Biz group evidence-based system loss reforms to cut power costs

MAKATI CITY — The Management Association of the Philippines has urged energy regulators to tighten the rules on system loss charges, warning that high power tariffs continue to erode the country’s competitiveness and discourage investments.

In a set of recommendations released on Friday, August 7, 2026, the business group called on the Department of Energy and the Energy Regulatory Commission to revise how key billing components, specifically generation charges and system loss recoveries, are calculated for households and commercial enterprises.

The MAP said a reliable, competitive, and affordable power sector remains essential to economic growth and to improving the welfare of Filipino households and businesses.

The proposals align with the administration’s priority of driving down power tariffs in the Philippines, where electricity costs rank among the highest in Southeast Asia. The MAP said it fully supports the President’s objective of reducing electricity costs.

The central pillar of the six-point submission is the reform of system loss caps. The group insisted that any adjustment to those caps must be guided by rigorous technical analysis, empirical evidence, and international best practices.

Under current industry rules, utilities are allowed to pass certain costs associated with lost electricity on to end-consumers through their monthly billing statements.

The MAP said regulators must strictly separate the two kinds of loss. Technical losses are an inherent characteristic of power transmission and distribution, while non-technical losses arise from power theft, metering inaccuracies, and operational deficiencies.

Regulation should distinguish between unavoidable technical losses and preventable inefficiencies, the group said, allowing recovery only of prudent and efficiently incurred costs.

“Ultimately, the policy question is not simply how System Loss should be regulated, but who should bear the cost of avoidable losses,” the statement read.

Consumers should not shoulder costs arising from operational inefficiencies, weak governance, or preventable non-technical losses, the MAP said. Those risks should primarily rest with the entities responsible for managing them, creating stronger incentives for operational excellence and continuous loss reduction.

At the same time, the group said regulatory policy must continue to encourage prudent investment in grid modernization, network upgrades, digitalization, and advanced metering technologies that improve efficiency and reduce losses over time. It described a stable and predictable regulatory framework as essential to sustaining those investments while maintaining safe and reliable service.

The MAP also backed performance-based regulation that sets clear and progressively improving loss-reduction targets for distribution utilities and electric cooperatives, taking into account regulator-approved capital and operating expenditures.

That framework would require transparent reporting, independent performance audits, and a system of incentives and penalties to ensure that efficiency gains translate into lower electricity costs for consumers.

Addressing non-technical losses will require coordinated action by regulators, law enforcement agencies, local government units, and electricity distributors, the group said.

The MAP supports stronger enforcement against electricity pilferage and other illegal activities that unfairly shift costs to law-abiding consumers.

Distribution utilities and electric cooperatives, for their part, should strengthen internal controls, improve meter accuracy, reduce administrative losses, and adopt technologies that improve network visibility and loss detection.

Utilities with persistently high losses should be placed under enhanced regulatory oversight and appropriate governance or operational reforms to protect consumers and improve service performance, the group added.

Beyond supply-side reforms, the MAP pressed the DOE to strengthen and fully enforce the Energy Efficiency and Conservation Act, or Republic Act 11285, including the timely implementation of its compliance and enforcement mechanisms for designated establishments in the commercial, industrial, and transport sectors.

Improving energy efficiency is one of the most cost-effective ways to moderate the long-term growth of electricity tariffs, the group said, noting that reducing demand and improving end-use efficiency can lower technical losses throughout the power system.

The MAP said it stands ready to work with Congress, the DOE, the ERC, industry participants, and other stakeholders on reforms that will reduce electricity costs while preserving the long-term reliability, resilience, transparency, and financial sustainability of the Philippine power sector.