By Sheldeen Joy Talavera, Reporter
ENERGY STAKEHOLDERS backed President Ferdinand R. Marcos, Jr.’s call to amend the 25-year-old power industry reform law but cautioned against a proposal to remove system loss charges from consumers’ electricity bills without first determining how the costs would be recovered.
Manila Electric Co. (Meralco), the country’s largest private electric distribution utility, said it is willing to take part in the discussions for the proposed amendments to the Republic Act No. 9136 or Electric Power Industry Reform Act (EPIRA) of 2001.
However, the company urged lawmakers to consider the impact of scrapping system loss charges, considering it “inherent” in operating an electric distribution system.
“We look forward to productive discussions which we hope will carefully consider the impact of reforms on the operations and sustainability of distribution utilities,” Meralco Executive Vice-President and Chief Operating Officer Ronnie L. Aperocho said in a statement on Tuesday.
Mr. Aperocho said the company has kept its system losses well below the cap set by the Energy Regulatory Commission (ERC) through investments in system loss management, network modernization, and operational efficiency.
Meralco charges a 5% system loss from its customers as part of the generation and transmission costs paid to power companies and the National Grid Corp. of the Philippines.
“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,” he said.
The Meralco official said such 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.
The Philippine Rural Electric Cooperatives Association, Inc. (PHILRECA), the national organization of 121 electric cooperatives in the Philippines, said it can only support the removal of system loss charges if the National Government would directly shoulder these costs through a dedicated subsidy mechanism.
“System losses on rural distribution networks — arising from extended feeder lines and challenging terrain — are governed by the law of thermodynamics rather than inefficiency,” PHILRECA said in a statement.
The group said disallowing the recovery of system loss without subsidy would bankrupt nonprofit electric cooperatives.
“Should the government choose not to shoulder these costs, we move for a comprehensive and holistic review on the total prohibition and urge Congress to instead adopt a performance-driven transition model with customized, feeder-specific technical loss caps set by the ERC alongside government-backed funding for grid upgrades and anti-pilferage enforcement,” it said.
In his fifth State of the Nation Address on Monday, Mr. Marcos called on lawmakers to approve a bill removing system loss charges from consumers’ electricity bills.
The system loss charge is part of the generation, and transmission costs paid to power producers and the grid operator. It covers electricity losses from technical and nontechnical factors like illegal connections.
The EPIRA allows the recovery of system losses from consumers. Under its guidelines issued in 2017, private distribution utilities should not collect system loss charges higher than 5.5%, while electric cooperatives are only allowed by as much as 8.25%. Any costs above the cap should be shouldered by utilities.
ERC Chairperson and Chief Executive Officer Francis Saturnino C. Juan said the agency is open to lowering the cap if it is based on technical considerations.
“Yes, but it has to be supported by the technical considerations as required in the current Section 43(f) [of EPIRA]. We cannot do it arbitrarily,” Mr. Juan told BusinessWorld.
Mr. Juan said there has to be an amendment to the EPIRA as the ERC cannot just unilaterally do away with the recovery and imposition of the system loss charge.
“We will follow what is in the law. If it already prohibits the charging of system loss or recovery of costs associated with it, we will comply. The question is, are the utilities ready? Will their operations not suffer,” he said.
At a briefing on Tuesday, Energy Secretary Sharon S. Garin said charges arising from electricity losses due to pilferage or inefficiency should be absorbed by the distributors.
“Consumers should not continue to bear the burden of avoidable system losses that can be reduced through better infrastructure, stronger operational discipline, and more effective regulation,” she said.
Ms. Garin said there are some “inefficient” electric cooperatives, with systems loss level hitting as high as 16%.
She said the Energy department is working with the ERC and the National Electrification Administration on how to implement the removal of system loss charges from power bills.
Noel M. Baga, co-convenor of the Center for Energy Research and Policy, said scrapping system loss charges — along with the value-added tax — would directly reduce households’ monthly electricity bill.
“This matters because Philippine residential rates are the highest in ASEAN (Association of Southeast Asian Nations)and have been among the highest in Asia for years,” Mr. Baga told BusinessWorld.
Consumer group Power for People Coalition said the proposed move to eliminate system loss charges is welcome, noting that consumers have long called for the removal of what they described as “unfair charges” in electricity bills.
“The administration cannot expect a pat on the back for too little too late — especially when it keeps ignoring the biggest extra charge in our power bills: high fuel costs,” said P4P Convenor Gerry C. Arances.
“Because of our country’s grave dependence on imported coal and gas, consumers are paying for all-time high power generation rates, no thanks to power companies who are enabled to pass these higher costs onto consumers,” he added.
Jose Enrique “Sonny” A. Africa, executive director of the think tank IBON Foundation, said that instead of overstating the gains of scrapping a small portion of electricity bills, any changes to EPIRA should focus on addressing the deeper structural factors that drive high electricity prices.
Meralco’s controlling shareholder, Beacon Electric Asset Holdings, Inc., is partly owned by PLDT, Inc. Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has an interest in BusinessWorld through the Philippine Star Group, which it controls.
