Bill capping system loss charges hurdles Senate on 3rd reading

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A BILL that seeks to reduce the cap on the electricity systems losses charged by distribution utilities to consumers was approved on Monday by the Senate on third and final reading.

Sponsored by Senator Sherwin T. Gatchalian, Senate Bill No. 1623, or the proposed “Recoverable Systems Loss Act,” was approved with 16 affirmative votes, zero negative vote and no abstention.

“Aside from forcing distribution utilities to adopt more efficient practices in delivering energy to our offices and homes, this legislation provides real and immediate relief to our countrymen who are struggling to keep up with the ever rising cost of every day goods and services,” said Mr. Gatchalian, who is chairman of the Senate energy committee.

Systems loss refers to 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.

Mr. Gatchalian said the bill would reduce the cap in systems losses of private electric distribution utilities, which consumers are made to pay for.

From 8.5%, utilities will only be allowed to pass on 5% of system losses. The cap for electric cooperatives will be lowered to 10% from 13%, he said.

He said that with the proposed rates, the bill would contribute to immediate consumer savings, noting that a systems loss rate of 10% for an electric cooperative in Mindanao, for instance, would translate to a rate reduction of P0.1636 per kilowatt-hour. The annual savings at P196.32 is equivalent to seven kilos of rice, he added.

“With 114,590 households served, this would mean an estimated total savings of around P22.50 million per year for one franchise alone,” he said.

Mr. Gatchalian said the bill provides a formula for the computation of system losses, technical losses, and non-technical losses incurred by distribution utilities.

The bill also requires utilities to submit their quarterly systems losses, including their technical and non-technical losses, to the Energy Regulatory Commission (ERC). In turn, the regulator is to review yearly the submitted data to “ensure that only allowable costs within the system loss caps are recovered.”

Mr. Gatchalian said the bill mandates the ERC to implement a performance incentive scheme to encourage system loss reduction. Failure to comply with the caps imposed in the bill will “subject both the ERC and the distribution utilities to administrative penalties.”

He said over the years, Filipinos “have had to suffer the burden of outrageously high electricity costs.”

While Republic Act. 9136 or the “Electric Power Industry Reform Act of 2001” gave the ERC the power to change the cap on the rates passed on by distribution utilities to consumers, these have not been changed for nine years, he said.

“Nine years that private distribution utilities and electric cooperatives have not been incentivized to improve their facilities and operations to reduce system losses… Nine years that consumers have been paying for a greater amount of system losses which could have resulted to savings with a lower cap,” he said.

“This measure is a crucial step toward alleviating this burden and improving the standard of living in the Philippines, and I hope you will support its passage,” he added.

The bill was co-authored by Senators Emmanuel D. Pacquiao, Joseph Victor G. Ejercito and Cynthia A. Villar. It was a consolidation of bills filed earlier by Messrs. Gatchalian, Pacquiao and Ejercito. — Victor V. Saulon