No More Paying for Stolen Power? Bill Targets System Loss Charges
- September 30, 2026
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Sen. Erwin Tulfo, chair of the Senate Committee on Energy, sponsored Senate Bill No. 2486, or the proposed System Loss Charge Removal Act, during the chamber’s deliberations on September 22.
System loss refers to electricity lost as power moves through distribution lines, transformers, and other equipment. While some losses are inherent to the delivery of electricity, the measure seeks to ensure consumers are not made to shoulder costs that regulators deem avoidable or unjustified, such as non-technical losses (NTLs) linked to electricity theft, illegal hookups, malfunctioning meters, poor system maintenance, billing errors, and inefficient operations.
“Bakit po ang consumer ang magbabayad sa kuryenteng hindi naman niya nagagamit? Bakit ang consumer ang sasalo kung luma ang kagamitan, sira ang metro, o ninakaw sa distribution company ang kuryente?” (Why should consumers pay for electricity they do not even use? Why should consumers bear the cost when equipment is old, meters are defective, or electricity is stolen from the distribution company?), stressed Tulfo.
The proposal would give the Energy Regulatory Commission (ERC) greater authority to assess which system-related expenses are justified and necessary for efficient distribution operations.
Tulfo also gave the assurance that the proposed removal of system loss charges would not simply be recouped through other billing items, addressing concerns that utilities could shift the costs to distribution or supply charges once the measure takes effect.
“We have anticipated this loophole, and it is unacceptable,” he said. “This is why the bill we are shepherding now explicitly prohibits distribution utilities and electric cooperatives from recovering allowed losses through distribution wheeling charges, supply charges, metering charges, universal charges, subsidies, or any other item in the bill.”
Likewise, Tulfo explained that the measure would not bar utilities from recovering legitimate operating costs. The ERC would still be able to approve expenses it deems necessary for the efficient delivery of electricity.
The ERC would be allowed a three-year transition period to roll out the framework, with the regulator tasked with protecting consumers without undermining the financial stability and reliability of DUs and ECs.
(Also read: ASEAN Leaders Press For Faster Action On Regional Power Grid)
How System Loss Charges Can Reward Inefficiency
The latest moves come against a long-standing concern over who ultimately pays for electricity losses. Data presented to the Senate Committee on Energy put the annual cost borne by consumers for power lost to theft, meter tampering and illegal connections at an estimated P6.82 billion.
The figures, along with testimony from the National Electrification Administration (NEA), indicate that the burden of these NTLs falls disproportionately on customers of ECs, compared with those served by private DUs.
Under the current rules, utilities can pass ERC-approved system losses on to consumers, while absorbing any amount above the allowable limit. Tulfo argued that this arrangement may weaken incentives to reduce losses, since part of the cost can still be recovered from customers.
For Meralco customers, system loss makes up about 5% of monthly electricity bills. The country’s largest power distributor reported a 5.72% system loss rate in the first quarter of 2026, below the ERC’s 6.5% ceiling.
A presentation to the Senate Committee on Energy showed that Meralco, Visayan Electric, Davao Light, and several ECs are pursuing measures to reduce technical losses, including amorphous-core transformers, AI-powered theft detection, and advanced metering systems.
However, some ECs record losses of as much as 16%, according to DOE Secretary Sharon Garin. The gap is stark against the global benchmark: the World Bank puts average transmission and distribution losses worldwide at around 8% to 9%.
The higher loss thresholds allowed for ECs, at 8.25% and up to 12% for some off-grid and lower-performing ECs, have raised concerns about incentives to improve. Critics argue that allowing utilities to recover more losses from consumers can lessen the pressure to invest in repairs, system upgrades, and more efficient operations.
Recent compliance data underscores those concerns. During the May 2026 billing period, identified as the toughest month for EC compliance amid peak summer demand, 36 of the country’s 121 cooperatives, or about 30%, exceeded ERC-set system loss caps.
The data also showed that 18 utilities breached their allowable feeder loss limits in 2025. Zamboanga City Electric Cooperative (ZAMCELCO) recorded the largest excess, with losses reaching 18.1% against an 8.25% cap, resulting in about P543 million in above-cap recovery costs.
