Manila Orders Utilities to Cut Electricity Theft as Marcos Moves to Scrap System Loss Fees

Palace Demands Stronger Anti-Theft Programs

The Philippine presidential palace has directed power utilities to strengthen anti-theft measures after President Ferdinand Marcos Jr. proposed eliminating system loss charges from consumer electricity bills. Palace Press Officer Claire Castro emphasized Wednesday that the administration does not intend to simply transfer the financial burden from consumers to utility companies.

Marcos announced the proposal during his fifth State of the Nation Address on July 27, stating that consumers should not bear the cost of electricity losses or the 12% value-added tax imposed on those charges. The move would require amendments to the Electric Power Industry Reform Act, which governs the country's power sector structure.

Castro clarified that the president expects utilities to implement robust monitoring and prevention programs rather than absorbing losses passively. The administration wants power companies to reduce losses from theft and pilferage that currently get passed on to paying customers.

Industry Groups Signal Concerns

Manila Electric Company and the Philippine Rural Electric Cooperatives Association have both called for careful deliberation on the proposal. PHILRECA expressed conditional support but stressed that removing VAT on system loss must not create unrecoverable input VAT or disguised costs for electric cooperatives, generation companies, and the National Grid Corporation.

Meralco indicated readiness to participate in discussions about the reform. The utility industry's cautious response reflects concern about operational viability if system loss charges disappear without addressing the underlying causes of electricity losses.

The Department of Energy clarified Tuesday that the proposal targets only system loss charges and their associated 12% VAT, not the entire VAT on electric consumption. System loss charges cover the cost of electricity lost before reaching consumers, including technical losses in transmission infrastructure and non-technical losses from theft and illegal connections.

Efficiency Push Amid Sector Reform

Castro said utility companies must improve efficiency to prevent losses from being passed to consumers, even as the government studies potential effects on the power sector. The administration is working with private partners to advance the proposal, which Marcos framed as a fairness issue at the Energy Museum inauguration Wednesday.

The president argued that Filipino families should pay only for electricity they actually use, not for inefficiencies beyond their control. The proposal represents a significant shift in how electricity losses are accounted for in Southeast Asia's second-largest economy.

Power theft and pilferage have long plagued the Philippines' electricity sector, particularly in densely populated urban areas and rural communities where illegal connections are more difficult to detect. Technical losses from aging transmission infrastructure add to the total system loss figure that utilities currently recover through consumer charges.

Legislative Path Ahead

Implementing the proposal will require Congressional amendments to EPIRA, the 2001 law that restructured the Philippine power industry and expanded private participation in generation. The reform could reshape cost allocation across generation, transmission, and distribution segments.

Castro emphasized that the government is studying the proposal's impact to avoid negative effects on utility operations. The administration's directive to strengthen anti-theft programs suggests it expects utilities to reduce non-technical losses before any charge removal takes effect.

The proposal comes as Marcos faces pressure to address rising living costs. Two separate surveys showed the public wanted the administration to tackle economic issues, including electricity costs that remain among the highest in Asia despite sector reforms over the past two decades.

Industry observers note that the success of removing system loss charges depends on whether utilities can significantly reduce theft and technical losses. Without substantial improvements in loss prevention, the proposal could strain utility finances or require government subsidies to maintain service quality and grid investment.