Meralco Chairman Manuel V. Pangilinan has warned that scrapping system loss charges from electricity bills could deal a heavy financial blow to the country’s power sector, emphasizing that technical loss is an unavoidable physics reality of power distribution.
While supporting efforts to lower power rates, Pangilinan explained that eliminating system loss entirely is physically impossible due to natural electrical resistance in distribution lines.
“Regarding the laws of physics, what do they say? Nature is to be commanded by obeying its laws, right? Any operation that involves transmission from point A to point B will involve some losses. That’s just the way it is,” Pangilinan said.
“When you push electricity through copper wires, there will be resistance. The longer the lines are, the higher the losses will be,” he added.
His remarks follow recent proposals during the State of the Nation Address to slash electricity costs by stripping system loss fees from consumer billing. Pangilinan clarified that these losses stem from physics rather than utility inefficiency.
“It is not a question of inefficiency; it is just the way it is, and there’s a cost to it. So, the real question is: who bears that cost?” Pangilinan said.
Removing the charge could cut Meralco ratepayer bills by five to 10 percent, but shifting the cost away from consumers poses significant financial risks for generation, transmission, and distribution firms alike.
“It’s a big bill for the industry because it cuts across generation, transmission, and distribution. The bill is too big for the industry to absorb on its own, so there has to be a discussion. It’s going to impact the entire power industry in this country,” Pangilinan said.
To soften the blow of potential policy shifts, the Department of Energy (DOE) and the National Electrification Administration (NEA) are evaluating structural industry reforms.
Energy Undersecretary Rowena Guevara noted the government is exploring long-term, low-interest loans to help electric cooperatives upgrade their grid infrastructure without immediately passing the costs onto consumers.
The NEA is also drafting guidelines for a phased reduction of system-related expenses to shield rural cooperatives from sudden liquidity shocks, while the DOE considers additional funding options from multilateral institutions and commercial banks.