Republic of the Philippines ENERGY REGULATORY COMMISSION San Miguel Avenue, Pasig City 20 RESOLUTION NO, » Series of 2017 ARESOLUTION ADOPTING THE ERC RULES FOR SETTING THE DISTRIBUTION SYSTEM LOSS CAP AND ESTABLISHING PERFORMANCE INCENTIVE SCHEME FOR DISTRIBUTION EFFICIENCY WHEREAS, Section 43 (£) of Republic Act No. 9136, otherwise known as the Electric Power Industry Reform Act of 2001 (EPIRA) provided that the cap on the recoverable rate of system loss prescribed in Section 10 of Republic Act No. 7832 is amended and shall be replaced by caps which shall be determined by the Energy Regulatory Commission (ERC) based on load density, sales mix, cost of service, delivery voltage and other technical considerations it may promulgate; WHEREAS, on September 2016, the Commission, after public bidding, engaged the services of a consultant, PowerSolv Inc. to conduct a study on system loss for purposes of establishing new caps based on the abovementioned parameters; WHEREAS, said engagement required PowerSolv Inc. to: 1) come up with a new distribution system loss caps (technical and non-technical losses) including incentive scheme fof system loss reduction based on the criteria provided in the EPIRA; 2) review and enhance, if necessary, the existing models/methodology for segregating the technical and non- technical losses; and 3) prepare the draft rules for the determination of caps for recoverable levels of distribution system losses; WHEREAS, PowerSolv Inc. was instructed that the methodology should consider characteristics that include load density, sales mix, cost of service, delivery voltage and any other technical considerations, as provided in the EPIRA, necessary for establishing different caps for different customer classes for different Distribution Utilities (DUs);20 Resolution No.__"_, Series of 2017 A Resolution Adopting the ERC Rules for Setting the Distribution System Loss Cap and Establishing Performance Incentive Scheme for Distribution Efficiency Page 2 of 3 —.S WHEREAS, Public Consultations on the draft rules were conducted in Manila on May 29-30, 2017 for the Luzon Stakeholders; in Cebu City for Visayas Stakeholders on June 01, 2017 and in Manila and Davao for Mindanao Stakeholders on August 09, 2017, and August 31, 2017, respectively; WHEREAS, on July 05, 2017 and July 06, 2017 a Focus Group Discussion (FGD) was conducted at the Distribution Management Committee (DMC) conference area for Electric Cooperatives and Private Distribution Utilities, respectively; ‘WHEREAS, after said public consultations and FGDs, PowerSolv Inc. submitted its proposed Rules for Setting the Distribution System Loss Cap and Establishing Performance Incentive Scheme for Distribution Efficiency (Rules); WHEREAS, the proposed Rules was presented to the Senate Committee on Energy and the Committee on Energy of the House of Representatives on separate committee hearings; WHEREAS, the Commission it its 05 December 2017 Regular Commission Meeting resolve to approve the Rules for Setting the Distribution System Loss Cap and Establishing Performance Incentive Scheme for Distribution Efficiency, hereto attached as Annex “A” and made an integral part of this Resolution; ~ “"" * WHEREAS, the new Rules grouped the Distribution Utilities into four (4) clusters based on similar technical considerations as discussed in the “Methodology on the Determination of System Loss Caps”, hereto attached as Annex “B” and made an integral part of this Resolution; NOW, THEREFORE, the ERC, after thorough and due deliberation, hereby RESOLVES, as it is hereby RESOLVED, to APPROVE and ADOPT, the Rules for Setting the Distribution System Loss Cap and Establishing Performance Incentive Scheme for Distribution Efficiency attached as Annex “A” of this resolution and the new caps shall be effective starting May 2018 billing.20 Resolution No. » Series of 2017 A Resolution Adopting the ERC Rules for Setting the Distribution System Loss Cap and Establishing Performance Incentive Scheme for Distribution Efficiency Page 3 of 3 as eeeSSSSSSSSSSSSSS This Resolution shall take effect after fifteen (15) days following the completion of its publication in a newspaper of general circulation in the Philippines or in the Official Gazette. Let copies of this Resolution be furnished the University of the Philippines Law Center-Office of the National Administrative Register (UPLC-ONAR), the Senate Committee on Energy, the House of Representatives Committee on Energy, the Department of Energy (DOE), and all Distribution Utilities. Pasig City, 05 December 2017. ae AGNES VST DEVANADERA. Chaiypeyson and CEO Qui, Meelis it ALFREDO J. NON GI VICTO) YAP- TARUC Commissioner i. JOSEFINA PA‘ A. MAGPALE- ASIRIT frroxt1o D. STA. ANA \issioner Commissioner nos.scunMbeairerryps