A bad sending unit will give you a false reading, either showing low oil pressure when there's plenty, or showing normal pressure when there's actually low or no pressure. If the gauge is showing low or no pressure, it's a serious warning that should be investigated immediately. Low oil pressure can lead to engine damage, but the sending unit itself isn't the root cause of the *power loss*. The low oil pressure *is* the problem, and a faulty sending unit could prevent you from knowing about it.
In short: The sending unit doesn't *cause* power loss, but a problem it indicates (low oil pressure) very much can. Get the oil pressure checked correctly (with a mechanical gauge) if the sending unit is suspect.
