Philippines Eyes Removal of 'System Loss' Charges on Electric Bills

In his fifth State of the Nation Address (SONA), President Ferdinand "Bongbong" Marcos Jr. made an unprecedented announcement that could reform the Philippine energy sector for the benefit of the consuming public. “At kung pagbawas ng presyo ang usapan, sa aking palagay, panahon na para tanggalin na natin ang system loss na pinapasa sa konsyumer. Pinapasa ito sa konsyumer at kinakarga sa bill na pinapatungan pa ng value-added tax,” Marcos said. “Hindi naman kasalanan ng konsyumer kung bakit nagkaroon ng system loss, kaya hindi naman tama na kailangan sila pa ang pagbabayarin dito,” he said. (And if we're talking about lowering prices, I believe it's time we remove the system loss charges being passed on to consumers. These charges are passed on to consumers, included in their electricity bills, and are even subject to value-added tax (VAT). The system loss is not the consumers' fault, so it is not right that they should be the ones paying for it.) The President then called on Congress for the immediate amendment of the Electric Power Industry Reform Act (EPIRA) to put a stop to system loss charges, including its accompanying value-added tax (VAT), from being passed on to consumers. This very declaration received a standing ovation during the SONA. What is system loss? But what is system loss? How does it affect an electricity consumer’s monthly bill? The Manila Electric Company (Meralco) explained that system loss is the difference between electricity generated by power plants and electricity consumed by and billed to end-customers. Simply put, as electricity travels far distances from power plants to homes and businesses, energy is lost due to both “technical” and “non-technical” factors. Technical factors, including electricity flowing through wires, which generates heat, power passing through multiple transformers, and voltage and stability concerns in the power system, also cause minor losses. Non-technical causes, on the other hand, include electricity theft or illegal connections. Clearly, technical and non-technical factors are not end-consumers' fault. But why are we being charged for it? Well, current laws such as the EPIRA and Republic Act No. 7832 or the Anti-Pilferage of Electricity and Theft of Electric Transmission Lines/Materials Act allow distribution utilities to recover a portion of system loss from end-consumers through a system loss charge reflected in monthly electricity bills. The Energy Regulatory Commission (ERC) set a maximum level of system loss that distribution utilities can charge to consumers. For rural electric cooperatives, the maximum system loss that can be recovered from customers is about 12% to 13%, while for private distributors the cap is at 6.5%. Based on Meralco’s breakdown of charges, the system loss charge, a pass-through charge, meaning it does not go directly to the company, accounts for 5% of its customers’ monthly electricity bill. Both the DOE and ERC have expressed support for the President’s proposal to scrap system loss charges from consumers’ bills. Meanwhile, Meralco is seeking a thorough discussion about it, noting its potential impact on power distribution utilities’ operational and financial health. —AOL, GMA News