By Benjamin Cuaresma
MANILA — Electric cooperatives have appealed to the national government to shoulder the financial impact of any move to abolish system loss charges, warning that eliminating the fees without corresponding subsidies could weaken rural power distribution and stall economic growth in the countryside.
The Philippine Rural Electric Cooperatives Association (Philreca) said it supports efforts to reduce electricity costs for consumers but insisted that any legislation removing system loss charges must include government funding to offset the resulting revenue losses of electric cooperatives.
Philreca President Jose Raul Saniel, who also heads Zamboanga del Sur 1 Electric Cooperative (Zamsureco-1), said power distributors serving rural communities could face serious financial strain if the charges are removed without an alternative funding mechanism.
“It should never become a situation where consumers benefit while electric cooperatives are pushed toward financial collapse,” Saniel said during a press briefing. “If cooperatives can no longer sustain their operations, it is the public and the local economy that will ultimately pay the price.”
The proposal gained momentum after President Ferdinand Marcos Jr., in his fifth State of the Nation Address, urged Congress to remove system loss charges as part of broader efforts to bring down electricity rates.
Saniel clarified, however, that Philreca fully supports the removal of the value-added tax (VAT) on system loss charges, describing it as a measure that could ease consumers’ electricity bills without threatening the operational stability of distribution utilities.
He stressed that lawmakers should distinguish between technical and non-technical system losses.
According to Saniel, technical losses are unavoidable because electricity naturally dissipates as it travels through transmission and distribution lines.
“These losses are governed by the basic laws of physics and thermodynamics. No law can completely eliminate them,” he explained.
Non-technical losses, such as power pilferage, illegal connections and metering inaccuracies, can be reduced through stricter enforcement and improved operational efficiency, he added.
Saniel urged Congress to adopt a gradual approach should it decide to reduce or eliminate system loss charges, saying electric cooperatives need sufficient time to adjust without disrupting power services.
Philreca, which represents 121 electric cooperatives nationwide, also argued that system loss charges comprise only a small portion of consumers’ monthly electricity bills—about four to five percent.
Instead, Saniel said policymakers should prioritize reforms that would reduce generation charges, which account for roughly 65 to 70 percent of total electricity costs.
“If the objective is to provide substantial relief to consumers, then attention should be directed toward generation costs because that is where the greatest savings can be achieved,” he said.
He emphasized that meaningful power sector reforms should examine the entire electricity supply chain—from generation and transmission to distribution—rather than focusing solely on system loss charges.
With both chambers of Congress expected to fast-track legislation before the end of the year, Philreca said it is actively participating in discussions with lawmakers, the Department of Energy and the Energy Regulatory Commission to ensure the concerns of electric cooperatives are considered.
Saniel warned that poorly designed reforms could undermine the government’s rural electrification program, particularly in geographically isolated and underserved communities that depend on electric cooperatives for reliable power.
He said cooperatives operate as non-profit distribution utilities tasked with maintaining extensive networks in remote areas, making cost recovery essential to sustaining operations.
“Our role is to bring electricity to rural communities on behalf of the government,” Saniel said. “If policies deprive electric cooperatives of the resources needed to operate efficiently, service quality will decline, investments in the provinces will suffer, and rural development will inevitably slow.”
He maintained that reducing electricity prices should be pursued through balanced reforms that protect consumers while preserving the financial viability of electric cooperatives.
elamigo/xf
