Manny Pangilinan asks who pays if system loss charges are removed

Manila Electric Company (Meralco) chairman and CEO Manuel V. Pangilinan on Wednesday asked who should shoulder the cost of system loss charges if these are removed from the bills of electricity consumers.

In his fifth State of the Nation Address, President Ferdinand “Bongbong” Marcos Jr. called on Congress to amend the Electric Power Industry Reform Act (EPIRA) and put a stop to system loss charges, including its accompanying value-added tax (VAT), from being passed on to consumers.

“It's a big bill for the industry because it cuts across generation, transmission, and distribution. The bill is too big for the industry to absorb all of it. So, there's got to be that discussion. It's going to impact the entire power industry in this country,” Pangilinan said.

“It is not a small matter… So, who's going to pay for that? The industry? It's going to cost tens of billions of pesos. Will you not survive?” the Meralco chairman asked.

System loss is the difference between electricity generated by power plants and electricity consumed by and billed to end-customers.

Simply put, as electricity travels far distances from power plants to homes and businesses, energy is lost due to both “technical” and “non-technical” factors.

Technical factors, including electricity flowing through wires that generate heat, power passing through multiple transformers, and voltage and stability concerns in the power system, also cause minor losses.

Non-technical causes, on the other hand, include electricity theft or illegal connections.

The Department of Energy (DOE) said the National Electrification Administration (NEA) may provide loans to help electric cooperatives upgrade their facilities and reduce system losses amid Marcos’ call to remove system loss charges from consumers’ electric bills.

'Common operational aspect'

In a statement issued Tuesday, Meralco executive vice president and chief operating officer Ronnie Aperocho said that while the company respects Marcos’ policy direction, “it is important to recognize that system loss is not unique to any distribution utility but is a common operational aspect of the delivery of electricity — which affects the entire power industry.”

Current laws such as the EPIRA and Republic Act No. 7832 or the Anti-Pilferage of Electricity and Theft of Electric Transmission Lines/Materials Act allow distribution utilities to recover a portion of system loss from end-consumers through system loss charge reflected in monthly electricity bills.

Aperocho said the power distribution utility “will actively participate in the discussions as the proposed amendments to the EPIRA are deliberated.”

“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,” he added.

'Technical losses inherent'

Based on Meralco’s breakdown of charges, the system loss charge, a pass-through charge, meaning it does not go directly to the company, accounts for 5% of its customers’ monthly electricity bill.

“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,” Aperocho said.

“For Meralco’s part, we have consistently invested in system loss management initiatives, network modernization, and operational efficiencies — which enable us to maintain our system loss well below the 6.5% cap set by the ERC,” he said.

The Meralco official said the company will continue working closely with the government, regulators, legislators, and other industry stakeholders in pursuing reforms that enhance consumer protection and strengthen the power industry. –NB, GMA News