Power Industry Faces Survival Crisis Over System Loss Charges

MANILA, Philippines — The Philippine power industry is facing a survival crisis over the allocation of costs for electricity system losses. Manny V. Pangilinan, chairman of Manila Electric Company (Meralco), warned that the industry "may not survive" if utility companies alone shoulder the entire burden 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 stated. Pangilinan's remarks followed President Ferdinand Marcos Jr.'s pronouncement in his 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. The President asserted that system losses are not the fault of consumers and therefore should not be charged on their monthly bills. However, Pangilinan countered, "So, who is going to pay for that? The industry? It's going to cost tens of billions of pesos. We will not survive." Both Meralco and the national organization of electric cooperatives, the Philippine Rural Electric Cooperatives Association, had previously expressed conditional support for the proposal, warning that utility companies could face bankruptcy if implemented without proper government support. System losses refer to electricity that is lost before the power distributed by utility companies reaches consumers. Meralco has explained that these are not unique to any distribution utility but are a common operational aspect of electricity delivery. The Department of Energy clarified that Marcos' proposal aims solely to remove the additional costs paid by consumers for system losses and the 12% value-added tax (VAT) associated with them. Malacañang also explained that Marcos does not want utility companies to shoulder these costs and urged them to actively monitor and prevent losses from theft and pilferage. Meanwhile, an economist warned that taxpayers may ultimately bear the costs of system losses, even if the charges are removed from consumers' electricity bills. Alexander Escucha, former president of the Philippine Economic Society, pointed out that the country's 121 non-profit, non-stock electric cooperatives may face potential financial losses if system losses and their accompanying 12% VAT are no longer charged to their customers. Consequently, these electric cooperatives might demand higher subsidies from the National Electrification Administration (NEA), a state-owned corporation tasked with ensuring the financial viability of rural electric cooperatives. The NEA, in turn, draws its subsidies from the national budget. "In simpler terms, we will still pay for it," Escucha told dzMM.