The Senate has approved on third and final reading a measure which will reduce the amount of system loss charges passed on by electricity distribution utilities to consumers in their monthly electric bills.
The Recoverable System Loss Act (Senate Bill 1623) seeks to lower the present system loss caps prescribed by the Energy Regulatory Commission (ERC) in accordance with R.A. 7832, from 8.5% to 5% for private distribution utilities (DUs), and from 13% to 10% for electric cooperatives (ECs).
“Power consumers are being forced to shoulder excessive charges from these losses, which electric companies should be taking care of in the first place. Reducing the Systems Loss cap to 5% could make a monthly savings for an average consumer of about P4.94, or a P59.28 annual savings,” said Gatchalian, the principal sponsor of the measure.
According to a 2017 World Bank report, the Philippines has one of the highest average system losses in East Asia at 9.4% in 2014, as compared to countries like Korea with 3.3% and Singapore with 2.0%.
Under this bill, the ERC will be mandated to conduct a periodic review every three (3) years to determine whether the caps should be reduced further, based on load density, sales mix, cost of service, delivery voltage and other technical considerations. It shall also devise a Performance Incentive Scheme (PIV) for DUs to further encourage System Loss reduction.
Gatchalian, also the chair of the Senate Committee on Energy, said the ERC last reduced system loss rates in 2010.
Under the measure, the ERC shall also 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.
Failure to comply will subject the DUs to fines of P300,000 for its first violation, P400,000 for its second violation, and a P500,000 fine on the third violation.
The measure similarly imposes penalties for false or fraudulent information submitted by the DUs in the form of P1-million fine on the first offense, P2-million on the second offense, and P3-million fine on the third offense, with an automatic recommendation by the ERC to the Joint Congressional Power Commission for the revocation of the DU’s franchise.
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.
“This measure will definitely help shield Filipino consumers from the outrageous cost of electricity rates. With the new mechanisms imposed under this measure, electric companies will also be compelled to improve their infrastructure in order to avoid further losses, thus making delivery of electricity across power lines more reliable and efficient,” Gatchalian pointed out.