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The push to lower electricity bills has put system loss charges under the spotlight, but the issue is more complicated than simply removing a line item from consumers’ bills. System losses are an inherent part of power distribution, while the costs associated with them still have to be recovered somewhere.
The Philippines has also made significant progress in reducing system losses over the past two decades, suggesting they are not the main driver of today’s high electricity prices. The bigger question, then, is what is actually keeping power costs high—and whether current policies are addressing those underlying pressures.
As the debate moves forward, the focus should shift from eliminating one charge to understanding the broader forces shaping electricity prices and identifying where meaningful reductions can be made.
(Also read: Visayas’ Latest Red Alert Signals Power Supply Crisis Is Far From Over)
Finding a Better Path to Lower Electricity Bills
Manila Bulletin’s Myrna Fernandez pointed to a troubling possibility: removing system loss charges may offer consumers only the appearance of relief while creating new risks. The underlying cost would still have to be recovered elsewhere, while an abrupt change in policy could unsettle investors and weaken confidence in the power sector.
“Higher uncertainty entails a heftier risk premium, which redounds to more expensive financing and ultimately higher electricity costs passed on to consumers,” she highlighted. “The final reckoning: a policy designed to make power cheaper could end up making the entire electricity system far more prohibitive.”
While the President’s SONA pledge has renewed scrutiny of electricity prices, it also highlights a broader responsibility: ensuring consumers get reliable power while avoidable costs are addressed through better regulation, management, and investment.
Against this backdrop, several measures could offer a more practical path toward lowering electricity bills without compromising the reliability of the power system.
Expanding Power Supply
The congressional hearing into the Luzon and Visayas blackouts in May offered a telling indication of where the country’s power problem lies. The National Grid Corporation of the Philippines (NGCP) cited insufficient energy supply as a key concern, with generation problems accounting for 235, or 96.7%, of the 243 red alerts recorded from 2016 to 2025.
That finding adds weight to a broader argument: if the country wants more reliable and potentially more affordable electricity, expanding supply must be part of the solution. The Philippines generated just 129 terawatt-hours (TWh) in 2025, well below Thailand’s 200 TWh, Malaysia’s 210 TWh, Taiwan’s 289 TWh, and Vietnam’s 329 TWh.
But increasing capacity is not simply a matter of announcing new projects. The timeline matters. Solar and wind farms can potentially be built within 12 to 24 months, while combined-cycle gas plants typically require two to four years. Modern coal plants take longer, while nuclear facilities can take six to seven years to construct, excluding lengthy planning and licensing periods.
That means pursuing several options at once. Grid-scale solar paired with battery and pumped hydropower can extend renewable power into evening hours, while developing indigenous gas and other energy resources could reduce exposure to imported fuels. Existing hydropower facilities also offer opportunities for rehabilitation and expansion.
Nuclear power could eventually provide stable, round-the-clock electricity, particularly as demand from industries such as data centers grows. But its long development timeline means it cannot address near-term supply constraints.
And then there is coal, which remains difficult to overlook. Despite accounting for less than 40% of installed capacity, coal generated nearly 60% of the country’s electricity in 2025. In the words of Minimal Government Thinkers Founder Bienvenido Oplas, “stop or temper the noise on early decommissioning of coal plants.”
The immediate priority, therefore, is to bring viable capacity online as quickly as possible while building a more diverse and resilient power system for the years ahead.
Reviewing Government-Imposed Charges
In a statement issued in May, the Department of Energy (DOE) said tax relief could provide significant relief to households and businesses struggling with high electricity costs.
“The DOE recognizes that proposals to suspend, reduce, or remove the VAT on electricity may help reduce power costs for consumers,” it stated. “Consistent with its mandate to ensure secure, reliable, and affordable electricity, the DOE supports measures that can ease the burden on Filipino households and businesses.”
The Philippine Rural Electric Cooperatives Association (Philreca) also supported removing the value-added tax (VAT) on system loss charges but cautioned that eliminating the charge, without government support, could leave some electric cooperatives (ECs) facing financial collapse.
The Energy Regulatory Commission (ERC) is moving to remove VAT on system loss charges, a move it estimates could save consumers about ₱6 billion. Under its draft resolution, the charges would be treated as government-mandated costs and excluded from the gross receipts of generation companies, distribution utilities and the grid operator. ERC Chair Francis Saturnino Juan said system losses cost around ₱50 billion annually, underscoring the potential savings for consumers.
The Energy Regulatory Commission (ERC) is moving to remove VAT on system loss charges, a move it estimates could save consumers about P6 billion. Under its draft resolution, the charges would be treated as government-mandated costs and excluded from the gross receipts of generation companies, distribution utilities and the grid operator. ERC Chair Francis Saturnino Juan said system losses cost around P50 billion annually, underscoring the potential savings for consumers.
