WHEN WE first heard President Ferdinand R. Marcos, Jr.’s pronouncement to remove the system loss charge from electric bills, it sounded like good news for consumers. Removing the system loss charge, including the 12% value-added tax (VAT) imposed on it, would certainly provide much-needed relief to Filipino households.
However, we believe this proposal deserves a more thorough study.
Every power distribution system experiences some level of system loss. Electricity is naturally lost as it travels through power lines and equipment, while some losses also result from authorized non-technical losses such as electricity theft and faulty metering.
The System Loss Charge is a fee collected by power distribution utilities and electric cooperatives to recover the cost of electricity they have already purchased but could not bill because it was lost within the distribution system. It is not an additional source of profit for power distributors.
Without corresponding policy and regulatory changes, simply removing the system loss charge raises the question of how these legitimate costs will eventually be recovered. There is a possibility that these costs may later be reflected in another recoverable component of the electric bill, defeating the purpose of removing the charge in the first place.
This is why the President’s announcement should be more than a response to the growing frustrations of consumers over rising electricity bills. It must be accompanied by meaningful policy and regulatory reforms that genuinely reduce the cost of electricity rather than merely shifting charges elsewhere in the bill.
We therefore urge the government to thoroughly study the system loss charge and pursue reforms that provide sustainable relief while continuing to protect consumers.
The government can begin by reviewing the disparity in the allowable system loss recovery between private distribution utilities and electric cooperatives. Private distribution utilities are allowed to recover up to 5% of their system losses, while electric cooperatives, which serve around 70 million consumers nationwide, are allowed to recover up to 12.5%. This means consumers served by electric cooperatives may shoulder significantly higher system loss charges than those served by private distribution utilities.
For example, a household in Davao Light’s franchise area was charged around P0.6322/kWh for system loss in June 2026, while a NORDECO consumer paid P1.4025/kWh. For a household consuming 250 kWh per month, this translates to approximately P158.05 in Davao Light compared to P350.62 in NORDECO. This illustrates how consumers served by electric cooperatives may pay higher system loss charges because of the different regulatory caps.
The government may therefore consider gradually bringing down the allowable system loss recovery for electric cooperatives to levels closer to those of private distribution utilities, while also providing support to help cooperatives improve the efficiency of their distribution systems.
Another area that deserves attention is the overall composition of the electric bill. The government should conduct a comprehensive review of existing electricity charges under the Electric Power Industry Reform Act of 2001 (EPIRA) and other related policies to determine which costs should continue to be passed on to consumers.
For example, the Lifeline Subsidy should no longer come from the pockets of electricity consumers but instead be funded through the appropriate government agencies. Other charges that deserve review include the Green Energy Auction Allowance (GEA-All) and the Feed-in Tariff Allowance (FIT-All).
Likewise, the 12% value-added tax imposed on several components of the electric bill – including generation, transmission, distribution, system loss, supply, and metering charges – should also be reviewed. Reducing or removing the VAT on these charges would provide immediate relief to consumers while broader reforms are being considered.
We support every effort to reduce electricity costs and ease the burden on consumers. However, reforms should be carefully studied to ensure they provide genuine and lasting relief rather than simply shifting costs from one part of the electric bill to another.
Ryan Amper
Convenor, Davao Consumer Movement
0905-5634083
