary cost is recovered by distribution
8 
utilities.
9 
Sec. 3. Transmission Losses. - Transmission losses are hereby disaggregated
10 
from the computation of allowable system loss charges. These losses shall not form
11 
part of the passed-on costs to electricity end-users.
12 
For the purposes of this Act, transmission loss shall refer to the difference in
13 
kilowatt-hours (kWh) between the electricity delivered by a generation company to a
14 
distribution utility as indicated in the powerplant billing meter installed at the plant
15 
gate and the electricity actually received by the substation of an individual distribution
16 
utility as indicated in the billing meter Installed at the delivery point.
17 
Sec. 4. Distribution System Loss Cap for Private Distribution Utilities. - Private
18 
distribution utilities are hereby allowed to pass on system losses to their consumers


1 
only to the extent that these system losses result from design fault, technical loss, and
2 
non-technical losses as defined by the Energy Regulatory Commission (ERC), which in
3 
no case shall be more than five percent (5%).
4 
Sec. 5. Distribution System Loss Caps for Eiectric Cooperatives. - Distribution
5 
utilities are hereby allowed to pass on system losses to their consumers only to the
6 
extent that these system losses result from design fault, technical loss, and non-
7 
technical loss as defined by the Energy Regulatory Commission (ERC), which in no
8 
case shall exceed the following:
9 
(a) 
For electric cooperatives in Cluster 1 - 12.00%;
10 
(b) 
For electric cooperatives in Cluster 2 - 10.25%; and
11 
(c) 
For electric cooperatives in Ouster 3 - 8.25%.
12 
A system loss charge shall be determined annually based on the previous year's
13 
costs and revenues of the distribution utiiities, which shall be verified by the ERC to
14 
ensure that only legitimate costs are borne by consumers. For the purpose of this Act,
15 
system loss shall mean the difference in kWh between the electricity purchased and/or
16 
generated and the electricity actualiy sold by a distribution utility.
17 
Sec. 6. Eiectric Cooperative dusters. - For the purpose of determining the
18 
applicable distribution system loss cap as provided in Section 5 of this Act, the electric
19 
cooperatives shall be classified as follows:
20 
(a) 
Cluster 1 Electric Cooperatives
21 
(1) 
Bantayan Electric Cooperative, Inc. (BANELCO)
22 
(2) 
Basiian Eiectric Cooperative, Inc. (BASELCO)
23 
(3) 
Batanes Electric Cooperative, Inc. (BATANELCO)
24 
(4) 
Busuanga Island Electric Cooperative, Inc. (BISELCO)
25 
(5) 
Cagayan de Suiu Electric Cooperative, Inc. (CASELCO)
26 
(6) 
Camotes Electric Cooperative, Inc. (CELCO)
27 
(7) 
Dinagat Island Electric Cooperative, Inc. (DIELCO)
28 
(8) First Catanduanes Electric Cooperative, Inc. (FICELCO)
29 
(9) 
Ifugao Electric Cooperative, Inc. (IFELCO)
30 
(10) 
Kaiinga-Apayao Electric Cooperative, Inc. (KAELCO)
31 
(11) 
Lubang Eiectric Cooperative, Inc. (LUBELCO)


1
2
3
4
5
6
7
8 
9
10
11
12
13
14
15
16
17
18
19
20 
21 
22
23
24
25
26
27
28
29
30
31
32
(12) 
Marinduque Electric Cooperative, Inc. (MARELCO)
(13) 
Maripipi Multi-Purpose Electric Cooperative (MMPC)
(14) 
Masbate Electric Cooperative, Inc. (MASELCO)
(15) 
Mountain Province Electric Cooperative, Inc. (MOPRECO)
(16) 
Occidental Mindoro Eiectric Cooperative, Inc. (OMECO)
(17) 
Oriental Mindoro Electric Cooperative, Inc. (ORMECO)
(18) 
Palawan Electric Cooperative, Inc. (PALECO)
(19) 
Province of Siquijor Electric Cooperative, Inc. (PROSIELCO)
(20) 
Romblon Electric Cooperative, Inc. (ROMELCO)
(21) 
Siargao Electric Cooperative, Inc. (SIARELCO)
(22) 
Siasi Electric Cooperative, Inc. (SIASELCO)
(23) 
Sulu Electric Cooperative, Inc. (SULECO)
(24) 
Tabas Island Electric Cooperative, Inc. (TIELCO)
(25) 
Tawi-tawi Electric Cooperative, Inc. (TAWELCO)
(26) 
Ticao Island Electric Cooperative, Inc. (TISELCO)
(b) Cluster 2 Electric Cooperatives
(1) 
Abra Electric Cooperative, Inc. (ABRECO)
(2) 
Agusan dei Norte Electric Cooperative, Inc. (ANECO)
(3) 
Agusan del Sur Electric Cooperative, Inc. (ASELCO)
(4) 
Akian Electric Cooperative, Inc. (AKELCO)
(5) 
Albay Electric Cooperative, Inc. (ALECO)
(6) 
Antique Electric Cooperative, Inc. (ANTECO)
(7) 
Aurora Electric Cooperative, Inc. (AURELCO)
(8) 
Batangas I Electric Cooperative, Inc. (BATELEC I)
(9) 
Benguet Electric Cooperative, Inc. (BENECO)
(10) 
Biliran Electric Cooperative, Inc. (BILECO)
(11) 
Bohol I Electric Cooperative, Inc. (BOHECO I)
(12) 
Bohol II Electric Cooperative, Inc. (BOHECO II)
(13) 
Bukidnon II Electric Cooperative, Inc. (BUSECO)
(14) 
Cagayan I Eiectric Cooperative, Inc. (CAGELCO I)
(15) 
Cagayan II Electric Cooperative, Inc. (CAGELCO II)
(16) 
Camarines Norte Electric Cooperative, Inc. (CANORECO)


