EIGHTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
First Regular Session
)
SENATE 
S.B. No.
T9 
JUL11 
Pr-24
3 6 4
ttut:
Intro d u ce d  by SEN. W IN  GATCHALIAN
AN ACT REDUCING THE RECOVERABLE SYSTEM LOSS RATE AND FOR
OTHER PURPOSES
EXPLANATORY NOTE
System loss is the difference between the electric energy delivered to the distribution 
system and the energy delivered to the end-users and other entities connected to the 
system. Although it is energy that end-users do not consume, they are made to pay for 
it through the system loss charge. However, this charge is dependent on the system 
loss cap determined by the Energy Regulatory Commission (ERC). In 2018, the ERC, 
after ten years, revised the system loss cap from 8.5% to 6.5% for private distribution 
utilites and from 13% to a range of 8.25% to 12% for electric cooperatives. 
For an 
average 200 kilowatt hour (kWh) Meralco customer, the system loss charge comprises 
4.78% of the electricity bill amount to 0.4774 per kWh or Php 95.48 per month.
This measure mandates the reduction of the system loss caps currently in place to 5% 
for private distribution utilities and 10% for electric cooperatives. It also requires the 
ERC to review, every three years, whether the caps should be decreased and to devise a 
performance incentive scheme to encourage system loss reduction. Failure of the ERC 
to do so would subject it to penalty. 
Through this bill, it is hoped that distribution 
utilities will be incentivized to improve their operations resulting to ajleefeaseiw system 
losses and savings for the Filipino household. 
Given the ^ofegoing, tije'Tmmediate 
passage of this measure is sought.


EIGHTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
First Regular Session
' '.S tilt"  C: 111'
SENATE
s.B. N o .___3G4
R E C t IV - ' i  !.v
Intro d u ce d  by SEN. W IN  GATCHALIAN
'19 JULll PI :24 
----
AN ACT
REDUCING THE RECOVERABLE SYSTEM LOSS RATE AND FOR OTHER
PURPOSES
Be it enacted by the Senate and the House o f Representatives o f the Philippines in 
Congress assembled:
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SECTION 1. Tide. -  This Act shall be known as the "Recoverable System Loss
Act".
Sec. 2. Declaration 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 consumer. 
Towards this end, the State shall ensure 
that the imposition of electricity charges to the public is justifiable, equitable, and 
reflects the true cost of electricity.
Sec. 3. Definition o f Terms. -  For purposes of this Act, the following terms 
shall be defined as stated below: Provided, That other terms used in this Act but not 
defined herein shall be understood to mean 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) Distribution utility (DU) refers to any electric cooperative, private distribution 
utility, government-owned or existing local government unit-owned utility,


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which has a franchise to operate a distribution system including those whose 
franchise covers economic zones;
b) Electric cooperative (EC) refers to a distribution utility organized pursuant to 
Presidential Decree No. 269, as amended, or as otherwise provided in 
Republic Act No. 9136 otherwise known as the Electric Power Industry Reform 
Act of 2001;
c) Department o f Energy (DOE) refers to the government agency created 
pursuant to Republic Act No. 7638 otherwise known as the Department 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 Regulatory Commission (ERC) refers to the regulatory body created 
pursuant to Republic Act No. 9136 otherwise known as the Electric Power 
Industry Reform Act of 2001;
e) Energy input refers to the energy, in kilowatt hour (kWh), delivered into the 
distribution system by the transmission system, embedded generating plants, 
other distribution systems, and user systems with generating facilities;
f) Energy output refers to the energy, in kWh, delivered by the DU to its 
customers metering point, including energy for the DU's own use, and energy 
sold by retail suppliers to their contestable customers that are connected to 
the said DU;
g) National Electrification Administration (NEA) refers to government agency 
created under Presidential Decree No. 269, as amended by Republic Act No. 
10531 or the National Electrification Administration Reform Act of 2013, and 
whose additional mandates are further set in Republic Act No. 9136 otherwise 
known as the Electric Power Industry Reform Act of 2001;


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h) National Power Corporation (NPC) refers to the government corporation 
created under Republic Act No. 9136 otherwise known as the Electric Power 
Industry Reform Act of 2001;
i) Non-Technicai Losses refer to the component of System Loss that is not 
related to the physical characteristics and functions of the electrical system, 
and is caused primarily by human action, whether intentional or not. 
Non- 
Technical Loss includes but shall not be limited to the energy lost due to 
pilferage, tampering of meters, and erroneous meter reading. 
It shall be 
calculated in accordance with Section 7 of this Act;
j) Private Distribution Utility (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) Small Power Utilities Group (SPUG) refers to the functional unit of the NPC 
created to pursue missionary 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) Technical Losses refer to the component of System Loss that is inherent in 
the physical delivery of electric energy. It includes conductor loss, transformer 
core loss, and metering equipment. It shall be calculated in accordance with 
Section 6 of this Act;
Sec. 4. Recoverable System Loss Rate. -  For purposes of recoverable Systems 
Loss rate, the following System Loss caps are set:


