Lawmaker seeks lower pass-on system loss charges

MANILA, Philippines — Sen. Sherwin Gatchalian is pushing for a law that aims to reduce the amount of system loss charges electricity companies are allowed to pass on to consumers in their monthly bills.

The lawmaker has filed Senate Bill 1623, otherwise known the Recoverable System Loss Act, which proposes to decrease the current system loss caps from 8.5 percent to five percent for private distribution utilities (DUs) and 13 percent to 10 percent for electric cooperatives (ECs).

This will result in net overall savings on retail electricity to as high as P0.66 per kilowatt-hour (kwh) in some areas.

Gatchalian, who chairs the Senate energy committee, said this legislation would provide real and immediate relief consumers.

“For years now, the Filipino people have had to suffer the burden of outrageously high electricity costs. This measure is a crucial step toward alleviating this burden and improving the standard of living in the Philippines,” he said.

For example, based on the committee’s estimates, decreasing the system loss cap to 10 percent would lead to a reduction of P0.2363 per kwh in the cost of electricity for the average household serviced by Camarines Sur IV Electric Cooperative Inc. (CASURECO IV).

This means an annual savings of P283.56 per household. With 61,328 households served, this would mean an estimated total savings of around P17.39 million per year for CASURECO IV consumers alone.

Meanwhile, consumers of Zamboanga Norte Electric Cooperative Inc. (ZANECO) would enjoy average annual savings of P196.32 per household due to the expected rate reduction of P0.1636 per kwh under the 10 percent cap.

This amounts to total savings of P22.5 million per year for the 114,590 households serviced by ZANECO.

"These are but two examples out of the 148 distribution utilities in the country. Imagine the total consumer savings from reduced system losses that can be brought about by this bill," Gatchalian said.

The senator also slammed the Energy Regulatory Commission (ERC) for failing to incentivize the improvement of the facilities and operations by distribution utilities to reduce system losses.

The ERC, which is empowered to regulate system loss charges, has not changed the cap since 2008.

To address this problem, the bill requires the ERC to review the cap every three years and devise a performance incentive scheme to encourage system loss reduction.

It will also mandate DUs to report their system losses and computation of system loss charges to the ERC annually. Failure to comply will subject both ERC and DUs to administrative penalties.

System loss is defined as the difference between electric energy delivered to the distribution system and the energy delivered to the end-users and other entities connected to the system.

There are two types: technical system loss, which refer to the electricity naturally lost while transporting electricity across power lines; and non-technical losses, which refer to electricity lost caused through human actions such as electricity theft and pilferage.