Market-driven power reforms find a champ

For energy policy analyst Bienvenido “Nonoy” Oplas Jr., lowering electricity prices is not about removing charges from consumers’ monthly bills but about reforming the country’s energy policies to promote competition, fiscal discipline and reliable power supply.

Speaking on DAILY TRIBUNE’s Straight Talk on Wednesday, Oplas challenged proposals to remove system loss charges from electricity bills, arguing that the costs stem from the physical realities of transmitting electricity rather than inefficiencies by distribution utilities.

“System loss is governed by physics and not politics,” he said, explaining that electricity naturally dissipates as it travels through transmission and distribution lines.

What the loss entails

The charge covers the electricity that utilities buy but cannot bill, lost to resistance in wires, transformers and other equipment as power moves from generation plants to homes and businesses.

Regulators cap how much of that loss a distribution utility can pass on to consumers, currently pegged at a percentage of a utility’s total energy input under rules set by the Energy Regulatory Commission.

Lawmakers have periodically pushed bills to scrap or reduce the charge outright, framing it as an unfair cost imposed on captive ratepayers, an argument that resurfaces whenever electricity bills spike during the dry season.

Oplas, president of Minimal Government Thinkers Inc., said eliminating the charge would only transfer the burden to taxpayers through government subsidies, increasing budget deficits and public borrowing.

Instead, he advocated temporarily suspending excise taxes on energy products, saying the move would immediately help reduce electricity costs while also easing expenses in transportation, agriculture and other industries dependent on fuel.

Excise tax backdrop

Excise levies on fuel and coal were expanded under the Tax Reform for Acceleration and Inclusion (TRAIN) law of 2017, which restructured the country’s tax system to fund infrastructure and social programs.

Coal, which fuels the bulk of the country’s baseload generation, carries its own excise rate that has climbed in scheduled increases since TRAIN took effect, a cost that generators typically pass through to distribution utilities and, eventually, to consumers.

His broader vision for the energy sector centers on market-oriented reforms.

Oplas argued that electric cooperatives should be corporatized to improve accountability and efficiency, saying many continue to receive government support despite recurring power interruptions.

The power distribution landscape is a patchwork of roughly 120 electric cooperatives, many established under the rural electrification push of the 1970s, alongside private investor-owned utilities such as Manila Electric Co.

Cooperatives are member-owned and often serve less densely populated, less profitable franchise areas, which has historically justified continued state support through the National Electrification Administration.

The cooperative model, with boards elected by consumer-members rather than shareholders demanding returns, dulls the incentive to invest in modernizing distribution networks, a gap that shows up most visibly in outage-prone provincial areas.

According to Oplas, unreliable electricity service remains a major obstacle to economic growth, particularly in the provinces.

“The most expensive electricity is no electricity,” he said, stressing that frequent blackouts disrupt businesses, damage equipment and impose greater costs on consumers than moderate increases in electricity rates.

Oplas also questioned the country’s approach to energy taxation, noting that while several neighboring Southeast Asian countries subsidize energy, the Philippines imposes taxes on coal, fuel and other energy products, contributing to higher electricity prices.

Regional comparison

Indonesia and Malaysia have long maintained fuel and electricity subsidy programs, though both have trimmed them in recent years as fiscal pressures mounted, Indonesia through periodic price adjustments and Malaysia through a shift toward targeted subsidies for lower-income households.

Vietnam and Thailand keep state-controlled utilities that absorb part of the cost of generation rather than passing the full amount to consumers.

The Philippines, by contrast, deregulated its power industry under the Electric Power Industry Reform Act (EPIRA) of 2001, moving generation and retail supply toward a competitive market while retaining excise and value-added taxes on the fuels that generators depend on, a combination Oplas has long argued stacks the deck against Filipino consumers relative to their neighbors.

As the country pursues renewable energy, Oplas maintained that conventional baseload power remains indispensable.

He said fossil fuels continue to supply the bulk of the country’s electricity generation and cautioned against depending heavily on intermittent renewable sources without sufficient backup generation or energy storage.

He likewise expressed support for nuclear power as a long-term option, while acknowledging that it will take years before it can significantly contribute to the country’s energy mix.

Nuclear’s slow revival

The government has revived interest in nuclear energy in recent years, including renewed studies on rehabilitating the mothballed Bataan Nuclear Power Plant and exploring small modular reactor technology.

The Department of Energy has set nuclear inclusion targets under its Philippine Energy Plan, but the timeline stretches well into the next decade, constrained by the years needed to build regulatory capacity, secure financing and win public acceptance in a country where the Bataan plant has stood idle since before it ever produced power for the grid.

Throughout the discussion, Oplas underscored his long-held position that competition, efficient regulation and sound fiscal policies, not expanded subsidies, are essential to achieving lower electricity costs and a more reliable power sector for Filipino consumers.