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a) For PDUs, a maximum of five percent (5%); and
b) For ECs, a maximum often percent (10%).
The ERC shall determine, every three (3) years, whether 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 benchmarks, 
taking into account the viability of PDUs and ECs and the interest of the consumers: 
Provided, That the ERC shall establish a timeframe 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 
finaiiy. That for ECs operating in SPUG areas, such timeframe shall concur with their 
rate filing.
Sec. 5. Systems Loss Calculation. -  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 determined by the ERC:
System Loss,% = (Input Energies -  Output Energies) xl00%
Input Energies
Sec. 6. Technical Loss Calculation. -  The Technical Loss shall be calculated 
using the following formula or as determined by the ERC:
Technical Loss = Feeder Technical Loss + (Sub-transmission Line Loss -i- Substation
Technical Loss)
Provided, That the Technical Loss shall be calculated using the following 
method or as determined by the ERC:
a) By conducting a power flow simulation to segregate the various components 
of the Technical Loss using a reliable software application acceptable to the 
ERC; and
b) By using the Coefficient and Network Parameters as well as the Sub­
transmission and Substation losses.


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Sec. 7. 
Non-Technica! Loss Calculation. -  The Non-Technical Loss shall be 
calculated using the following formula or as determined by the ERC:
Non-Technical Loss = Total System Loss -  Technical Loss
Sec. 8. Annual Review o f System Loss Charges. -  DUs shall quarterly submit 
to the ERC a sworn statement containing their segregated System Losses indicating 
their Technical and Non-Technical Losses, and all documents pertinent to System 
Loss Charges. 
The ERC shali annualiy review and strictiy verify the System Loss 
Charges to ensure that only allowable costs within the System Loss caps are 
recovered. Failure to comply with this Section shall subject the DUs to administrative 
penalties, including but not limited to suspension or revocation of licenses or permits 
to operate, to be determined by the ERC.
Sec. 9. Performance Incentive Scheme (PIS). -  The ERC shali devise a 
Performance Incentive Scheme for DUs to encourage System Loss reduction in 
furtherance of the objectives stated in this Act.
Sec. 
10. 
Individualized System Loss Cap. 
-  A 
DU, 
in 
exceptionai 
circumstances, may be aliowed to use an an individuaiized 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 method for 
determination of the cap, and the data requirements to be submitted shall be 
determined by the ERC: Provided further, That in determining the reasonable level 
of an individualized System Loss cap, a cost and benefit analysis must be provided 
and analyzed from the viewpoint of the consumer: Provided finally. That the no 
individuaiized System Loss cap shall be higher than the existing System Loss cap at 
the time of the effectivity of this Act.
Sec. 11. Timeline on Individualized System Loss Cap. -T h e  ERC shall issue a 
final decision on a DU's appiication for the use of an individualized System Loss cap 
within one hundred and twenty caiendar days (120) from submission of such


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application: Provided, That failure of ERC to comply with the time stated herein shall 
subject the persons concerned to the administrative penalties stated in Section 12 of 
this Act.
Sec. 12. Administrative Offenses and Penalties. -  The following acts shall be 
considered administrative offenses:
a) Failure to discharge the responsibilities stated in Sections 4, 8, 9, 10, and 11 
of this Act; and
b) Failure to comply with the mandated timeframes in Sections 4, 8, and 11 of 
this Act.
Any person found guilty of the offenses mentioned above shall be penalized as 
follows:
a) First offense -  Thirty days suspension without pay and mandatory attendance 
in Values Orientation Program;
b) Second offense -  Six (6) months suspension without pay; and
c) Third offense -  Dismissal that shall carry with it perpetual disqualification 
from holding public office, and forfeiture of retirement benefits.
Sec. 13. Implementing Rules and Regulations. -  Within ninety (90) days from 
the effectivity of this Act, the ERC, in coordination with the Department of Energy 
and the National Electrification Administration and in consultation with stakeholders, 
shall promulgate the necessary rules and regulations to implement the provisions of 
this Act.
Sec. 14. Separability Clause. -  If any portion or provision of this Act is 
declared unconstitutional, the remainder of this Act or any provisions not affected 
thereby shall remain in force and effect.
Sec. 15. Repealing Cause. -  Any law, presidential decree or issuance, 
executive order, letter of instruction, rule or regulation inconsistent with the 
provisions of this Act is hereby repealed or modified accordingly.


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Sec. 16. Effectivity. -  This Act shall take effect fifteen (15) days following its
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complete publication in the Official Gazette or a newspaper of general circulation.
Approved,