Meralco CEO Manny Pangilinan asks: Who will pay for proposed system loss charge removal?

Meralco Chairman and CEO Manuel V. Pangilinan raised concerns over proposals to remove system loss charges from electricity bills, questioning who will absorb the financial burden.

In a press conference on Wednesday, Pangilinan stated that while Meralco will cooperate with the government in reviewing potential amendments to the Electric Power Industry Reform Act of 2001—as called for by President Ferdinand Marcos Jr. during his recent State of the Nation Address—physically eliminating technical losses is impossible due to natural electrical resistance.

“Any operation that involves transmission from point A to point B will involve some losses. That’s just the way it is,” Pangilinan said. “When you push electricity through copper wires, there will be a resistance. The longer the lines are, the higher the losses will be.”

"It is not a question of inefficiency, it’s just the way it is. There’s a cost to it. So, the real question is, who bears the cost?" he said.

While removing these charges could cut consumer rates by 5% to 10%, shifting the cost entirely away from end-users poses a major financial risk to the energy sector.

"If they were to say January 1, no more system losses, we will. And they're telling us to eat the losses arising from the system losses within our network. There are also system losses from the gate of the plant, from the grid to Meralco," he added.

“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,” said Pangilinan.

During his SONA on Monday, Marcos gained loud and extended applause when he demanded the removal of systems loss charges in electricity bills.

"Panahon na para tanggalin na natin ang systems loss na pinapasa sa consumer," Marcos said. "Pinapasa ito sa consumer at kinakarga sa bill, na pinapatungan pa ng value-added tax. Hindi naman kasalanan ng consumer kung bakit nagkaroon ng systems loss. Kaya hindi naman tama na kailangan sila pa ang pagbabayarin dito," he said.

"Therefore, we, the people, request, no, we demand the immediate amendment of the EPIRA," he added.

According to the Supreme Court e-Library, EPIRAwas put in place to protect the public interest in relation to rates and services of electric utilities.

Energy Secretary Sharon Garin said on Tuesday told reporters that removing it "will really take time."

“It’s not that easy. We can issue policies but the implementation side of the electric cooperatives… it will really take time,” Garin said, adding that the DOE, ERC, and NEA will need to assess electric cooperatives and private distribution utilities to determine the capital expenditures needed to reduce recoverable system losses.

“The inefficiency of an electric cooperative or distribution utility should not be compensated for by the people who pay for electricity,” Garin said.