.ilNETEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES
First Regular Session
SENATE
s.B. No. 385
ol tii?•'■‘••'•'I'
•22 JUL12 All 59
RECESVl.'J BV.
Introduced by Senator WIN 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). ERC 
Resolution No. 10 Series of 20181 states that the system loss caps for private 
distribution utilities (PDUs) is 6.5% for 2018 which will then be reduced to 6.25% in 
2019, 6% in 2020 and 5.5% in 2021. The same resolution states that for electric 
cooperatives (ECs), the system loss cap is 12% in 2018, a range of 11% to 12% in 
2019, a range of 10% to 12% in 2020, a range of 9% to 12% in 2021 and a range of 
8.25% to 12% from 2022 onwards. However, it is important that the system loss caps 
are regularly reviewed for the benefit of the consumers.2 For a Meralco customer, the 
average system loss is 5.85% and the average system loss charge is P0.3144 per 
kilowatt-hour for 20213. Further, for an average 200-kilowatt hour (kWh) Meralco 
customer, the system loss charge comprises 3.82% of the electricity bill equivalent to 
Php 62.88 per month.
1 A Resolution Clarifying the System Loss Calculation and Providing the Effectivity of the Rules for Setting the Distribution 
System Loss Cap
2 ERC(2022).
3 MERALCO(2022),


This measure requires the ERC to review, every three years, whether the system loss 
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 a decrease in system losses and savings for the Filipino
household. Given the foregoing, the immediate passage of this rrfeasure is sought.


NINETEENTH CONGRESS OF THE ) 
REPUBLIC OF THE PHILIPPINES )
First Regular Session 
)
SENATE
Senate Bill No. 385
72 JUL 12 fill 59
RBCBVCD3'...
Introduced by Sen. Win Gatchalian
AN ACT
REDUCING THE RECOVERABLE SYSTEM LOSS RATE AND FOR OTHER
PURPOSES
Be it enacted by the Senate and House of Representatives of the Philippines in 
Congress assembled:
1 
CHAPTER X
2 
GENERAL PROVISIONS
3 
Section 1. Title. - This Act shall be known as the "Recoverable System Loss
4 
Act."
5
6 
Sec. 2. Declaration of Policy. - It is hereby the declared the policy of the State
7 
to ensure the quality, reliability, security, and affordability of supply of electric power
8 
while taking into consideration the viability of all distribution utilities and the protection
9 
of rights of every consumer. Towards this end, the State shall ensure that the
10 
imposition of electricity charges to the public is justifiable, equitable, and reflects the
11 
true cost of electricity.
12
13 
Sec. 3. Definition of Terms- For purposes of this Act, the following terms shall
14 
be defined as stated below: Provided, That other terms used in this Act but not defined
15 
herein shall be understood to mean the way they are defined in Republic Act No. 9136
16 
or Electric Power Industry Reform Act of 2001 and its Implementing Rules and
17 
Regulations:
18 
a) Distribution Utility (DU) refers to any electric cooperative, private
19 
distribution utility, government-owned or existing local government unit-


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
owned utility, 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 of 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;
g) National Electrification Administration ((EA) 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;
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


1 
pilferage, tampering of meters, and erroneous meter reading. It shall be
2 
calculated in accordance with Section 7 of this Act;
3 
j) Private Distribution Utiiity (PDU) refers to a distribution utility organized as
4 
a private corporation which has a franchise to operate a distribution system
5 
including those whose franchise covers economic zones: Provided/ That for
6 
purposes of this Act, government-owned and local government owned
7 
utilities as well as those operating within economic zones shall be classified
8 
as PDUs;
9 
k) Smaii Power Utiiities Group (SPUG) refers to the functional unit of the NPC
10 
created to pursue missionary electrification function;
11 
I) System Loss refers to the difference between the electric energy delivered
12 
to the distribution system (Energy Input) and the energy delivered to the
13 
end- users and other entities connected to the system (Energy Output):
14 
Provided, That it shall be calculated in accordance with Section 5 of this
15 
Act;
16 
m) Technicai Losses refer to the component of System Loss that is inherent in
17 
the physical delivery of electric energy. It includes conductor loss,
18 
transformer core loss, and metering equipment. It shall be calculated in
19 
accordance with Section 6 of this Act;
20
21 
Sec. 4. Recoverabie System Loss Rate - For purposes of recoverable Systems
22 
Loss rate, the following System Loss caps are set:
23 
a) For PDUs, a maximum of five percent (5.5%)1; and
24 
b) For ECs, a maximum often percent (10.25%)2
25 
The ERC shall determine, every three (3) years, whether the caps shall be
26 
reduced further on the basis of load density, sales mix, cost of service, delivery
27 
voltage, and other technical considerations, as well as international benchmarks,
28 
taking into account the viability of PDUs and ECs and the interest of the consumers:
29 
Provided, That the ERC shall establish a timeframe for the compliance of all the DUs
1 This is the current system loss cap for PDUs
2 This is the current system loss cap for ECs.


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
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. System Loss Caicuiation. - - 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:
Total System Loss = S Energy delivered by the Transmission System + X Energy 
delivered by the Embedded Generators + s Energy delivered by other Distribution 
Systems + S Energy delivered by User Systems with Generating Units -1 Energy 
delivered to the Users of the Distribution System - Distribution Utility Use
Sec. 6. Technicai Loss Caicuiation - 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 + 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.
Sec. 7. Non-Technicai Loss Caicuiation. - 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. Annuai Review of System Loss Charges. - DUs shall quarterly submit to 
the ERC a sworn statement containing their segregated System Losses indicating their


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
Technical and Non-Technical Losses, and all documents pertinent to System Loss 
Charges. The ERC shall annually review and strictly 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 shall 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 exceptional circumstances, 
may be allowed to use 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 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, JhditXhe no individualized 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. - 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 submission of such 
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


1 
b) Failure to comply with the mandated timeframes in Sections 4, 8, and 11 of
2 
this Act.
3 
Any person found guilty of the offenses mentioned above shall be penalized as follows:
4
5
6
7
8 
9
10
11
12
13
14
15
16
17
18
19
20 
21 
22
23
24
25
26
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 Clause. 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.
Sec. 16. Effectivity. - This Act shall take effect fifteen (15) days following Its 
complete publication in the Official Gazette or a newspaper of general circulation.
27 Approved,