DAYS AFTER President Ferdinand Marcos Jr. floated the idea of amending the Electric Power Industry Reform Act (EPIRA), the Manila Electric Company (Meralco) issued a statement in a bid to justify passing on the so-called systems losses to its consumers.
This comes as several consumer advocate groups called on the urgent need to shun monopoly which effectively allowed Meralco to make the consumers shoulder loses induced by the company’s inefficiency and pilferage.
In its statement, Meralco demanded that they be allowed to take part in government discussions prior to congressional actions.
According to the utility company, technical losses (from distribution operations and pilferage by some households and industrial users) are “unavoidable,” short of saying that it cannot by itself shoulder the loses.
Meralco EVP/COO Ronnie L. Aperocho urged the lawmakers to carefully weigh the operational impact of amending EPIRA law and that some technical power losses are unavoidable in electricity distribution.”
The President’s appeal to the lawmakers during his 5th SONA at the Batasan Pambansa was the best message for many Filipinos who are burdened by the high cost of electricity further deepening their cost of living burdens in addition to heavy taxes every step of the way.
The President wanted lawmakers to amend the EPIRA and stop utilities from passing system loss charges and the associated value-added tax on to consumers.
“We respect President Marcos’ policy direction and will actively participate in the discussions as the proposed amendments to the EPIRA are deliberated,” said Aperocho.
He then claimed that the utility firm is investing in infrastructure and technology to improve efficiency, but eliminating technical losses entirely may not be possible.
“While distribution utilities like Meralco continue to invest in modernizing and upgrading facilities and deploying technologies that reduce system losses, a certain level of technical losses remains inherent in operating an electric distribution system,” he averred.
Meralco said its modernization and efficiency initiatives have kept system losses below the 6.5% cap set by the Energy Regulatory Commission (ERC).
Aperocho urged lawmakers to consider how changes to the system loss framework could affect the ability of utilities to maintain and upgrade their networks.
“We look forward to productive discussions which we hope will carefully consider the impact of reforms on the operations and sustainability of distribution utilities,” Aperocho said.
“To ensure real benefits to consumers, these reforms should also support the ability of distribution utilities and electric cooperatives to efficiently operate, invest in infrastructure and system resilience, and deliver safe and stable electricity service.”
The ERC supported the presidential directive saying it is ready to work with Congress, the Department of Energy and industry stakeholders on the proposed changes.
“As the country’s independent electric power industry regulator, the ERC stands ready to work closely with Congress, the Department of Energy (DOE), industry stakeholders, and other concerned government agencies in advancing the legal and regulatory measures necessary to advance this reform,” Inquirer quoted the regulator.
The ERC said it remains committed to its mandate “to protect consumer welfare through transparent, fair, and accountable regulation.”
Studies showed that the average transmission and distribution (T&D) losses in Southeast Asia (ASEAN) hover at around 9%, which is higher than the OECD (the 39-member nation Organization for Economic Cooperation and Development) average of 6–7%, varying widely from advanced compact systems to developing rural networks.
In the ASEAN the regional average is 9 percent except for Singapore, which maintains very low systems losses of around 5% because of compact and highly modernized urban infrastructure.
Countries like the Philippines, Indonesia, and Vietnam report average losses around 9% to 10%, while rural or remote island cooperatives within these nations can experience localized technical and non-technical losses exceeding 15%.
Technical losses are energy dissipated as heat and noise in overloaded primary/secondary lines, distribution transformers, and substations, while non technical losses are electricity pilferage (illegal connections, jumper cables, meter tampering) and commercial errors (faulty meter reading or billing mistakes).
Independent research groups like the IBON Foundation and consumer advocates criticize Meralco’s system loss charges for passing unconsumed power and pilferage costs onto consumers, making up roughly 5% to 8% of monthly electricity bills, and compounding the burden by being subject to the 12% Value-Added Tax (VAT), the IBON website noted.
IBON said consumers pay for electricity that is lost and never reaches households or businesses arising from power theft (illegal connections/jumpers) and commercial reading errors, which advocacy groups argue should be managed by corporate efficiency rather than public subsidization.
It added that imposing a consumption VAT on system loss is viewed as unjust because no actual good or service is bought or consumed by the end-user.
It maintained that Meralco’s system loss rate of 5.72% is below the 6.5% cap set by ERC.
Government officials have been pushing to amend EPIRA to prevent passing systems loss charges and their respective VAT onto consumers. But Meralco maintains its baseline of technical loss is physically unavoidable in power distribution and warns that abrupt changes could impact utility operations and grid maintenance.
Another group, the Power for People Coalition (P4P) said amending EPIRA is long overdue but falls short of addressing Filipinos’ hardships amid higher power costs.
P4P convenor Gerry Arances said that eliminating system loss charges is “a good step,” but that consumers have for decades been demanding the removal of unfair charges” and that “it’s absurd to present it as something new in the President’s fifth SONA.”
P4P is a national network of consumer groups, people’s organisations, and civic movements advocating for clean, affordable, and accessible energy.
He continued: “The administration cannot expect a pat on the back for too little, too late—especially when it continues to ignore the biggest extra charge in our power bills: high fuel costs.”
Arances argued that the country’s continued dependence on imported coal and natural gas remains the primary reason Filipinos pay some of the region’s highest electricity rates.
He maintained that any amendment to EPIRA should go beyond removing system loss charges.
“It’s not just the system loss provision that needs changing. The entire policy and regulatory framework governing the electricity sector needs an overhaul,” Arances said.
Last June, DOE Undersecretary Dr. Rowena Cristina Guevara said the country’s average power rate reached P12.43 per kilowatt-hour (kWh), higher than Singapore’s by P0.093 per kWh.
Filipinos could see even higher electricity rates in their bills as fuel prices increase due to renewed hostilities in the Middle East.
The consumer group also welcomed Marcos’ recognition of renewable energy as part of the solution to the country’s energy challenges, noting that the energy crisis and the increasing frequency of natural disasters underscore the importance of expanding solar energy, particularly rooftop solar systems.