DOE: Scrapping ‘system loss’ charge may take a year
The government will need about a year to fully remove the controversial system loss charge from consumers’ electricity bills, with the Department of Energy (DOE) saying sweeping infrastructure upgrades, regulatory changes and tougher measures against electricity theft must first be completed before the policy can take effect.
Energy Secretary Sharon Garin said on Tuesday the complete removal of system loss charges could be achieved by 2027, before President Marcos delivers his next State of the Nation Address (Sona), although implementation would begin immediately through discussions with the Energy Regulatory Commission (ERC) and the National Electrification Administration (NEA).
“It’s not that easy. We can issue policies but the implementation side of the electric cooperatives… it will really take time,” Garin told reporters in a briefing.
Road to reform
She said the DOE, ERC and NEA would assess more than 100 electric cooperatives and private distribution utilities to determine the investments needed to reduce recoverable system losses.
“Because the inefficiency of an electric cooperative or distribution utility should not be compensated for by the people who pay for electricity,” Garin said.
The timetable highlights the challenge facing the administration after Mr. Marcos, in his fifth Sona on Monday, urged Congress to immediately amend the Electric Power Industry Reform Act (Epira) to stop distribution utilities from charging consumers for system losses and the value-added tax (VAT) imposed on those charges.
“It is not the consumer’s fault that a system loss occurred,” the President said in Filipino, arguing that households should not pay for electricity that never reaches them.
System loss is the difference between electricity entering a distribution network and the amount eventually billed to customers. It covers technical losses caused by resistance in power lines, transformers and aging equipment, and nontechnical losses from electricity theft, illegal connections, defective meters and billing errors.
Energy Undersecretary Mario Marasigan said most nontechnical losses stem from electricity pilferage through illegal tapping.
Garin clarified that Mr. Marcos’ directive covers the entire system loss charge—both technical and nontechnical losses—as well as the VAT imposed on that charge.
Under the 25-year-old Epira, the ERC sets the maximum level of system losses utilities may recover from consumers. Losses beyond the regulatory cap must be absorbed by the utilities.
Modernization needed
The DOE said amendments to the law should protect consumers while preserving the financial viability of distribution utilities and encouraging investments in power infrastructure.
Many electric cooperatives would have to modernize power lines, substations, transformers and metering systems to reduce technical losses, with the required capital expenditures subject to ERC approval.
Once implemented, the DOE estimates electricity bills could fall by 5 to 10 percent, depending on the distribution utility.
For customers of Manila Electric Co. (Meralco), system loss charges account for about 5 percent of monthly bills. Meralco said its system loss rate stood at 5.72 percent in the first quarter of 2026, below the ERC’s 6.5-percent cap. Some electric cooperatives, however, post system losses as high as 16 percent, Garin said.
Meralco said it respects the President’s policy direction and is ready to participate in discussions on proposed Epira amendments, but stressed that “a certain level of technical losses remains inherent in operating an electric distribution system.”
Executive vice president and chief operating officer Ronnie Aperocho said the utility has invested heavily in network modernization and operational efficiency to keep system losses below the regulatory ceiling. He added that Meralco does not earn from system loss charges, saying the collections are remitted to electricity suppliers and the National Grid Corporation of the Philippines.
ERC Chair Francis Saturnino Juan said regulators are studying alternative mechanisms that would protect consumers while preserving the financial viability of distribution utilities.
Consumers want more
Consumer groups welcomed the proposal but said it addresses only a fraction of electricity costs.
Power4People Coalition convener Gerry Arances described the removal of system loss charges as “a step in the right direction,” but said generation charges—which account for 45 to 65 percent of Meralco bills—remain the biggest contributor to high electricity prices.
He said the country’s heavy dependence on imported coal and liquefied natural gas continues to drive up power costs and expose consumers to volatility in global fuel prices.
“What we need to address is the source of electricity. We really need to change sources,” said Arances, who also heads the Center for Energy, Ecology, and Development.
Consumer watchdog Consuma PH also urged Malacañang to present a clear implementation roadmap. Its spokesperson, former 1Tahanan party list Rep. Nathan Oducado, said consumers should not shoulder inefficiency or electricity theft and called for safeguards to prevent utilities from recovering lost revenues through higher charges elsewhere or reduced investments.
Senate push
The President’s call also prompted fresh legislative action in the Senate.
Senate energy committee chair Erwin Tulfo filed Senate Resolution No. 537 seeking an inquiry into the practice of passing system loss charges to consumers. He also introduced Senate Bill No. 2239, or the Energy Tax Repeal Act, and Senate Bill No. 2340 exempting system loss charges from the 12-percent VAT.
Tulfo said the energy tax, originally intended to promote conservation, has become an unnecessary burden on households. He also announced that the Senate energy committee would resume hearings on Epira amendments on July 30, expressing hope the measures could be approved before yearend.
“Why are consumers being charged for systems loss? They shouldn’t be. I think that’s wrong,” he said.
Sen. JV Ejercito likewise filed Senate Bill Nos. 2342 and 2343, which would prohibit distribution utilities and electric cooperatives from passing system losses to consumers and remove the 12-percent VAT on electricity bills.
“Consumers should only pay for the electricity they actually use and the services they receive. If you didn’t use the electricity, you shouldn’t pay for it,” Ejercito said.
The flurry of proposals signals growing congressional support for one of the administration’s key energy reforms, although the DOE has made clear that translating the President’s directive into lower electricity bills will require changes to the law, significant infrastructure investments in aging power networks and a lengthy transition before consumers experience the full savings.
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