Before refrigerators reached a small town, every household bought ice from Aling Ising.
The town gave her the only delivery route. In return, she had to serve every house, including the distant ones where the road was rough and the trip unprofitable. The arrangement made sense. Two competing ice carts would duplicate horses, helpers and storage while leaving the farthest households uncertain of service.
Each morning Aling Ising bought one hundred kilos from the ice plant. By evening, her ledger showed only ninety-four kilos delivered and paid for.
Four kilos had melted despite ordinary care. The sun was hot, the roads were long, and no cart could carry ice without some loss. Two more kilos had been chipped away, mismeasured or taken before reaching a paying household.
Those losses were not alike. One came from physics. The other from conduct.
But Aling Ising had paid for all one hundred kilos. She therefore spread the cost of the missing six among the households that did pay.
A family at the end of the route objected: why should we pay for ice we never received?
The mayor agreed. At the next town meeting, he announced that households would no longer be charged for missing ice.
The applause came before the arithmetic.
The ice plant still charged Aling Ising for one hundred kilos. The decree had removed six kilos from the household receipt, but not from anyone’s cost. Aling Ising could absorb the loss, raise the price of the 94 kilos delivered, reduce service to distant homes, spend less on insulated boxes, ask the town treasury for support – or become much better at preventing theft.
Each choice put the burden somewhere different and created a different incentive.
The missing ice did not vanish when it disappeared from the bill.
As the last installment showed, a cost can arise in one place and appear on the bill somewhere else. Distribution makes that easier to see.
The parable is the distribution system in miniature. The route is the franchise. The obligation to visit every household is the duty to serve. Melting is technical loss; chipping, mismeasurement and theft are non-technical loss. The customer is captive, the distributor has paid for the full hundred, and the law must decide where the missing six belong.
Of all the companies in the electricity chain, the consumer knows one best. The generator is anonymous. The grid operator is a rumor. The name on the bill-Meralco in the capital, a local utility or electric cooperative elsewhere-is the distributor. Because it collects the total, it also collects much of the blame.
Distribution utilities and electric cooperatives are monopoly networks. They maintain local wires, transformers, meters and substations. Duplicating those networks would be wasteful, so the state permits recovery of prudent costs and, where applicable, a regulated return. The bargain runs both ways: captive consumers pay regulated rates; utilities must deliver efficient service.
A monopoly does not risk losing customers to a cheaper network next door. Regulation has to manufacture that discipline. If every prudent-looking peso is simply added to rates, the utility has little reason to ask whether the same service could have been delivered for less.
Some system loss is unavoidable. Excessive loss is different. Electricity generated but not billed to the responsible user is ultimately paid for by someone else. The regulatory task is to distinguish unavoidable loss from preventable loss and place each where the incentive to reduce it is strongest.
The logic works both ways. If every missing kilowatt-hour can automatically be recovered, the incentive to invest in better meters, feeder upgrades, theft detection or maintenance weakens. But if no unavoidable loss can ever be recovered, a utility may spend more eliminating a loss than the electricity saved is worth.
Good regulation sits between those errors.
That is the purpose of performance-based regulation. Rate-setting should not simply ask what a utility spent. It should ask what efficient performance should cost. At each reset, targets should reflect reasonable benchmarks and comparable utilities, not merely improvement from the utility’s own past. Otherwise a poor baseline becomes a permanent excuse.
The issue is immediate. Meralco’s distribution charge, unchanged since 2022, is under reset now-an application to raise it from P1.35 to P2.34 per kilowatt-hour. Whatever the outcome, the right question is the same: not merely what was spent, but what efficient service should cost.
A rate case decides which costs belong to consumers, which risks belong to the utility, and how much inefficiency the public should finance. Those choices eventually become centavos on a bill.
System loss is only one way inefficiency can migrate onto somebody else’s bill. Cooperative debt provides another. The mechanism is different; the incidence problem is the same.
Electric cooperatives brought electricity to remote barangays, islands and mountain communities that private utilities had little commercial reason to serve. Geography and poverty can make their networks genuinely more expensive. But mission cannot become immunity.
Some cooperatives are distressed because the territory is difficult. Others because collection is weak, governance is poor or debts accumulate. When debt is forgiven without fixing the cause, the cost does not disappear.
It moves.
EPIRA itself condoned roughly P18 billion of cooperative rural-electrification debt, assumed by PSALM in 2002. Two decades later, the Department of Finance reported that two Mindanao cooperatives alone owed PSALM more than P16 billion in unpaid power bills, attributing the problem to ‘financial mismanagement and low collection efficiency.’
Now Congress is again being asked to forgive cooperative obligations. House Bill 7291 would condone accumulated interests, penalties and surcharges, including unpaid universal charges, while creating a P5-billion refinancing facility whose repayment may ultimately be recovered through regulator-approved charges.
The point is not that distressed cooperatives should never receive relief. It is simpler: a debt does not disappear because Congress forgives it.
If government does not fund the relief from the budget, somebody else pays.
The universal charge is collected from electricity consumers nationwide. So, a customer of a well-run utility can end up paying part of another institution’s failure through his own monthly bill.
That is one way somebody else’s inefficiency becomes your electricity price.
Debt relief may still be justified where distress is genuine. But without structural reform it weakens the discipline that debt is supposed to impose. Relief should therefore come with conditions that bite: fit-and-proper standards that can remove unfit managers, performance targets backed by disallowance, escrow arrangements that cannot casually be waived, and step-in rights government is actually willing to use.
This is not an argument for private utilities over cooperatives. A private utility can perform badly if regulation is weak. A cooperative can perform well under difficult conditions.
The test is simpler: which structure gives consumers reliable service at efficient cost? And the consumer should be asked to pay only for that.
What the consumer is often asked to pay for, however, includes something else entirely: other people’s subsidies.
Atty. Laurence R. Rogero is an infrastructure lawyer with three decades of experience in the Philippine and international power and water sectors. He held senior positions at Mirant Philippines and Manila Water and served as President and CEO of Metro Pacific Water. He has consulted for the ADB and the World Bank. He is Lead Independent Director of Vivant Corporation, which has interests in energy and water, and lectures at the Ateneo de Manila University, where he is pursuing postgraduate studies in economics. He graduated magna cum laude from the UP School of Economics, earned his law degree from UP, and obtained an LL.M. with Distinction from Georgetown University as a Fulbright Fellow. The views expressed are his own and do not necessarily reflect those of any organization with which he is affiliated.