Consumers could see lower electricity bills if Congress approves President Ferdinand R. Marcos Jr.'s proposal to remove system loss charges, with the Energy Regulatory Commission (ERC) supporting the measure even as power distributors warned that the costs would need to be recovered through another funding mechanism.

In his fifth State of the Nation Address (SONA), Marcos called on Congress to amend the Electric Power Industry Reform Act (EPIRA) to prohibit distribution utilities from passing system loss charges to households and businesses.

The ERC welcomed the proposal, saying it supports reforms that "place the welfare of electricity consumers at the forefront."

"The Commission likewise recognizes the importance of pursuing measures that help reduce unnecessary costs while ensuring the viability of all distribution utilities and promoting a more efficient, affordable, and reliable power sector," the regulator said in a statement on Tuesday.

The ERC said it stands ready to work with Congress, the Department of Energy, industry stakeholders, and other government agencies in crafting the legal and regulatory measures needed to implement the reform.

"The ERC remains committed to fulfilling its regulatory mandate to protect consumer welfare through transparent, fair, and accountable regulation. The Commission will continue to promote efficiency and support meaningful reforms that would contribute to lower electricity rates without compromising the quality, reliability, and sustainability of electric service for all Filipinos," it added.

Meanwhile, the Manila Electric Co. (Meralco), the country's largest power distributor, said it respects the President's policy direction and will participate in discussions on the proposed amendments to EPIRA.

"We respect President Marcos' policy direction and will actively participate in the discussions as the proposed amendments to the EPIRA are deliberated," Meralco Executive Vice President and Chief Operating Officer Ronnie L. Aperocho said.

Aperocho said system loss is "not unique to any distribution utility but is a common operational aspect of the delivery of electricity," noting that technical losses remain unavoidable in operating power distribution networks.

He said Meralco has continued investing in network modernization, system loss management and operational efficiencies, enabling it to maintain its system loss "well below the 6.5 percent cap set by the ERC."

"While distribution utilities like Meralco continue to invest in modernizing and upgrading facilities and deploying technologies that reduce system losses, a certain level of technical losses remains inherent in operating an electric distribution system," he said.

Aperocho said reforms should be designed to deliver savings to consumers without weakening the ability of distribution utilities and electric cooperatives to invest in infrastructure, improve system resilience and maintain reliable electricity service.

"We look forward to productive discussions which we hope will carefully consider the impact of reforms on the operations and sustainability of distribution utilities," Aperocho said.

"Meralco will continue working closely with the government, regulators, legislators, and other industry stakeholders in pursuing reforms that enhance consumer protection and strengthen the power industry," he added.

The Philippine Rural Electric Cooperatives Association (PHILRECA) likewise backed proposals to remove the value-added tax (VAT)on system loss charges but said eliminating the charge should be accompanied by government support to prevent financial strain on electric cooperatives.

"We support proposals to eliminate VAT on system loss charges, as consumers should never be taxed on unutilized energy that never reached their homes," PHILRECA said.

However, it said it could support the complete elimination of system loss charges "if and only if the national government directly shoulders these costs through a dedicated subsidy mechanism."

The group warned that "without a direct government subsidy, a total ban on system loss recovery directly violates Section 25 of EPIRA and will bankrupt non-profit electric cooperatives."

Instead, PHILRECA urged Congress to adopt a "performance-driven transition model" that would set feeder-specific technical loss caps through the ERC while providing government funding for grid upgrades and anti-electricity pilferage efforts.