By el Amigo
MANILA, Philippines — Business tycoon Manuel V. Pangilinan has cautioned that removing system loss charges from consumers’ electricity bills could impose billions of pesos in additional costs on power distributors, raising questions about who would ultimately shoulder the financial burden.
Pangilinan, chairman of Manila Electric Co. (Meralco), said system losses are an unavoidable consequence of transmitting electricity through power lines. He explained that electrical resistance naturally results in some power loss, particularly across long transmission and distribution networks.
“It is not a question of inefficiency. It is simply part of the process of delivering electricity,” Pangilinan told reporters during a media briefing on Wednesday.
He stressed that eliminating the charge would require the power industry to absorb costs amounting to tens of billions of pesos, which could threaten the financial viability of utilities if no alternative funding mechanism is put in place.
President Ferdinand Marcos Jr. recently called on Congress to amend the Electric Power Industry Reform Act (EPIRA) to remove system loss charges and the value-added tax imposed on them. The proposal was among the most applauded measures announced during his fifth State of the Nation Address.
The Department of Energy (DOE) estimates that consumers could see their monthly electricity bills reduced by five to ten percent if the charges are abolished.
System loss charges cover both technical losses—such as energy dissipated through power lines and transformers—and non-technical losses caused by electricity theft, illegal connections, defective meters, and billing discrepancies.
For Meralco customers, system loss charges make up roughly five percent of their monthly electricity bills. The company reported a system loss rate of 5.72 percent during the first quarter of 2026, which remains below the regulatory cap of 6.5 percent.
Energy Secretary Sharon Garin said the proposed policy shift may take at least a year to implement as the government must assess the operational and infrastructure requirements of more than 100 electric cooperatives and private distribution utilities nationwide.
Malacañang, meanwhile, clarified that the government is not considering subsidies for power distributors or electric cooperatives. Instead, utilities are expected to improve their systems and minimise losses from power theft and other inefficiencies.
The Philippine Rural Electric Cooperatives Association expressed support for removing the VAT component of the charge but warned that scrapping system loss fees altogether without government assistance could place many electric cooperatives at risk of financial distress.
Despite his concerns, Pangilinan said Meralco remains willing to work with the government on possible amendments to the country’s power industry laws.
elamigo/xf
