Power industry may not survive if forced to absorb system loss charges alone, Meralco chairman warns

MANILA, Philippines — Manila Electric Company (Meralco) chairman Manny V. Pangilinan warned that the power industry in the country “may not survive” if utility companies alone will shoulder the costs of system loss charges. “The bill is too big for the industry to absorb all of it. So, there's got to be that discussion. It's going to impact the entire power industry in this country,” Pangilinan said. The businessman’s comment came following President Ferdinand Marcos Jr.'s pronouncement in his latest State of the Nation Address (SONA) on July 27 to amend the Electric Power Industry Reform Act (EPIRA) as a solution to high electricity bills. Marcos said the system losses are not the consumers’ fault and therefore must not be charged on their monthly bills. “So, who is going to pay for that? The industry? It's going to cost tens of billions of pesos. We will not survive,” Pangilinan said. Meralco and the national organization of electric cooperatives, the Philippine Rural Electric Cooperatives Association, had earlier expressed conditional support for the proposal. They called for a careful review, warning that utility companies could face bankruptcy should it be implemented without proper government support. System losses are the electricity lost before the power distributed by utility companies reaches consumers. Meralco earlier explained that these system losses are “not unique to any distribution utility but is a common operational aspect of the delivery of electricity.” The Department of Energy had clarified that Marcos’ proposal only aims to remove the extra costs paid by consumers for system losses and the 12% value-added tax that comes with them. Malacañang also explained on Wednesday, July 29, that Marcos does not want utility companies to shoulder the burden of these costs and urged them to actively monitor and prevent losses from theft and pilferage. Meanwhile, an economist warned that taxpayers may still end up paying for the costs of system losses even if the charges are removed from consumers’ electricity bills. Philippine Economic Society former President Alexander Escucha said that the 121 non-profit, non-stock electric cooperatives in the country face potential financial losses if system losses, and the 12% value-added tax that comes with them, are no longer charged to their customers. As a result, Escucha explained, these electric cooperatives may demand higher subsidies from the National Electrification Administration (NEA), a state-owned corporation attached to the Department of Energy that provides subsidies to rural electric cooperatives in the country. Escucha added that the NEA, which is mandated to ensure the financial viability of these electric cooperatives, gets the subsidies it distributes from the national budget. “Sa madaling sabi, tayo rin ang magbabayad niyan,” Escucha told dzMM on Thursday, July 30. (In simpler terms, we will still pay for it.) Editor's note: Manuel "Manny" V. Pangilinan is the chairman of Meralco and the chairman, president and CEO of PLDT Inc. A unit under PLDT's media conglomerate has a majority stake in Philstar Global Corp., which runs Philstar.com. This article was independently produced following editorial guidelines.