Senator Win Gatchalian over the weekend commended the Energy Regulatory Commission (ERC) for lowering the cap on the allowable rate of system losses that can be passed-on to consumers in their monthly electricity bills.
“Lowering the recoverable system loss rate is a pro-consumer action that will reduce electricity rates and force electric companies to make their operations more efficient. I commend the ERC for making this move,” said Gatchalian, who is the chairman of both the Senate Energy Committee and the Joint Congressional Power Commission.
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). ERC has mandated a staggered decrease in the maximum allowable pass-on charge, from 12% of total system losses in 2018 to 8.25-12% in 2022 for electric cooperatives, and from 6.5% in 2018 to 5.5% in 2021 for private distribution utilities.
The system loss caps set by the ERC are within the same neighborhood as those provided under Senate Bill No. 1623, otherwise known as the Recoverable System Loss Act, which was approved by the Senate on third and final reading last month. If passed into law, Senate Bill No. 1623 would set a standard cap of 10% for electric cooperatives, and 5% for private distribution utilities, respectively.
Gatchalian, who is the principal sponsor of the Recoverable System Loss Act, said that the enactment of his bill into law would further strengthen the mandate of ERC to closely monitor pass-on system loss charges and ensure accountability for non-compliance.
SB 1623 mandates the ERC to conduct a periodic review every three (3) years to determine whether the caps should be reduced further. This, the senator said, would compel ERC to safeguard consumer interests on a more regular basis, noting that it had been eight years since the body last lowered recoverable system loss rates.
Gatchalian’s bill would also require ERC to conduct an annual review of system loss charges to ensure that only allowable costs within the caps stipulated are being recovered. The review shall be based from the quarterly mandatory report submissions by the DUs to ERC, which should contain their Segregated System Losses. Administrative sanctions shall also be handed down to ERC officials who failed to discharge their responsibilities or comply with the requirements detailed in the measure.
“The strict compliance and constant review mandated by the Recoverable System Loss Act will compel electric companies to improve their infrastructure in order to avoid further losses, thus making delivery of electricity across power lines more reliable and efficient. In the end, this will result in lower electricity rates for consumers,” Gatchalian said.