Meanwhile, Meralco Vice President Joe Zaldarriaga wrote that reducing electricity bills also means looking beyond generation and distribution costs to the charges built into consumers’ monthly bills. “Filipinos pay 12 percent value-added tax on several components of the electric bill,” he noted. “For many households, this can amount to thousands of pesos each year.”
Other government-mandated fees fund rural electrification, renewable energy programs, and legacy costs from the former National Power Corporation (Napocor).
A broader review of these charges could identify which costs should continue to be passed on to consumers and which are better funded by the government. Another option is to gradually reduce the Universal Charge for Missionary Electrification (UCME), currently at ₱0.27 per kilowatt-hour, with the long-term goal of removing it from on-grid consumers altogether.
For off-grid communities, Oplas said that developing more affordable and reliable baseload power could eventually reduce dependence on costly diesel generators and lessen the need for nationwide subsidies.
Holding Electric Cooperatives to Higher Standards
Reforming the system loss charge should not mean shielding ECs from accountability. While many serve remote and difficult-to-reach communities, their operating challenges should not automatically justify higher loss allowances or weaker efficiency standards.
The Energy Regulatory Commission (ERC) currently permits private distribution utilities to recover about 5.5% to 6.5% in system losses, compared with roughly 12% to 12.5% for ECs. Any losses beyond those limits must be absorbed by the distributor.
BusinessWorld’s Dindo Manhit emphasized that this wide gap deserves greater scrutiny. “The policy must therefore protect consumers while recognizing legitimate differences in operating conditions,” he wrote. “Private distribution utilities and electric cooperatives should be held to the same standards of efficiency and accountability. Any differentiated treatment should have a clear basis and should be justified by transparent technical considerations.”
System losses also reflect the condition of a utility’s network and its ability to prevent theft and inefficiencies. Philippine Star’s Boo Chanco stressed that modern equipment, better monitoring, and digital technologies can help bring these losses down.
“Smart grids cross-reference the exact amount of electricity sent into a local neighborhood line with real-time consumption data of the homes on that line,” he stated. “If there is a discrepancy, the utility instantly pinpoints the location of an illegal connection. Meralco and MORE in Iloilo City are using these facilities.”
Lowering the charge should therefore come with stronger incentives for every distributor, including ECs, to reduce avoidable losses and modernize their networks. Protecting consumers and maintaining reliable service should be pursued together, not treated as competing goals.
(Also read: Is More Baseload the Answer to the Philippines’ Energy Emergency?)
Beyond the System Loss Debate
What is encouraging is that more people are now taking a closer look at how electricity is priced and delivered. That scrutiny can only benefit consumers, particularly if it leads to a clearer understanding of why Philippine electricity remains expensive.
The debate over system loss has exposed a larger problem: electricity prices are shaped by a complex mix of supply, generation costs, infrastructure, regulation, taxes, subsidies, and utility performance. Fixing one component will not be enough. Nor should the goal simply be to make a particular charge disappear from the bill.
The more useful question is whether each peso consumers pay is necessary, efficiently incurred, and fairly allocated. That requires policymakers to distinguish between genuinely unavoidable costs and those that can be reduced through better investment, stronger regulation, improved technology, or greater competition.
It also means demanding more accountability from all sides. Utilities must do their part to minimize losses and improve efficiency, while the government must create conditions that encourage new investment and ensure that its own policy-driven costs are not unnecessarily passed on to households.
Consumers ultimately need more than a cheaper-looking electricity bill. They need power that is affordable, reliable, and sustainable over the long term. Achieving that will require looking beyond system loss and confronting the deeper structural reasons why electricity costs so much in the Philippines.
Sources:
https://mb.com.ph/2026/08/03/scrapping-system-loss-why-that-sona-promise-may-never-happen
https://www.philstar.com/business/2026/07/30/2545619/sona-2026-energy
https://www.philstar.com/business/2026/08/06/2547224/understanding-system-loss
https://newsinfo.inquirer.net/2273969/scrapping-system-loss-charge-too-big-a-cost-for-industry-mvp
https://bworldonline.com/opinion/2026/08/05/768044/the-real-cost-of-mishandling-system-loss/
https://www.philstar.com/business/2026/08/03/2546504/system-loss-charge
https://pia.gov.ph/news/doe-supports-vat-reduction-on-electricity-to-ease-consumer-costs
https://business.inquirer.net/605351/erc-eyes-vat-removal-in-system-loss-charges