Over the past few weeks, public discussions have focused on system loss in the power system as more consumers pay attention to their bills. While this is a welcome development, it’s equally important to ensure that these discussions are grounded in facts.
After nearly four decades in the power industry – living through blackouts that lasted as long as 12 hours, witnessing the sector’s painful reforms, and watching the Electric Power Industry Reform Act (EPIRA) take effect in 2001 – I believe the current debate over system loss needs clearer context.
Most people only see the monthly electricity bill, so, naturally, attention focuses there. But that bill reflects a complex chain that powers our homes and industries: power plants, transmission lines, substations, transformers, distribution lines, and thousands of workers who maintain the system 24/7. Understanding system loss means looking beyond the bill.
System loss has two distinct components: technical and non-technical. Technical losses are unavoidable and governed by physics. Energy dissipates as heat whenever electricity flows through conductors and equipment; no grid is immune. Non-technical losses, by contrast, stem from theft, illegal connections, and operational lapses. These are preventable and can be reduced through enforcement, better metering, and improved operations.
To understand today’s situation, we must recall the policy history. Long before EPIRA, Republic Act 7832 acknowledged that some loss is inherent in delivery but limited the portion recoverable from consumers through capped pass-through rates, which were set to decline from 14.5 percent to 9.5 percent. EPIRA preserved that framework while empowering the Energy Regulatory Commission (ERC) to adjust caps based on industry conditions and technical standards. Over time, the ERC lowered the cap for private distribution utilities – first to 8.5 percent and later to the current 5.5 percent of feeder energy.
Those reforms mattered. They helped the country move past the era of frequent, prolonged blackouts that many of us remember. EPIRA aimed to balance consumer protection with a viable power system, and one of its provisions allowed regulated recovery of system losses – an issue now central to debates about electricity costs.
What often gets lost in the rhetoric is progress. In 2003, roughly two years after EPIRA, the national average system loss hovered near 13 percent. By 2025, it had fallen to about 8 percent. That improvement reflects sustained investments in network modernization, operational upgrades, and anti-theft campaigns. While more can be done, the steady decline over two decades shows that system loss is not the primary driver of rising electricity prices.
The President’s remarks during his recent State of the Nation Address rightly reignited a conversation about fairness in pricing. Consumers deserve reliable service and continued efforts to eliminate avoidable costs. Several legislative measures now aim to protect consumers from paying for theft and inefficiency while recognizing the realities of operating a power system that must reach remote islands, mountainous terrain, and scattered rural communities.
Industry stakeholders generally support measures to curb avoidable losses and shield consumers from paying for others’ wrongdoing. At the same time, they stress the need for a sustainable approach to managing unavoidable costs – especially for electric cooperatives that serve far-flung communities. Lowering prices and preserving service quality must go hand in hand.
The Institute of Integrated Electrical Engineers of the Philippines (IIEE) highlighted that policymakers should “adopt practical, evidence-based policies that protect consumers while supporting a safe, reliable, efficient, and sustainable electric power industry.” Meanwhile, the Management Association of the Philippines (MAP) called for reforms based on sound technical and economic principles.
“The business body insisted that the regulator must establish loss recovery limits grounded strictly in sound technical analysis, empirical data, and international benchmark standards,” MAP said in a statement.
System loss is only one piece of the bill. Filipinos also pay 12 percent value-added tax on several bill components, and policy-driven charges and subsidies are embedded in monthly statements.
For many households, these add up to significant sums annually. If the goal is meaningful relief, policymakers should review all bill components comprehensively rather than focusing narrowly on a single line item.
It is encouraging that more citizens are becoming more critical of how electricity is priced and delivered. That scrutiny can lead to better policy. I write from the perspective of someone who has seen the worst outages, the reforms that followed, and the steady improvements since. My aim is to add context to the debate so reforms can be designed to be fair, effective, and ultimately beneficial for consumers and the country as a whole.
