BBM Says in SONA 2026: "It is time for Systems Loss to Go..."

 Q: Can you concisely discuss the unbundled charges of a Meralco bill?

The Electric Power Industry Reform Act (EPIRA) requires electricity bills to be unbundled, meaning every component of your bill is shown separately so consumers know exactly what they are paying for. Each charge corresponds to a specific service or government program and is regulated by the Energy Regulatory Commission (ERC).

Mrelaco: Understanding Your Bill

Key Takeaway

• Only the Distribution, Supply, and Metering Charges are Meralco's regulated service charges.
  
  
• All other charges are pass-through charges that Meralco merely collects and remits to generators, NGCP, PSALM, TransCo, or government agencies. Based on Meralco's recent average bill breakdown, about 12% of a typical residential bill goes to Meralco's distribution business, while roughly 88% consists of pass-through charges.

For educational purposes, you can summarize the bill's flow as:

Generation → Transmission → Distribution → Supply & Metering → Government Charges & Subsidies

This sequence mirrors the physical and commercial journey of electricity—from being generated, transmitted over the national grid, delivered to your home, and finally billed with the applicable government-mandated charges.

Q: In the Meralco bill who charges systems loss: Meralco distribution or NGCP transmission?

The short answer is: both.

The System Loss Charge is not solely a Meralco (distribution) charge nor solely an NGCP (transmission) charge. It covers electricity losses that occur in both the transmission network and the distribution network. Meralco collects it as a pass-through charge and remits the corresponding amounts to the entities that incurred the losses.

Specifically:

Portion Network Paid to

Transmission System Loss High-voltage grid (Power Plant → NGCP → Meralco) NGCP

Generation-related System Loss Additional energy generators must produce to compensate for losses Generation Companies

Notice that Meralco itself does not retain the System Loss Charge. According to Meralco, it is "part of the generation and transmission costs" and is remitted to power generation companies and NGCP.

Why is this confusing?

Many people assume the System Loss Charge is Meralco's recovery for electricity lost in its own distribution wires. However, under the current unbundled billing presentation, the System Loss Charge is treated as a pass-through charge, while Meralco earns only from its Distribution, Supply, and Metering Charges.

System Loss Charge – Covers the cost of electricity lost as power travels through the grid due to technical losses (heat in wires, transformers, etc.) and regulated non-technical losses. This charge is shared between generation companies and NGCP and is collected—but not earned—by Meralco.

Q: BBM in his SONA said "It is time to remove systems loss..."  This can be done via amending EPIRA Law? But is it a realistic promise?

Yes—but whether it is realistic depends on what "remove the system loss charge" actually means.

President Marcos called on Congress to amend EPIRA so consumers no longer pay the System Loss Charge, arguing that consumers should not bear losses that are beyond their control.

The challenge is that system losses are real physical and economic costs.

Why system loss exists

Electricity is lost due to:

• Technical losses – heat dissipated in transmission lines, transformers, and distribution wires. These are unavoidable, even in the most efficient power systems.
  
  
• Non-technical losses – electricity theft, illegal connections, meter tampering, and billing errors. These can be reduced but never completely eliminated.

So even if the System Loss Charge disappears from your bill, the cost itself does not disappear.

What happens if EPIRA is amended?

Congress has several options.

Option 1 – Prohibit recovery from consumers (what BBM appears to be proposing)

Distribution utilities (and possibly other industry participants) would have to absorb the cost.

Pros:

• Consumers immediately see lower bills.
  
  
• Utilities have stronger incentives to reduce losses.

Cons:

Utilities may seek higher distribution rates later.

Smaller electric cooperatives could face financial stress.

Investors may perceive greater regulatory risk.

Option 2 – Government subsidizes the losses

The charge disappears from the electric bill but is funded through the national budget.

Pros:

• Lower electricity bills.

Cons:

Taxpayers still pay for the cost indirectly.

Option 3 – Recover only unavoidable technical losses

Consumers pay only for efficient, unavoidable technical losses.

Utilities absorb:

• theft,
• illegal connections,
• inefficiencies beyond regulatory limits.

This approach is already partly reflected in current regulation because the ERC imposes caps on recoverable system losses; losses beyond those caps cannot be passed on to consumers.

Is EPIRA the only law that needs amendment?

Probably not.

While EPIRA established the framework for unbundled charges, the detailed rules on recoverable system losses are also found in ERC regulations implementing EPIRA. An amendment to EPIRA would likely require corresponding changes to ERC rules and tariff methodologies.

Is the promise realistic?

Technically, yes. Economically, it's more complicated.

Electricity cannot be transmitted without losses. The real question is who pays:

• the consumer,
  
  
• the utility,
  
  
• the power generators,
  
  
• the transmission operator,
  
  
• or the government.

Removing the line item from the bill does not eliminate the underlying cost. Unless technological advances reduce losses dramatically, those costs must still be borne somewhere in the electricity supply chain.

The debate is not whether system losses exist—they always do. The real policy question is who should bear the cost: consumers, utilities, or the government.