Power firms will not go bankrupt if the government pushes measures to scrap the non-technical system loss in electricity bills, as it accounts for only 1.5 percent of the entire system loss, the Energy Regulatory Commission (ERC) told a Senate panel Thursday.

There are two types of system loss. Human factors and operational issues, such as jumpers or illegal connections, meter tampering, and administrative errors, cause non-technical system losses.

Technical system loss, meanwhile, is natural or caused by the laws of physics and occurs when electricity flows through power lines, transformers, and equipment.

Since non-technical system loss accounts for about 1.5 percent of power utilities’ entire system loss charges, the financial impact will be minor, and power firms would also improve enforcement against electricity theft, reducing the effect on their profit.

“This would trim their revenue. However, it is relatively small compared to the total system loss,” ERC chairperson and chief executive officer Francis Saturnino Juan told the Senate energy committee.

“The ERC believes that if this regulation is implemented, our utilities will adjust and adapt, and they may become more diligent in apprehending electricity thieves. This way, the impact of removing — for instance — non-technical system losses would not be extreme for them,” he added.

The panel, chaired by Senator Erwin Tulfo, resumed hearings on proposals to amend the 25-year-old Electric Power Industry Reform Ac.

Broad Marcos order

The move follows President Marcos Jr.’s marching order in his penultimate SoNA to scrap the system loss and VAT on electricity bills to help reduce power costs, as the country struggles with sharply rising fuel prices driven by the war in the Middle East, now in its fifth month.

Juan’s remark was in response to Tulfo’s queries about whether removing a portion of the system loss would cause a big hit to the power firms’ revenue, as they raised reservations about the President’s proposal.

Tulfo argued that forcing private distribution companies to absorb these technical and non-technical losses will compel them to improve their grid infrastructure and efficiency, rather than having consumers bear the cost of their operational inefficiencies.