1
(17)
Camarines Sur I Electric Cooperative, Inc. (CASURECO I)
2
(18)
Camarines Sur II Electric Cooperative, Inc. (CASURECO II)
3
(19)
Camarines Sur III Electric Cooperative, Inc. (CASURECO III)
4
(20)
Camarines Sur IV Electric Cooperative, Inc. (CASURECO IV)
5
(21)
Camiguin Electric Cooperative, Inc. (CAMELCO)
6
(22)
Capiz Electric Cooperative, Inc. (CAPELCO)
7
(23)
Cebu I Electric Cooperative, Inc. (CEBECO I)
8
(24)
Cebu II Electric Cooperative, Inc. (CEBECO II)
9
(25)
Cebu III Electric Cooperative, Inc. (CEBECO III)
10
(26)
Central Pangasinan Electric Cooperative, Inc. (CENPELCO)
11
(27)
Cotabato Electric Cooperative, Inc. (COTELCO)
12
(28)
Davao del Norte Electric Cooperative, Inc. (DANECO)
13
(29)
Davao del Sur Electric Cooperative, Inc. (DASURECO)
14
(30)
Davao Oriental Electric Cooperative, Inc. (DORECO)
15
(31)
Eastern Samar Electric Cooperative, Inc. (ESAMELCO)
16
(32)
First Bukidnon Electric Cooperative, Inc. (FIBECO)
17
(33)
First Laguna Electric Cooperative, Inc. (FLECO)
18
(34)
Guimaras Electric Cooperative, Inc. (GUIMELCO)
19
(35)
Ilocos Norte Electric Cooperative, Inc. (INEC)
20
(36)
Ilocos Sur Electric Cooperative, Inc. (ISECO)
21
(37)
Iloilo I Electric Cooperative, Inc. (ILECO I)
22
(38)
Iloilo I Electric Cooperative, Inc. (ILECO II)
23
(39)
Iloilo III Electric Cooperative, Inc. (ILECO III)
24
(40)
Isabela I Electric Cooperative, Inc. (ISELCO I)
25
(41)
Isabela II Electric Cooperative, Inc. (ISELCO II)
26
(42)
La Union Electric Cooperative, Inc. (LUELCO)
27
(43)
Lanao del Norte Electric Cooperative, Inc. (LANECO)
28
(44)
Lanao del Sur Electric Cooperative, Inc. (LASURECO)
29
(45)
Leyte I Electric Cooperative, Inc. (LEYECO I)
30
(46)
Leyte III Electric Cooperative, Inc. (LEYECO III)
31
(47)
Leyte IV Electric Cooperative, Inc. (LEYECO IV)
32
(48)
Leyte V Electric Cooperative, Inc. (LEYECO V)


1
(49)
2
(50)
3
(51)
4
(52)
5
(53)
6
(54)
7
(55)
8
(56)
9
(57)
10
(58)
11
(59)
12
13
(60)
14
15
(61)
16
(62)
17
(63)
18
(64)
19
(65)
20
(66)
21
(67)
22
(68)
23
(69)
24
(70)
25
(71)
26
(72)
27
(73)
28
(74)
29
(75)
30
(76)
31
(77)
32
(78)
AREA I) 
Nueva E( 
AREA II)


