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RECEIVED 2\

REPUBLIC OF THE PHILIPPINES.
HOUSE OF REPRESENTATIVES,

it O6 Aus oy)
Quezon City ote ae 2018
SEVENTEENTH CONGRESS qul
Third Regular Session “5 V4

House Bill No.__8043

Introduced by MAGDALO Party-List Representative
HON. GARY C. ALEJANO

EXPLANATORY NOTE

‘A 2017 report of the Department of Energy (DOE) said that at P8.90 per kwh, Philippine
electricity rates still ranks as the highest in Southeast Asia. The system loss component constitutes a
considerable portion of the electric bill being shouldered by consumers and at the rates presently
existing, which the law allows private electric distribution utilities and cooperatives. Consumers are
disadvantaged when the said distributors can afford to suffer system losses as high as 14% for
electric cooperatives and 9.5% for private electric distribution utilities such as MERALCO as they
are allowed by law to pass the same to the consumers, even when a substantial part of said system
loss, may be avoidable with more diligence.

‘Thus, it becomes necessary to provide a measure to rationalize the recovery by electric
power utilities by providing for a progressive reduction on the rate of such present system loss in
order to discourage inefficiency in the way that these power operators and distributors deal with
system loss and compelling them to exert all legal, administrative, and technical efforts to
systematically reduce the same.

MERALCO and other similar private power utilities are to reduce the cap of rate being
charged by them for system loss at 1% every year from the present 9.5% until it reaches 4.5%. On
the other hand, the cap rate of system loss recoverable by electric cooperatives must likewise be
reduced 1% every year from the present 14% until it reaches 7% of its entirety.

In view of the foregoing, immediate approval of this measure is earnestly sought. (



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REPUBLIC OF THE PHILIPPINES
HOUSE OF REPRESENTATIVES
Quezon City
SEVENTEENTH CONGRESS
Third Regular Session

House pitt No. 2943

Introduced by MAGDALO Party-List Representative
HON. GARY C. ALEJANO

AN ACT
ESTABLISHING REFORMS IN THE RECOVERY OF SYSTEM LOSS CHARGES BY
PRIVATE COMPANIES AND RURAL ELECTRIC COOPERATIVES UNDER REPUBLIC
ACT NO. 7832, OTHERWISE KNOWN AS THE “ANTI-ELECTRICITY AND ELECTRIC
‘TRANSMISSION LINES/MATERIALS PILFERAGE ACT OF 1994,” AS AMENDED BY
SECTION 43(F) OF REPUBLIC ACT NO. 9136 OR THE “ELECTRIC POWER
INDUSTRY REFORM ACT OF 2001,” AND APPROPRIATING FUNDS THEREFOR

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

SECTION 1. Short Title —This Act shall be known as the “Electric Power Distribution
System Loss Recovery Rationalization Act.”

promote efficiency in the delivery and distribution of electric power by private electric utilities and
rural electric cooperatives and to secure equity not only obedience to its authority and the rule of
law, but also to ensure equity in the payment therefor by electric power consumers. As such, there
is a need to adopt measures to reduce the cap on the system loss rate in order to effectively
discourage inefficiency in the distribution of electric power by compelling power operators to exert
all legal, administrative, and technical efforts to systematically reduce system loss.

SEC. 3. Progressive Reduction on the Cap of Recoverable Rate of System Loss.—The cap
‘on the recoverable rate of system loss laid down under Section 10 of R.A. No. 7842, as amended, is
hereby modified to read as follows:

“(a) For private electric utilities THERE SHALL BE A REDUCTION OF ONE
PERCENT (1%) A YEAR ON THE EXISTING NINE AND A HALF PERCENT
(9.5%) CAP ON SYSTEM LOSS RATE UNTIL SUCH CAP REACHES 4.5% IN
ACCORDANCE WITH THE FOLLOWING SCHEDULE:



(J) EIGHT AND A HALF PERCENT (8 4) AT THE END OF THE FIRST
YEAR FOLLOWING THE EFFECTIVITY OF THIS ACT;

(2) SEVEN AND A HALF PERCENT (7 4) AT THE END OF THE SECOND
YEAR FOLLOWING THE EFFECTIVITY OF THIS ACT;

(@) SIX AND A HALF PERCENT (6 4) AT THE END OF THE THIRD YEAR
FOLLOWING THE EFFECTIVITY OF THIS ACT;

(4) FIVE AND A HALF PERCENT (5 4) AT THE END OF THE FOURTH
YEAR FOLLOWING THE EFFECTIVITY OF THIS ACT; AND

(5) FOUR AND A HALF PERCENT (4 %) AT THE END OF THE FIFTH
YEAR FOLLOWING THE EFFECTIVITY OF THIS ACT.

