Beyond system loss: We need system change

President Marcos’ call in his fifth State of the Nation Address (Sona) to stop passing system loss charges—and the corresponding value-added tax (VAT)—to electricity consumers is long overdue. But unless it is followed by immediate legislative action, it risks becoming another applause line that fades once the speeches end.

The proposal is hardly new. As early as 2015, together with fellow Bayan Muna party list Rep. Neri Colmenares and other Makabayan bloc lawmakers, we filed bills exempting system loss charges from VAT. In 2017, House Bill No. 1616, which we also principally authored, was even approved on third reading in the House of Representatives. The legislative blueprint has existed for years. What has always been missing is political will.

If Malacañang is serious about lowering electricity costs, it should certify the necessary measure as urgent. Consumers need a law, not another promise.

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The principle is straightforward: people should not pay for electricity they never consumed. Yet under the country’s power regime, households continue to shoulder part of the cost of technical losses and power theft—expenses distribution utilities are expected to minimize. Even with regulatory limits, these charges can add around P100 to P140 a month, excluding VAT, for an average household consuming 200 kilowatt-hours. For families already burdened by rising food, transport, and education costs, that is money they cannot afford to lose.

The debate that followed the Sona exposed a deeper problem. When the Energy Regulatory Commission chair Francis Saturnino Juan raised concerns about who would absorb the cost if system loss charges were removed, it revealed how policy has long been framed—not from the perspective of consumers, but from that of power utilities and government revenues.

The answer should be obvious. System loss is a normal business risk that should be borne by the companies earning billions from the industry, not by ordinary consumers. Meralco posted a consolidated core net income of P50.57 billion in 2025, Aboitiz Power earned P33.1 billion, and San Miguel Global Power reported P48.3 billion. In every other business, operational losses are treated as part of the cost of doing business. Power companies should not be exempt from that basic rule while their customers subsidize their inefficiencies.

But removing system loss charges addresses only one symptom. The real problem is the Electric Power Industry Reform Act (Epira) of 2001.

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Epira promised competition and lower electricity rates through privatization and deregulation. More than two decades later, Filipinos continue to pay some of the highest electricity prices in Asia while the industry remains concentrated in the hands of a few conglomerates. Instead of creating a genuinely competitive market, Epira turned electricity into a highly profitable commodity where corporate earnings are protected while operational risks are transferred to consumers.

The state has likewise retreated from its responsibility to ensure affordable electricity. Government has increasingly acted as regulator rather than provider of an essential public service, often appearing more concerned with investor confidence and tax collections than consumer welfare.

The same imbalance is evident in the gradual corporate takeover of electric cooperatives. Created as nonstock, nonprofit utilities owned by consumers, many have since fallen under the control of private corporations through joint ventures, franchise acquisitions, and other privatization schemes. As profit replaces public service, consumers lose both affordable electricity and meaningful participation in decisions affecting their own utilities.

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Ending system loss charges is therefore only a beginning. Congress must revisit—and, if necessary, repeal or substantially amend—the anti-poor Epira. The power sector needs reforms that strengthen electric cooperatives, expand public participation, impose stricter regulation, and prohibit utilities from passing avoidable business losses to consumers.

The President’s Sona should not be remembered for a popular promise but for whether it finally leads to meaningful reform. Filipinos deserve more than relief from a single item in their monthly electric bill. They deserve an energy system where electricity is treated as an essential public service, not merely a source of guaranteed private profit.

Until that happens, consumers will continue paying for a power regime that privatizes profits while socializing losses.

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Carlos Isagani Zarate is a Mindanao-based public interest lawyer and former three-term member of the House of Representatives representing the Bayan Muna party list. He is currently the senior legal advisor of the Klima Center of the Manila Observatory and senior partner of the La Viña Zarate and Associates (LVZ Law).