Committee chairman Sen. Erwin Tulfo and Sen. Vicente “Tito” Sotto III argued that nontechnical losses, largely attributable to pilferage, meter tampering, and illegal connections, should not be recovered from paying customers who did not use the stolen power.
Both lawmakers rejected the utilities’ long-used comparison of the system loss to melting ice. They argued that the analogy does not hold because, unlike a retailer absorbing shrinkage, distribution utilities are shielded by law from bearing the cost themselves.
“It is not the fault of the consumers,” Sotto said, arguing that utilities under Republic Act 9136, the Electric Power Industry Reform Act (EPIRA), have had no financial incentive to invest in modern equipment because all losses are ultimately recovered from their customers.
Enforcement gaps
Testimony from the PNP’s Criminal Investigation and Detection Group underscored enforcement gaps behind the persistence of the pilferage.
The PNP reported 548 cases filed under the Anti-Electricity and Electric Transmission Lines/Materials Pilferage Act (RA 7832) from 2022 to August 2026, resulting in 665 arrests but only 21 convictions — a rate the senators said was alarmingly low.
The National Bureau of Investigation, for its part, told the committee it could not yet provide nationwide pilferage data, citing the need to collate the figures from regional offices. This drew criticism from Tulfo, who demanded a report before the next hearing.
Sotto proposed reclassifying the system loss from a “pass-through” revenue item, which currently carries a VAT, into a cost borne directly by the distribution utilities. He argued that this would create a financial incentive for companies to invest in modern transformers, substations, and metering technology rather than simply billing consumers for their losses.
ERC chairperson and CEO Francis Saturnino Juan said the commission was open to the proposal but cautioned that it would require a broader review of utility rate structures. He warned that struggling cooperatives, particularly in island provinces, could face financial strain without a phased transition in the removal of the system loss.
Juan confirmed the ERC will finalize a resolution removing the VAT from the system loss charge by 26 August, with the Bureau of Internal Revenue (BIR) set to issue a corresponding revenue regulation. This means the tax could disappear from electric bills as soon as the September billing cycle.
The ERC chief estimated the change would trim about P61 from a typical monthly bill.
Loss reduction
Separately, the senators grilled officials of the Oriental Mindoro Electric Cooperative over recurring brownouts after the provincial government said the cooperative was in a “power crisis.”
Ormeco representatives denied this but acknowledged delays in fully implementing a 57-megawatt (MW) emergency power supply agreement, with 10 MW still unresolved.
Meralco, the Visayas Electric Company, Davao Light, and several electric cooperative associations presented ongoing technical-loss reduction measures, including amorphous-core distribution transformers, AI-assisted detection of pilferage, and advanced metering infrastructure.
The National Grid Corporation of the Philippines said it was expanding high-voltage lines and installing capacitor banks and static synchronous compensator units to address losses on the transmission side.
The cost data underpinned a broader finding by the NEA. In the May 2026 billing period, which the agency identified as the worst month for cooperative compliance due to peak summer demand, 30 percent or roughly 36, of the country’s 121 electric cooperatives breached the ERC’s loss caps.
The same data identified 18 distribution utilities that exceeded their ERC-mandated feeder loss caps in 2025. The costliest breach came from the Zamboanga City Electric Cooperative which posted an 18.1-percent feeder loss against its 8.25-percent cap, translating to P543 million in above-cap recovery costs.
The South Cotabato II Electric Cooperative in General Santos City followed with a 13.6-percent loss against the same 8.25-percent cap, costing P410 million, while the Albay Electric Cooperative — listed alongside APEC, the private firm that formerly held its concession — exceeded its 10.25-percent cap with a 21.5-percent loss rate, costing P374 million.
Other noncompliant cooperatives included the Zamboanga del Sur II Electric Cooperative (P81 million), Cotabato Electric Cooperative (P37 million), Davao Oriental Electric Cooperative (P35 million), Aurora Electric Cooperative (P13 million), Camiguin Electric Cooperative (P9 million), and Siasi Electric Cooperative (P0.7 million).
A private distribution utility, Negros Electric and Power Corp. (also known as Negros Power), also breached its 5.5-percent cap with a 7.5-percent loss rate, costing P148 million.
Eight additional utilities were flagged as exceeding their caps: IEC, Celcor, Decorp, Quezelco II, Pelco II, Esamelco, Socoteco I and Noceco.
In his fifth State of the Nation Address on 27 July, President Ferdinand Marcos Jr. demanded the removal of the system loss charge, including the value-added tax (VAT) imposed on it, from electricity bills.
He argued that consumers should not have to shoulder the losses incurred in the transmission and distribution of electricity, saying, “We, the people, request — no, we demand — the immediate amendment of the EPIRA and to prohibit the charging of the system loss to consumers, including the VAT thereon.”
His argument was that consumers were not responsible for system losses so it was unfair to make them pay for it — a line that drew the loudest applause with some in the audience rising from their seats.
To act on this, Marcos called on Congress to amend Section 43(f) of the EPIRA which currently allows utilities to recover their system losses from consumers, subject to caps set by the ERC, which cannot unilaterally remove the charge.
Phased NTL removal
Consumers of private distribution utilities pay about four centavos per kilowatt-hour delivered to cover NTL costs, compared with 27.1 centavos per kWh for customers of Cluster 1 electric cooperatives, 11.7 centavos for Cluster 2, and 20.7 centavos for Cluster 3, the data showed.
The difference is nearly seven times between the cheapest and costliest categories.
Energy committee figures indicated that eliminating the NTL recovery from consumer bills entirely would save the average household roughly P18 a month, based on the approximately 32 million electricity consumers nationwide.
The industry, however, urged a phased removal of the NTL charges, accompanied by measures to reduce technical losses.
NEA officials warned that if the lawmakers proceed with the total removal of the NTL recovery, the number of financially affected cooperatives could balloon to 78.
An NEA-engaged technical consultant credited with developing the methodology used to separate technical from nontechnical losses told the panel the agency had begun preparing cooperatives for an eventual law scrapping the system loss charge.
He cited a pilot program in Zamboanga where losses were cut from 23 percent to 13 percent after the NEA formed a joint task force with the Philippine National Police and the National Bureau of Investigation to pursue pilferage cases.
He said the NEA aims to raise financing this year so cooperatives could begin phasing out nontechnical losses by January 2027, with technical-loss reduction plans submitted to the ERC by mid-2027.