Provided, That the ENERGY REGULATORY COMMISSION is hereby
authorized at the end of the [fourth] FIFTH year following the effectivity of this Act, and as
often as necessary taking into account the viability of private electric utilities and the
interest of the consumers, whether the caps herein or theretofore established shall be
reduced further [which shall, in no case, be lower than nine percent (9%)] and accordingly
fix the date of the effectivity of the new caps: Provided, further, That in the calculation of
the system loss, power sold by the NATIONAL POWER CORPORATION or any other
entity that supplies power directly to a consumer and not through the distribution system of
the private electric utility shall not be counted even if the billing for the said power used is
through the private electric utility.

‘The term "power sold by NATIONAL POWER CORPORATION or any other
entity that supplies power directly to a consumer” as used in the preceding paragraph shall
for purposes of this section be deemed to be a sale directly to the consumer if: (1) the point
of metering by the NATIONAL POWER CORPORATION or any other utility is less
than one thousand (1,000) meters from the consumer, or (2) the consumer's electric
consumption is three percent (3%) or more of the total load consumption of all the
customers of the utility, or (3) there is no other consumer connected to the distribution line
of the utility which connects to the NPC or any other utility point of metering to the

consumer meter.


(b) For rural electric cooperatives THERE SHALL BE A REDUCTION OF
1% A YEAR ON THE PRESENT 14% CAP ON SYSTEM LOSS RATE UNTIL THE
SAME REACHES 7% IN ACCORDANCE WITH THE FOLLOWING SCHEDULE:

(1) THIRTEEN PERCENT (13%) AT THE END OF THE FIRST YEAR
FOLLOWING THE EFFECTIVITY OF THIS ACT;

(2) TWELVE PERCENT (12%) AT THE END OF THE SECOND YEAR
FOLLOWING THE EFFECTIVITY OF THIS ACT;

(3) ELEVEN PERCENT (11%) AT THE END OF THE THIRD YEAR
FOLLOWING THE EFFECTIVITY OF THIS ACT;

(4) TEN PERCENT (10%) AT THE END OF THE FOURTH YEAR
FOLLOWING THE EFFECTIVITY OF THIS ACT;

(5) NINE PERCENT (9%) AT THE END OF THE FIFTH YEAR
FOLLOWING THE EFFECTIVITY OF THIS ACT;

(© EIGHT PERCENT (8%) AT THE END OF THE SIXTH YEAR
FOLLOWING THE EFFECTIVITY OF THIS ACT; AND

(7) SEVEN PERCENT (7%) AT THE END OF THE SEVENTH YEAR
FOLLOWING THE EFFECTIVITY OF THIS ACT.

Provided, That the ENERGY REGULATORY COMMISSION is hereby
authorized to determine at the end of the [fifth] SEVENTH year following the effectivity of
this Act, and as often as is necessary, taking into account the viability of rural electric
cooperatives and the interest of the consumers, whether the caps herein or theretofore
established shall be reduced further [which shall, in no case, be lower than nine percent
(9%)] and accordingly fix the date of the effectivity of the new caps.

Provided, finally, That in any case nothing in this Act shall impair the authority of
the ENERGY REGULATORY COMMISSION to reduce or phase out technical or design
losses as a component of system losses.


SEC. 4. Implementing Rules and Regulations—The Department of Energy, in
consultation with TRANSCO and the ERC, shall promulgate within sixty (60) days after the
effectivity of this Act the rules and regulations that shall be necessary to carry out and implement
the substantive provisions of this Act.

SEC. 5. Separability Clause—\f any provision of this Act shall be declared
unconstitutional or invalid, the other provisions of this Act not otherwise affected, shall remain in
full force and effect.

SEC. 6. Repealing Clause.—All laws, decrees, orders, rules and regulations, and all other
issuances, or parts thereof, which are inconsistent with this Act are hereby repealed or modified

accordingly.

SEC. 7. Effectivity.—This Act shall take effect fifteen (15) days following its publication in
at least two (2) newspapers of general circulation.

Approved,