CONSUMERS PAY TODAY BECAUSE THE LAW ALLOWS IT

The system-loss charge was not created by Meralco.

It exists because Congress passed laws allowing distribution utilities and electric cooperatives to recover part of their system losses from consumers.

The policy began with Republic Act No. 7832 in 1994. When Congress later passed the Electric Power Industry Reform Act, or EPIRA, in 2001, the practice continued under the country’s restructured power industry.

Here’s how the system works.

Congress passed the law. The Energy Regulatory Commission (ERC) decides how much system loss utilities may charge consumers. Utilities can then include only the approved amount in customers’ electric bills.

The idea behind the policy was simple. No power distribution system delivers every unit of electricity it receives. Some electricity is always lost as it travels through wires, transformers, and other equipment.

Lawmakers, however, also placed limits on how much utilities could recover from consumers.

That raises the question Congress now has to answer.

Should consumers continue paying for even those unavoidable technical losses, or should utilities shoulder the entire cost themselves?

WHAT IS SYSTEM LOSS?

Not every unit of electricity bought by a distribution utility reaches homes and businesses.

Some power is naturally lost as heat while moving through wires, transformers, substations, and other equipment. Engineers call these technical losses.

Other losses happen for reasons that are much harder to defend, including electricity theft, illegal connections, faulty meters, billing errors, poor maintenance, and aging equipment.

Here’s an easy example.

A utility buys 100 units of electricity from a supplier. By the time customers receive their bills, only 95 units appear on their meters. The utility still paid for all 100 units.

Under today’s rules, the ERC allows part of that difference, up to a certain limit, to be recovered from consumers.

If losses go beyond that limit, the excess is generally expected to be absorbed by the utility instead of being passed on to customers.

That’s an important difference.

One issue lawmakers may eventually have to settle is whether unavoidable technical losses should continue to be treated differently from losses caused by theft, weak maintenance, faulty equipment, or poor management.

THE PRESIDENT HAS NOT REMOVED THE CHARGE YET

The President’s SONA did not abolish the system-loss charge.

It announced the direction he wants lawmakers to take.

That does not change the law overnight.

Both the House of Representatives and the Senate still have to debate and pass a bill before consumers see any change on their electric bills.

Several questions also remain unanswered.

Will every type of system loss disappear from the bill?

Will only certain charges be removed?

Will privately owned utilities and electric cooperatives follow the same rules?

Will the changes happen immediately or over several years?

Those answers are not in the SONA.

They will come from whatever bill Congress eventually approves.

REMOVING THE CHARGE DOES NOT REMOVE THE COST

This is where the discussion becomes more difficult.

Even if the words “system loss” disappear from your monthly bill, electricity will still be lost somewhere in the distribution system.

Power will continue to be lost as it passes through equipment.

Electricity theft may still happen.

Old infrastructure will still need repairs and replacement.

Changing the label on the bill does not change those realities.

Meralco has long maintained that it does not earn from the system-loss charge because the money covers electricity that entered its distribution system but could no longer be billed to individual customers.

Whether people agree with that explanation or not, one practical question remains.

If consumers stop paying, who takes over the cost?

Utilities could absorb it themselves.

Government could help smaller electric cooperatives.

Congress could create another way of sharing the expense.

Or regulators could later allow utilities to recover some of the cost through a different charge.

That is why people should pay attention to more than just one line disappearing from the bill.

The important question is whether the cost actually disappears, or simply shows up somewhere else.

THE BIGGER GOAL SHOULD BE REDUCING THE LOSSES

Lower electric bills would certainly help consumers.

But lower bills alone will not solve the actual problem if the same amount of electricity continues to be lost every year.

Old equipment still needs replacing.

Meters still need to be more accurate.

Electricity theft still needs stronger enforcement.

Power lines still need regular upgrades and maintenance.

If lawmakers want lasting reform, they should spend as much time reducing these losses as deciding who pays for them.

That could mean tighter limits, more inspections, stronger action against electricity theft, faster replacement of aging equipment, improved metering, and clear goals for reducing system loss over time.

Otherwise, the debate simply becomes about moving the bill from one pocket to another while the amount of electricity being lost barely changes.