FIFTEENTH CONGRESS OF THE REPUBLIC 
OF THE PHILIPPINES 
First Regular Session 
SENATE 
2551 
S.B. 
Introduced by SENATOR VILLAR 
EXPLANATORY NOTE 
1 6 
S£P 30 P 4 :05 
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", 
which was enacted in 8 December 1994. R.A. No. 7832 rationalizes the recoverable 
system losses of electric consumers. 
The provision is substantially affected by the 
enactment of 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 system loss. 
At present, private distribution utilities and rural cooperatives are allowed to pass 
as much as nine and a half percent (9.5%) and fourteen percent (14%) respectively, of 
their total system losses to the consumers. System losses may be technical or non-
technical. Technical losses are those that pertains to losses 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. Non-technical technical losses refers 
to those which are due to pilferage. 
But one thing is certain, electricity prices in the country keep riSing, so much so 
that in Southeast ASia, electricity cost in the Philippines are billed as the region's second 
highest. Unfortunately, instead of protecting the consumers against continubus increase 
of electricity prices, this provision of the EPlRA law is being taken advantage of by the 
some companies in the power industry in the guise of systems loss. 
The 1987 Philippine Constitution provides that the State shall free the people 
from poverty through policies that provide adequate social services. It is guided by this 
provision that this legislation is submitted, 
to unburden the general public from 
shouldering the costs of losses. 
It 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. 
In view thereof, the passage of this measure is earnestly urged. 
LLAR 
i ,. 


, 
FIFTEENTH CONGRESS OF THE REPUBLIC 
OF THE PHILIPPIN6S 
First Regular Session 
SENATE 
S.B. No. 2551 
Introduced by SENATOR MANNY VILLAR 
HI 
SEll' 30 P4 :05 
AN ACT REMOVING THE ALLOWABLE SYSTEMS LOSS FROM PRIVATE UTILITY 
COMPANIES AND REDUCING THE CAP 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 THE 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: 
Sec. 1. Declaration of Policy. It is the policy of the State to protect the rights of every 
electric consumer without comprising the State's aSSistance to the viability of every 
electric distributor's 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. 
Sec. 2. Allowable System loss that may be passes-on to the Consumers.-Only rural 
electric cooperatives are hereby allowed to pass-on to the consumers system losses and 
limited only to deSign fault and technical loss as defined by the Energy Regulatory 
Board (ERC), which in no case shall be more than five percent (5%). A system loss 
charge shall be determined annually based on the previous year's costs and revenues 
that only legitimate costs are borne by tile 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 
expresses as a percentage of kWh purchased and/or generated excluding costs due to 
pilferage, administration inefficiencies and administrative cost. 
Sec. 3. Exemption from Value-Added Tax (VAT). - The imposition of system loss in the 
consumer's bill, although forming part of a rural cooperative'S operating expenses, shall 
not be made subject to twelve percent (12%) Value-Added Tax (VAT) as provided in 
Section 108 of Republic Act No. 9337. 


Sec. 4. 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,. 
Sec. 5. Repealing Clause. - All laws, acts, decrees, executive orders, issuances, and 
rules and regulations or part thereof which are contrary to and inconsistent with any 
provisions of this Act are hereby repealed, amended, or modified accordingly. 
Sec. 6 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. 
Sec. 7. Effectivity. - This Act shall take effect fifteen days (15 days) after its complete 
publication either in the Official Gazette or in a newspaper of general circulation in the 
Philippines. 
Approved