South Cotabato II Electric Cooperative (SOCOTECO II) posted a 13.6% loss, with excess costs estimated at P410 million. Albay Electric Cooperative (ALECO), listed alongside APEC, its former private concessionaire, recorded a 21.5% loss, translating to roughly P374 million in above-cap costs.
Data also shows that customers of private DUs pay about P0.04 per kilowatt-hour (kWh) to cover such NTL costs, compared with P0.271 for Cluster 1 ECs, P0.117 for Cluster 2 and P0.207 for Cluster 3. That puts the highest rate at nearly seven times the lowest.
Too Much Leeway for ECs?
Reducing system losses would require many ECs to upgrade aging distribution networks, including power lines, substations, transformers, and metering infrastructure.
To support that effort, the National Electrification Administration (NEA) is seeking an additional P7 billion from Congress to help ECs address NTLs. The request exceeds the agency’s entire P6.49-billion proposed budget for 2027.
The P7-billion request is not part of the 2027 National Expenditure Program (NEP) submitted by the executive branch. Under NEA’s proposed budget, P850 million in national government equity is earmarked to support loans for ECS, while another P5.64 billion is allocated for subsidies and other funding under the National Rural Electrification Program. No separate funding is included in the NEP specifically for system loss reduction.
NEA Administrator Antonio Mariano Almeda explained that the effort would require major investments in metering, including installing meters on unmetered connections and replacing units as authorities intensify efforts against electricity theft. The proposed funding would come as loans, not subsidies, with NEA lending to ECS for loss-reduction investments.
Meanwhile, Palace Press Officer Claire Castro said the Department of Budget and Management (DBM) is studying options that could include a grant, a loan, or direct government funding, but no final financing mechanism has been decided.
Philippine Daily Inquirer columnist Jake Maderazo argued that subsidies for underperforming ECs have not necessarily translated into the infrastructure upgrades they need. Shifting the burden to government funding would not eliminate the cost for consumers. Instead, the expense could ultimately fall on taxpayers through higher taxes, additional borrowing, or reduced public spending.
“Even then, considering the current subsidies electric cooperatives already have, when has an inefficient one ever proven that it is capable of spending money effectively and efficiently, especially when it comes to improving its distribution systems?” he wrote. “How can their customers be assured that it will now modernize facilities, upgrade technologies, and truly deliver moving forward?”
(Also read: BIR Removes VAT On System Loss Charges, But Economists Seek Deeper Power Reforms)
Beyond System Loss Charges
Removing system loss charges from consumers’ bills may address one part of the problem, but it does not by itself fix the weaknesses that allow those losses to persist. For the consumer group Partners for Affordable and Reliable Electricity (PARE), the reforms should include a uniform 5% system loss cap and a broader review of EC governance, infrastructure, collection performance, procurement and regulatory oversight.
Additionally, Manila Times columnist Ben Kritz has raised a broader question about the long-term role of ECs.
“It was never intended that ECs should be perpetual; over time, as their business improved and the populations they served grew, they would graduate into self-sustaining and ideally profitable business models,” he pointed out. “However, in one of the dumbest mistakes that were made in crafting that entire law (EPIRA), the transformation from a nonstock, nonprofit cooperative to a stock cooperative or stock corporation was made optional. Thus, there is no real incentive for ECs to upgrade, and the predictable result has been that they haven’t.”
At the center of the issue is a basic question raised by Tulfo. “Why do consumers bear the brunt of inefficiencies and deteriorating facilities resulting in system loss?” he emphasized. “Electricity is not a luxury. It is a basic necessity that modern society needs to operate with dignity.”
Sources:
https://newsinfo.inquirer.net/2305128/sona-promise-lower-power-bills-as-vat-on-system-loss-out
https://www.rappler.com/business/national-electrification-administration-2027-budget-system-loss
https://www.facebook.com/photo/?fbid=1035058769534318&set=a.161462543560616
https://www.manilatimes.net/2026/09/17/opinion/columns/what-to-do-with-electric-cooperatives/2426721
