Solon warns: Eagerness to remove system loss charge may be misleading

MANILA, Philippines — A lawmaker has warned his colleagues that too much eagerness or focus on removing system loss charges from electric bills may be misleading people, claiming that some system loss is normal when operational realities are considered.

After the hearing of the House of Representatives’ committee on energy on Wednesday, Pangasinan Rep. Mark Cojuangco said that system loss must not always be perceived as system inefficiency — comparing it to a vehicle that loses part of its fuel to mere heat brought by the combustion system.

Despite this, Cojuangco noted that taxi drivers are still allowed to charge passengers for the entire trip, and not for the fuel it actually consumed.

“Ibig sabihin, 70 percent ng energy ng gasolina ay natatapon bilang init ng makina, exhaust, etc. Ibig sabihin ba nitong system loss na reklamo natin ay bawal maningil ang taxi driver ng kabuuan ng kanyang gasolina nya dahil 70% ay natapon sa system loss?” Cojuangco asked.

(Does this mean that since 70 percent of the energy of gasoline is wasted as heat of the engine, exhaust, etc, does this system loss that we are complaining about mean that taxi drivers cannot charge the amount corresponding to the entirety of his fuel because 70 percent is considered as system loss?)

“It doesn’t make sense. I hope we can soul-search and look at this dispassionately because we might be misleading our people,” he added.

According to Cojuangco, what the people should check is if a distribution utility (DU) comes near the theoretical maximum efficiency expected to know if “the DU is truly doing its best to reduce technical system losses.”

APEC party-list Rep. Sergio Dagooc, on the other hand, said that talks about the removal of system loss should consider the regulatory framework governing electric cooperatives, as it is different from the guidelines that apply to DUs.

Dagooc explained that electric cooperatives are non-stock, non-profit entities owned by their member-consumers, while DUs are investor-owned — which means DUs may remain viable after the removal of system loss charges, but electric cooperatives do not have the same luxury.

Energy Regulatory Commission (ERC) Chairperson Atty. Francis Saturnino Juan agreed with Dagooc’s view, saying that electric cooperatives could face cash flow constraints if system loss charges are removed instantly.

“If system loss is removed without corresponding adjustments, the funds intended for salaries and maintenance will instead be used to absorb those costs,” Dagooc said.

“Distribution utilities do not earn from system loss,” he added.

After the hearing on the push to remove system loss charges — a proposal raised by President Ferdinand Marcos Jr. in his fifth State of the Nation Address (Sona) last July 27 — several lawmakers called for more inclusive discussions, noting that the talks about amending the Electric Power Industry Reform Act (EPIRA) should involve more than one company.

According to Akbayan party-list Rep. Dadah Kiram Ismula, the discussions should go beyond Manila Electric Company (Meralco), as there are other electric distribution utilities (DUs) that also charge system loss dues to consumers.

During the hearing, committee chairperson and Palawan Rep. Jose Alvarez clarified that there are two kinds of system losses charged to consumers — a technical system loss (TL) and non-technical system loss (NTL).  Of the two, Alvarez said that charges due to NTL can easily be removed.

But Cagayan de Oro City Rep. Rufus Rodriguez said that Congress cannot just simply abolish system loss — TL or NTL — as further studies should be done, and the Energy Regulatory Commission (ERC) opinion on the matter should be considered.

Since Marcos’ Sona speech, different proposed measures seeking to remove system loss charges on electric bills have been filed before the House.

Last July 30, Navotas Rep. Toby Tiangco said he has refiled House Bill (HB) No. 10273 or the proposed System Loss Charges Abolition Act of 2026, noting that households must not be made to shoulder costs stemming from inefficiencies in the power distribution system.

Aside from Tiangco, Bagong Henerasyon party-list Rep. Robert Nazal also filed his own version, contained in HB No. 10357.

READ: Tiangco, other solons file House bills vs system loss

However, there are other versions of the proposed measure.  Last July 31, Quezon City Rep. Patrick Michael Vargas said he has filed HB No. 10306, which also seeks to amend Epira.

However, Vargas’ bill differs in the sense that it does not seek to completely remove system loss charges, but to fix the structure regarding the collection of such fees.

Section 4 of HB No. 10306 creates a recoverable system loss charge, which places a cap on how much distribution utilities (DUs) can collect.

Under the proposal, the maximum system loss charge that DUs can impose is at 4 percent of the total electricity purchased for companies operating in urbanized and highly urbanized areas, and 6 percent those in rural or missionary areas.

Section 5 of the bill prohibits companies from recovering or imposing system loss charge based on non-technical losses like theft and system inefficiency.

READ: Solon urges colleagues: Start tackling bill Epira amendments

Moreover, if Vargas’ bill is used, there will be a gradual reduction of system loss limits — down from 4 percent to 3 percent for urban areas within two years after the effectivity of the bill, should it be enacted; and down from 6 percent to 5 percent for rural areas, still under the same timeframe.

Epira is a landmark 2001 law that privatized and restructured the Philippine power sector into four main segments: generation, transmission, distribution, and supply.  Under this, distribution utilities are allowed to charge a portion of system loss from consumers through a system loss charge reflected in monthly electricity bills.

Amid Marcos’ call for the removal of system loss charges, Meralco said that some system losses are an “inherent” part of delivering electricity.

Last July 29, Meralco chairperson and businessman Manuel Pangilinan questioned Marcos’ proposal to scrap the system loss charge, saying the removal will entail costs “too big” for power industry players to shoulder.

READ: Scrapping ‘system loss’ charge ‘too big’ a cost for industry – MVP 

“When you push electricity through the copper wires, there will be a resistance. The longer the lines are, the more the losses will be,” Pangilinan said.

“It is not a question of inefficiency. It is just the way it is, and there’s a cost to it. So the real question is, who bears the cost?” he added. /jpv