Senate OKs bills on energy efficiency, system loss cap

MANILA, Philippines — The Senate has passed two bills that will advance energy efficiency and conservation practices in the country and reduce the amount of system loss being passed on to electricity consumers.

The two measures, Energy Efficiency and Conservation Act of 2018 (Senate Bill 1531) and Recoverable System Loss Act (Senate Bill 1623), were sponsored by Sen. Sherwin Gatchalian who chairs the Committee on Energy.

Senate Bill 1531 lays down a solid foundation for a comprehensive energy efficiency and conservation policy that would mandate the efficient and judicious use of energy resources and promote the development and utilization of both new and alternative sources of energy efficient technologies and systems.

“We are helping shape the consciousness of our consumers, including the government, through a change in the policy regime regulating energy consumption. The strategies detailed in this measure are all poised to provide not only savings for the government but also more money in people’s pockets,” Gatchalian said.

He said if the country’s energy efficiency reaches half as that of Germany — one of the most energy efficient countries in the world – then the country could save around P1.6 trillion from 2018 to 2030 or P126.4 billion on the average annually.

Reaching fully similar energy efficiency standards with that of Germany could result, on the other hand, in estimated savings of P420 billion yearly or around P5.5 trillion over the same period.

The measure mandates the creation of a National Energy Efficiency and Conservation Plan that defines national targets, details feasible strategies, and imposes a regular monitoring and evaluation system. It will also create a National Energy Efficiency and Conservation Database which will store all relevant information about energy consumption and the application of energy efficient and renewable energy technologies.

The measure would also institutionalize the energy efficiency and conservation standards and strategies in local governance through the creation of a Local Energy Efficiency and Conservation Plan and the inclusion of Guidelines on Energy Conserving Design on Buildings in the issuance of building permits.

To further encourage complete compliance to the energy standards to be proposed, the measure would include incentives as well as technical assistance from government agencies.

An Inter-Agency Energy Efficiency and Conservation Committee will also be created to provide strategic directions in the implementation of the Government Energy Management Program (GEMP), a program to reduce monthly consumption of electricity and petroleum products by the government.

Once ratified, the Department of Energy (DOE) shall be the lead government agency tasked to ensure the proper implementation of this measure.

On the other hand, Senate Bill 1623 seeks to lower the present system loss caps prescribed by the Energy Regulatory Commission (ERC) in accordance with Republic Act 7832, from 8.5 percent to five percent for private distribution utilities (DUs), and from 13 percent to 10 percent for electric cooperatives (ECs).

It was in 2010 when the ERC last reduced system loss rates.

 “Power consumers are being forced to shoulder excessive charges from these losses, which electric companies should be taking care of in the first place,” Gatchalian said.

According to a 2017 World Bank report, the Philippines has one of the highest average system losses in East Asia at 9.4 percent in 2014, as compared to countries like Korea with 3.3 percent and Singapore with two percent.

Under this bill, the ERC will be mandated to conduct a periodic review every three 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.

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.

Power distributors that will fail to comply will be subjected to fines of P300,000 for the first violation, P400,000 for the second violation and a P500,000 fine on the third violation.

The measure also 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 (JCPC) 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.