Meralco flags huge cost risk in plan to remove system loss charges

National

WHAT could lower electricity bills for millions of Filipinos could also saddle power distributors with tens of billions of pesos in costs, Meralco chair Manuel V. Pangilinan warned.

Pangilinan pushed back against President Ferdinand Marcos Jr.’s proposal to remove system loss charges from electricity bills, saying electricity losses during transmission remain a cost that must be shouldered by someone.

“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 told reporters in a media briefing, as quoted by the Inquirer.net.

He said system loss is not necessarily a sign of inefficiency but a consequence of transmitting electricity, adding that the costs would be too large for the power industry to absorb on its own.

Pangilinan said the burden could reach tens of billions of pesos, raising the question of who would ultimately pay if consumers were no longer charged for system losses.

His remarks came two days after Marcos, in his fifth State of the Nation Address, called on Congress to amend the Electric Power Industry Reform Act and stop distribution utilities from charging consumers for system losses and the VAT imposed on them.

“It is not the consumer’s fault that a system loss occurred,” Marcos said.

The Department of Energy estimates removing the charge could cut electricity bills by 5 to 10 percent, depending on the distribution utility. System loss covers technical losses from power lines, transformers and aging equipment, as well as nontechnical losses such as electricity theft, illegal connections, defective meters and billing errors.

Meralco’s system loss charge accounts for about 5 percent of monthly bills. Its system loss rate stood at 5.72 percent in the first quarter, below the 6.5-percent cap set by the Energy Regulatory Commission. Some electric cooperatives, however, report losses as high as 16 percent.

Energy Secretary Sharon Garin said implementation could take about a year as the government assesses infrastructure needs and upgrades involving more than 100 electric cooperatives and private distributors.

Energy Undersecretary Rowena Cristina Guevara said the government would seek loans for cooperatives, while Malacañang said subsidies for utilities were “not being discussed.”

“What the President wants is to remove this extra cost from our people—not to shift the burden either to consumers or to utility companies,” Palace press officer Claire Castro said in the same article.

The Philippine Rural Electric Cooperatives Association supported removing VAT on system loss charges but warned that scrapping the fee without government support could put cooperatives at risk of bankruptcy. It called technical system loss an inherent cost of serving remote communities and urged tax relief that would be “real tax relief, not a hidden cost transfer.”(MyTVCebu)