Philippines Debates Scrapping System Loss Charge

MANILA, Philippines — President Ferdinand Marcos Jr.'s push to scrap system loss charges on electricity bills has sparked a debate, with power utilities urging a balanced approach that considers both consumer relief and operational sustainability. The system loss charge, which recovers costs for electricity lost before reaching consumers, typically accounts for about five percent of electricity bills in the Meralco franchise area. Meralco executive vice president and COO Ronnie Aperocho stated the company is ready to participate in discussions on proposed amendments to the Electric Power Industry Reform Act (EPIRA). "We look forward to productive discussions, which we hope will carefully consider the impact of reforms on the operations and sustainability of distribution utilities (DUs)," Aperocho said. He stressed that reforms should not only provide relief to consumers but also ensure DUs and electric cooperatives (ECs) remain capable of investing in critical infrastructure, strengthening system resilience, and maintaining reliable electricity service. "We believe it is important to recognize that system loss is not unique to any distribution utility but is a common operational aspect of the delivery of electricity – which affects the entire power industry," Aperocho added. He noted that while DUs like Meralco invest in modernizing facilities and deploying technologies to reduce system losses, a certain level of technical losses remains inherent in operating an electric distribution system. Energy Regulatory Commission (ERC) chairman and CEO Francis Saturnino Juan explained that Congress must first amend Section 43(f) of EPIRA before system loss charges can be removed from electricity bills. "Under this provision, the ERC cannot just unilaterally do away with the recovery and imposition of the system loss charge," Juan told The STAR. Energy Secretary Sharon Garin indicated that the process could take about a year, with no definite timeline yet for consumers to see the charges removed. The Philippine Rural Electric Cooperatives Association (PHILRECA) supports the removal of value-added tax (VAT) on system loss charges but warned that scrapping the fee altogether without direct government subsidy could put ECs at risk of financial collapse. PHILRECA urged Congress and tax authorities to adopt zero-rating or tax exemption mechanisms for electricity lost in transit across the entire power supply chain. The National Grid Corp. of the Philippines (NGCP) stated it does not charge consumers for transmission technical system loss. Following President Marcos' State of the Nation Address, shares of Meralco and Synergy Grid and Development Philippines Inc. (SGP), the listed firm behind NGCP, fell as investors reacted to uncertainty over potential policy changes. "Investors generally dislike regulatory uncertainty because it makes it more difficult to estimate future earnings and returns," said Toby Allan Arce, head of sales trading at Globalinks Securities and Stocks Inc. Source: Philstar Nation