Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila

FIFTEENTH CONGRESS
First Regular Session

House Bil No,__ 341

Introduced by the Honorable ROILO GOLEZ

EXPLANATORY NOTE

‘System losses that are presently being authorized by law, particularly under Section 10 of 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”, to be passed and charged to consumers include electricity
lost due to pilferage (non-technical), design fault (technical) and administration inefficiencies and
electric consumption for distribution and operation (administrative)

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, the consumers are disadvantaged when the said electric distributors can
afford to suffer systems 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, technical efforts to systematically reduce
the same.

The 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 by 1% every year from the present 14% until it reaches 7% of its entirety.

For the following premises, immediate passage ofthis bil is eamestly sought.


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila

FIFTEENTH CONGRESS
First Regular Session

" 311

House Bill No.

Introduced by the Honorable ROILO GOLEZ

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:

ARTICLE |
TITLE AND DECLARATION OF POLICY

SECTION 1. Title of the Act - This Act shall be known as the “Electric Power Distribution System
Loss Recovery Rationalization Act of 2010".

SECTION 2. Declaration of Policy - It is hereby declared the policy of the State not only to
promote efficiency in the delivery and distribution of electric power by private electric utilities and
tural electric cooperatives but also 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, technical efforts to systematically reduce system loss

SECTION 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 Republic Act No. 7842
otherwise known as "AN ACT PENALIZING THE PILFERAGE OF ELECTRICITY AND THEFT OF
ELECTRIC POWER TRANSMISSION LINES/MATERIALS, RATIONALIZING SYSTEM LOSSES
BY PHASING OUT PILFERAGE LOSSES AS A COMPONENT THEREOF, AND FOR OTHER
PURPOSES’, as amended by Section 43(f) of Republic Act No. 9136 or the "ELECTRIC POWER
INDUSTRY REFORM ACT OF 2001", is hereby modified and subjected to a progressive reduction
as follows:


(2) 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:

(i) Eight and a half-percent (8 1/2%) at the end of the first year following the effectivity of
this Act;

(i) Seven and a hal-percent (7 1/2%) at the end ofthe second year following the effectivity
of this Act;

(ii) Six and a half-percent (6 1/2%) at the end of the third year following the effectivity of
this Act;

(iv) Five and a halt-percent (5 1/2%) at the end of the fourth year following the effectivity of
this Act; and

(v) Four and a half-percent (4 1/2%) at the end of the fith year following the effectivity of
this Act

Provided, That the ENERGY REGULATORY COMMISSION is hereby authorized to
determine at the end of the 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 further reduced
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 NATIONAL POWER CORPORATION 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:

(i) Thirteen percent (13%) at the end of the first year following the effectivity of this Act;
(i) Twelve percent (12%) at the end of the second year following the effectivity of this Act;

(ii) Eleven percent (11%) at the end of the third year following the effectivity of this Act;


(iv) Ten percent (10%) at the end at the fourth year following the effectivity ofthis Act;

(¥) Nine percent (9%) at the end of the fifth year following the effectivity of this Act,

(vi) Eight percent (8%) at the end of the sixth year following the effectivity of this Act, and
(vil 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 seventh year following the effectivity of this Act, and as offen 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 further reduced 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.

Sections 4. Implementing Rules and Regulations. - The Department of Energy, in consultation
with TRANSCO and the ENERGY REGULATORY COMMISSION, shall promulgate within sixty
(60) days after the effectivity of this Act, the Implementing Rules and Regulations that shall be
necessary to carry out and implement the substantive provisions of this Act.

Sections 5. Separability Clause. - If for any reason, any section or provision of this Act, or any
portion thereof, or the application of such section, provision or portion thereof to any person, group
or circumstance is declared invalid or unconstitutional, the remainder of this Act shall not be
affected by such declaration and shall remain in force and effect.

Section 6. Amending / Repealing Clause. - All applicable laws or provisions thereof that are
inconsistent with the provisions of this Act are hereby amended or repealed accordingly.

Section 7. Effectivity. - This Act shall take effect fifteen (15) days after its complete publication
in the Official Gazette or at least two (2) national newspapers of general circulation.

APPROVED,