Cheaper power bills, but at what cost? Meralco weighs in on system loss charge

National

CUTTING the system loss charge may lighten electricity bills, but Manila Electric Co. (Meralco) says the proposed reform should not come at the expense of the investments needed to keep the power grid reliable.

Meralco executive vice president and COO Ronnie Aperocho said the utility was ready to participate in discussions on proposed amendments to the Electric Power Industry Reform Act (EPIRA), urging a careful assessment of how the changes could affect distribution utilities (DUs).

“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 in a Philstar report.

He said reforms should provide consumer relief while allowing DUs and electric cooperatives (ECs) to continue investing in critical infrastructure, system resilience and reliable electricity service. He also noted that system loss is an industrywide operational concern and that some technical losses are inherent in electricity distribution despite investments in network upgrades and loss-reduction technologies.

System loss refers to electricity lost before it reaches consumers, with the cost currently recovered through a separate line item on power bills.

In Meralco’s franchise area covering Metro Manila and nearby provinces, system loss typically accounts for around five percent of electricity bills, or about P5 for every P100 paid. Meralco said its network modernization and operational efficiency efforts have kept its system loss below the 6.5-percent cap set by the Energy Regulatory Commission (ERC).

ERC chairman and CEO Francis Saturnino Juan said Congress must first amend Section 43(f) of EPIRA before the charge can be removed, as the ERC cannot eliminate it on its own under the existing law.

“Under this provision, the ERC cannot just unilaterally do away with the recovery and imposition of the system loss charge,” Juan said in the same article.

Energy Secretary Sharon Garin has not set a definite timeline for the removal, saying the process could take about a year.

The Philippine Rural Electric Cooperatives Association (PHILRECA) supports removing VAT on system loss charges but warned that scrapping the charge without a direct government subsidy could threaten ECs’ financial viability. It said technical losses are unavoidable in serving far-flung areas and constitute an operational cost, not additional income.

PHILRECA urged Congress and tax authorities to consider zero-rating or tax exemptions across the electricity supply chain, saying VAT relief should not simply shift costs elsewhere.

The National Grid Corp. of the Philippines (NGCP) said it does not charge consumers for transmission technical system loss.

Shares of Meralco fell 4.66 percent to P562, while Synergy Grid and Development Philippines Inc., NGCP’s listed parent, declined 0.36 percent to P28.

Globalinks Securities and Stocks Inc. head of sales trading Toby Allan Arce said regulatory uncertainty makes it harder for investors to estimate companies’ future earnings and returns.(MyTVCebu)