1 
(79) Surigao del Sur I Electric Cooperative, Inc. (SURSECO I)
2 
(80) Surigao del Sur II Electric Cooperative, Inc. (SURSECO II)
3 
(81) Tarlac I Electric Cooperative, Inc. (TARELCO I)
4 
(82) Tarlac II Electric Cooperative, Inc. (TARELCO II)
5 
(83) Zambales I Electric Cooperative, Inc. (ZAMECO I)
6 
(84) Zambales II Electric Cooperative, Inc. (ZAMECO II)
7 
(85) Zamboanga del Norte Electric Cooperative, Inc. (ZANECO)
8 
(86) Zamboanga del Sur I Electric Cooperative, Inc. (ZAMSURECO I)
9 
(87) Zamboanga del Sur II Electric Cooperative, Inc. (ZAMSURECO II)
10 
(c) 
Cluster 3 Electric Cooperatives
11 
(1) 
Batangas II Electric Cooperative, Inc. (BATELECII)
12 
(2) 
Central Negros Electric Cooperative, Inc. (CENECO)
13 
(3) 
Leyte II Electric Cooperative, Inc. (LEYECO II)
14 
(4) 
Misamis Oriental I Rural Electric Cooperative, Inc. (MORESCO I)
15 
(5) 
Peninsula Electric Cooperative, Inc. (PENELCO)
16 
(6) 
South Cotabato I Electric Cooperative, Inc. (SOCOTECO I)
17 
(7) 
South Cotabato II Electric Cooperative, Inc. (SOCOTECO II)
18 
(8) 
Zamboanga City Electric Cooperative, Inc. (ZAMCELCO)
19 
The clustering shall be valid for two (2) years following the effectivity of this
20 
Act. Subsequently and every year thereafter, the ERC shall review and revise the
21 
clustering of electric cooperatives prescribed in this section as deemed necessary.
22 
Sec. 7. Powers and Functions of the Energy Regulatory Commission. - In
23 
addition to its powers and functions under Republic Act No. 9136, otherwise known
24 
as the Electric Power Industry Reform Act of 2001, and other relevant laws, the ERC
25 
shall perform the following:
26 
(a) 
Determine, as often as is necessary, whether the caps shall be reduced
27 
further on the basis of load density, sales mix, cost of service, delivery
28 
voltage, and other technical considerations, as well as international
29 
benchmarks, taking into account the viability of distribution utilities and
30 
electric cooperatives and the interest of the consumers;


1 
(b) 
Exercise the emergency power, when deemed necessary, to increase the
2 
system loss rates caps as prescribed by this Act;
3 
(c) 
Review and verify the system loss charges reported by distribution
4 
utilities to ensure that only legitimate costs are borne by the consumers.
5 
Subsequently and every year thereafter, the ERC shall review the system loss
6 
rates prescribed by this Act based on parameters such as load density, sales mix, cost
7 
of service, delivery voltage and any other technical considerations, as provided in the
8 
EPIRA, necessary for establishing different caps for distribution utilities.
9 
Sec 8. System Loss Reduction Program and Incentives. - The ERC shall develop
10 
an incentive mechanism to reward distribution utilities whose actual system losses are
11 
below the prevailing approved caps. The incentive mechanism so adopted may be
12 
incorporated by the ERC in the performance incentive scheme under the performance-
13 
based regulation for private distribution utilities and in the benchmarking methodology
14 
for electric cooperatives. Towards this end, expenses associated with any system loss
15 
reduction program duly approved by the ERC shall be considered part of the capital,
16 
expenditure plans or programs, and operating costs of distribution utilities.
17 
Sec. 9. Emergency Cause. - The application of allowable system loss rates
18 
provided in this Act may be suspended upon the occurrence of the following: acts of
19 
God, riots, war, terrorist act, epidemic, pandemic, civil commotion, natural
20 
catastrophes, and other emergency circumstances wherein the distribution utility is
21 
unable to accurately determine the energy sold because of damage or loss of
22 
consumers billing meters and other facilities used in the determination of the
23 
consumers energy consumption, as determined by the ERC.
24 
Sec. 10. Impiementing Ruies and Reguiations. - Within sixty (90) days from
25 
the effectivity of this Act, ERC shall, in consultation with government agencies and
26 
other stakeholders concerned, promulgate the rules and regulations to effectively
27 
implement the provisions of this Act.
28 
Sec. 11. Separabiiity Cause. - If any provision or part hereof is declared
29 
unconstitutional, the remainder of this Act or any provision not affected thereby shall
30 
remain in full force and effect.


Sec. 12. Repealing Clause. - All laws, acts, decrees, executive orders, 
issuances, and rules and regulations or parts thereof which are contrary to and 
inconsistent with this Act are hereby repealed, amended or modified accordingly.
Sec. 13. Effectivity. - This Act shall take effect immediately following its 
publication in the Olficial Gazette or in at least two (2) newspapers of general 
circulation.
Approved,