Time to amend Epira
Enthusiastic applause and a standing ovation greeted President Marcos’ emphatic call during his State of the Nation Address (Sona) for electricity distributors to stop passing on system losses and the attached value-added tax to consumers already burdened by the highest electricity rates in the region.
“It’s time to stop passing the burden of system loss to consumers … System loss is not the consumers’ fault,” Mr. Marcos declared in Filipino during his penultimate address.
“Therefore, we, their people, request—no, we demand, the immediate amendment of the Epira and to prohibit charging system loss against consumers, including the value-added tax thereon,” Mr. Marcos added, referring to the Electric Power Industry Reform Act.
Mr. Marcos’ call is certainly a much-needed relief as every centavo saved is another centavo that can be channeled to other monthly expenses.
Apart from removing the system loss charges, other measures must be taken to significantly bring down monthly power costs.
The Energy Regulatory Commission (ERC) has also long imposed a cap on the level of system losses that can be passed on to consumers.
Unnecessary costs
For the largest private electric utilities such as the Manila Electric Co. (Meralco), for example, the cap has been set at 5.5 percent since 2021, down from 6.5 percent in 2018 and already deemed efficient compared to utilities in other emerging markets.
For rural electric cooperatives, the limits imposed since 2022 range from 8.25 percent to 12 percent depending on the coverage area.
System losses beyond these levels are not allowed to be charged to the consumers, as regulators recognize that no distribution utility is 100 percent and a certain level of system losses are “inherent” in operations, according to Meralco executive vice president and chief operating officer Ronnie Aperocho.
There is always room, however, for power distributors to be more efficient, especially the rural electric cooperatives that charge even higher rates per kilowatt-hour.
Thus it is a welcome move that the day after the Sona, Energy Secretary Sharon Garin said that the Department of Energy (DOE) would soon meet with the ERC, the distribution utilities, and the electric cooperatives to work together on how to bring down monthly power bills.
The ERC said that it was ready to work with Congress, the DOE, and other industry stakeholders to pursue reforms that would remove unnecessary costs while keeping distribution utilities viable.
Highest in Asia
But while the DOE and the ERC are working to respond to Mr. Marcos directive, they should take his order as a call not just to eliminate system loss charges but to review the entire Epira.
Epira, also known as Republic Act No. 9136, is a landmark 2001 law that privatized and restructured the Philippine power sector into four main segments: generation, transmission, distribution, and supply.
They should determine if it is no longer responsive to today’s needs and then move for the immediate repeal or review of provisions that have contributed to making Philippines’ power costs the highest in Asia, surpassing erstwhile leader Singapore.
The DOE and ERC could exert as much effort on the generation side of the power bill that accounts for the biggest share at around 50 percent.
It could determine, for instance, if there is indeed free market competition for wholesale power that is then distributed to households and commercial and industrial customers given that cross-ownership between power generators and distributors is allowed under Epira.
Do the private electricity distributors get the lowest possible price for their electricity or are there factors that make them ultimately buy power from their affiliates or sister-companies even if the generated power is more expensive?
‘Sweetheart deals’
This is precisely why Philreca party list Rep. Presley de Jesus filed in 2025 a resolution in Congress seeking an amendment to this provision in the Epira, saying that large private electric distributors could forge “sweetheart deals” with affiliated power generators thus giving them control over pricing.
De Jesus said that as long as this practice is not subjected to stricter control, truly competitive power rates will continue to elude consumers. Certainly, this valid concern should be worthy of policy regulators’ response.
The ERC, for its part, could also take the spirit of Mr. Marcos’ Sona directive and go through the books of the distributors and electric co-ops and find out if they are making too much of a profit at the expense of the Filipino consumer.
There are also suggestions that the government look into reforming the country’s electric cooperative system to allow willing investors to take over the administration and operation of problematic co-ops and thus deliver electricity more efficiently and cheaply to the consumers.
Clearly, there are immediate steps that the government can take to finally ease consumers of the burden of high power rates. Removing system loss charges should just be the first of many.
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