CERA backs uniform 5.5% system loss cap instead of scrapping charge

MANDAUE CITY, Cebu – A local consumer group is urging the Energy Regulatory Commission (ERC) and the national government to review the system loss cap imposed on power distributors, proposing a uniform 5.5-percent cap for both private distribution utilities (DUs) and electric cooperatives (ECs).

In a statement, the Cebu Electricity Rights Advocates (CERA) said existing ERC regulations allow private DUs such as Visayan Electric (VECO) and Mactan Electric Company (MECO) to recover only up to 5.5 percent of system loss from consumers.

However, CERA noted a significant disparity, as electric cooperatives such as CEBECO I, II, and III are allowed to recover up to 12.5 percent of their system loss.

READ: DOE says scrapping system loss fee may take one year

“We found that one primary reason for the increasing electricity rates among electric cooperatives is their high system loss cap. These losses are then transferred to consumers, resulting in disproportionately high electric bills. Why should consumers living in cooperative areas carry a heavier financial burden for technical inefficiencies than their neighbors in private distribution utility territories?” said Nathaniel Chua, CERA Convenor.

Chua said this dual-standard policy “unfairly burdens consumers in cooperative franchise areas while also trapping electric cooperatives in a cycle of underinvestment and deteriorating infrastructure.”

What is system loss?

System loss refers to electricity lost during distribution due to technical factors, such as heat dissipation in power lines, as well as non-technical causes, including electricity pilferage and illegal connections.

Based on the January 2026 billing data, CERA said a household consuming 200 kilowatt-hours (kWh) of electricity served by a private distribution utility would pay a maximum system loss charge of P140.

In contrast, a household consuming the same amount of electricity but served by an electric cooperative could pay up to P280 because of the higher allowable system loss cap.

CERA also warned that the current policy undermines the financial viability of electric cooperatives.

“While the higher cap allows cooperatives to recover more system losses from consumers, any actual losses exceeding the 12.5% threshold must be absorbed by the cooperative, reducing funds intended for system upgrades, maintenance, and workforce support,” read part of the statement.

Chua said the policy creates a “self-perpetuating cycle” that could eventually worsens service reliability.

“When actual losses exceed the cap, the financial hit is absorbed by the cooperative. This drains the funds meant for crucial capital expenditures, system improvements, and even manpower salaries and support. It creates a vicious cycle. The cooperative loses the budget needed to upgrade aging lines, which in turn causes even higher technical losses the following month. The generous 12.5% cap is acting as a crutch that enables poor infrastructure,” he said.

System loss cap

In his State of the Nation Address (SONA), President Ferdinand Marcos Jr. urged Congress to amend the Electric Power Industry Reform Act (Epira) to eliminate system loss charges passed on to electricity consumers.

Marcos argued that consumers should not shoulder the cost of inefficiencies in the power sector.

While welcoming the President’s proposal, the Cebu-based group said abolishing system loss charges altogether could face strong resistance from the power industry, potentially delaying reforms that would benefit consumers.

Instead, CERA is pushing for what it described as a more practical and immediately attainable measure – setting a uniform 5.5-percent system loss cap for all electricity distributors.

“A complete removal of system loss charges is an ideal long-term goal, but it will undoubtedly be met with heavy resistance, delaying the help that consumers need right now. Leveling the cap at 5.5% is a fairer, more realistic compromise. It is easier to implement, forces cooperatives to urgently prioritize system modernization rather than relying on a high cap, and most importantly, it immediately protects provincial consumers from paying for ‘ghost electricity’ they never used,” Chua said.

CERA underscored the urgent need to address the disparity in system loss caps, citing Cebu’s tightening power supply conditions and persistently high electricity costs that continue to strain household budgets and erode the province’s economic competitiveness.

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