Businessman Manuel V. Pangilinan on Wednesday balked at President Ferdinand Marcos Jr.’s proposal to scrap the system loss charge from electricity bills, saying the removal will entail costs ‘too big’ for power industry players to shoulder.
‘When you push electricity through the copper wires, there will be a resistance. The longer the lines are, the more the losses will be,’ Pangilinan, chair of Manila Electric Co. (Meralco), told reporters in a media briefing.
‘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 the cost?’ he added.
The costs are ‘too big for the industry to absorb all of it,’ said the chief executive of the country’s biggest power distributor, which counts about 8.3 million consumers. ‘So, who’s going to pay for that? The industry? It’s going to cost tens of billions of pesos. Will you not survive?’
Pangilinan’s remarks were the strongest pushback from the private sector so far on the president’s call on Congress to drop the system loss charge from electricity bills, one of the most applauded parts of his fifth State of the Nation Address (Sona) delivered on Monday.
On Tuesday, Energy Secretary Sharon Garin also admitted that it might take a year to accomplish what Marcos wanted, but said discussions could begin with the concerned agencies.
10-percent drop in bill
Once the charge is removed, the Department of Energy (DOE) estimates that electricity bills could fall by 5 to 10 percent, depending on the distribution utility.
System loss is the difference between electricity entering a distribution network and the amount eventually billed to customers.
It covers technical losses caused by resistance in power lines, transformers and aging equipment, and nontechnical losses from electricity theft, illegal connections, defective meters and billing errors.
For Meralco customers, system loss charges account for about 5 percent of monthly bills. Meralco said its system loss rate stood at 5.72 percent in the first quarter of 2026, below the 6.5-percent cap set by the Energy Regulatory Commission (ERC).
Some electric cooperatives in the provinces, however, post system losses as high as 16 percent.
In his last Sona, the president urged Congress to immediately amend the Electric Power Industry Reform Act (Epira) to stop distribution utilities from charging consumers for system losses and the value-added tax (VAT) imposed on those charges.
‘It is not the consumer’s fault that a system loss occurred,’ the president said, arguing that households should not pay for electricity that never reaches them.
Consumer groups welcomed the proposal but pointed out that generation charges – which account for 45 to 65 percent of Meralco bills – remain the biggest contributor to high electricity prices.
‘Spanner in the works’
Pangilinan said Meralco was not yet ready to disclose the company’s full-year financial outlook amid regulatory delays on its rate reset request, coupled with Marcos’ recent call to remove unavoidable system loss charges.
‘The statement of the president at the Sona has just thrown a spanner in the works,’ he said.
For the January-June 2026 period, Meralco still managed to record modest income growth despite the flattish performance of its power distribution unit. It ended the first half with P26.5 billion in consolidated core net income, up 3.8 percent from P25.5 billion last year.
Still, Pangilinan said Meralco would continue to cooperate with the government, especially on the proposed changes in the 25-year-old Epira law.
No subsidies for co-ops
Also on Wednesday, Garin said the government would need about a year to drop the system loss charges as the DOE and ERC have to assess the capital outlay or infrastructure planning of more than 100 electric cooperatives, including private distribution utilities.
This is necessary since power cooperatives would have to purchase new equipment to upgrade their lines and systems, Garin said.
The DOE official earlier said sweeping infrastructure upgrades, regulatory changes and tougher measures against electricity theft must first be completed before the policy can take effect.
Meanwhile, Energy Undersecretary Rowena Cristina Guevara said the DOE would ask the National Electrification Administration to extend loans to electric cooperatives, and also approach other financial institutions.
Malacañang said it was ruling out subsidies for electric cooperatives for now.
‘What the president wants is to remove this extra cost from our people – not to shift the burden either to consumers or to utility companies,’ Palace press officer Claire Castro said on Wednesday.
Instead of giving subsidies, the government expects power distributors and cooperatives to streamline their operations by minimizing electricity losses from illegal connections, power theft, jumper lines, and other forms of unauthorized consumption, she said.
Subsidies for utility companies instead of the removal or cut in collected system loss charges are ‘not being discussed,’ Castro said.
‘What utility companies need to study is how they can prevent these losses from occurring. The president also does not want it to have a negative impact on utility companies,’ she added.
Unavoidable cost
The Philippine Rural Electric Cooperatives Association (Philreca) expressed support for the removal of VAT on system loss charges. However, it warned that scrapping the fee altogether without a direct government subsidy could put electric cooperatives at risk of bankruptcy.
The group said technical system loss is an inherent and unavoidable cost of transmitting electricity, particularly in remote communities typically served by electric cooperatives.
Philreca urged Congress and tax authorities to adopt zero-rating or tax exemption mechanisms across the entire power supply chain for electricity lost in transit, saying the VAT cut must be ‘real tax relief, not a hidden cost transfer