Big babies

While there maybe a flurry of controversies and scandals being looked into by the 17th Congress, the Senators quietly approved on third and final reading last Monday the proposed bill that would effectively reduce our monthly electric bills. It will benefit all consumers of the Manila Electric Co. (Meralco) and other public utilities which have passed on to their respective customers the burden of their systems losses.

Approved was Senate Bill (SB) 1623, or the proposed “Recoverable Systems Loss Act” that reduces the cap on the recoverable systems losses charged by distribution utilities to consumers. For us Meralco customers, we have been carrying the systems losses as among the items of charges reflected in our monthly electric bills for the past 17 years now since the Electric Power Industry Reform Act (EPIRA) of 2001 took effect.

Its counterpart versions at the House of Representatives, namely, House Bills 942 and 2297 on the proposed Recoverable System Loss Act, however, remain pending at the energy committee chaired by Marinduque Rep.Lord Allan Jay Velasco.

Millions of electricity consumers are required under the EPIRA to pay for our share to foot the bill for tens of billions of pesos worth of extra charges passed on to us by Meralco and electric cooperatives and utilities for so-called system losses or power that is stolen, pilfered or lost through other causes like natural calamities or transmission inefficiency.

What takes the cake is that this EPIRA also required us electric consumers to pay the 12 percent value added tax (VAT) on those systems losses.

The VAT is a consumption tax. So why the hell is systems losses or electricity lost that we consumers have not even used are being taxed to us? It’s really outrageous.

That levy would soon be scrapped if a bill the House of Representatives has approved last month on third and final reading becomes a law.

However, it has no counterpart measure at the Senate. Legislative procedures, however, allow both chambers to adopt a bill in its entirety in lieu of counterpart version. 

Since these two approved measures have already reached this stage of legislation – with similar intentions to ease the burden of electric consumers from systems losses – our lawmakers could put together both measures as one consolidated bill by a bicameral conference committee.

So it was with great interest when I learned that the 17th Congress finally acted on these measures that would end soon this injustice to us consumers perpetrated through these years. Industry sources placed systems losses by one major electric utility firm at around P10 to P12 billion a year. Since they can pass on to their customers their systems losses, these utilities have apparently become complacent in reducing such systems losses.

Of the 22 Senators, 16 voted for the approval of SB 1623. There was no negative vote and no abstention. It is not known why six Senators did not cast a vote on this very popular measure. Perhaps they were either conveniently absent or out of the session hall when the voting was done.

The approval of SB 1623 was shepherded by Sen. Sherwin Gatchalian as the chairman of the Senate committee on energy. Aside from Gatchalian, the bill was co-authored by Senators Manny Pacquiao, Joseph Victor Ejercito and Cynthia Villar. It was a consolidation of bills filed earlier by Gatchalian, Pacquiao and Ejercito. 

SB 1623 defines systems loss as the “difference between the electric energy delivered to the distribution system and the energy delivered to the end-users and other entities connected to the system.”

But what befuddles us about this particular imposition to consumers continued on unchecked when the EPIRA itself provided a mechanism through which it should have been done. Under EPIRA, it gave the Energy Regulatory Commission (ERC) the mandate to change the cap on the rates passed on by electric distribution utilities to consumers.

In his sponsorship of SB 1623, Gatchalian noted the ERC has not changed the rates for the past nine years. From 8.5 percent, private distribution utilities will now only be allowed to pass on five percent of system losses under the bill. Meanwhile, the cap for electric cooperatives will be lowered from 13 percent to 10 percent.

The proposed bill would also require such distribution utilities to quarterly submit their systems losses indicating their technical and non-technical losses along with other pertinent documents to the ERC, which in turn, would annually review such losses to “ensure that only allowable costs within the system loss caps are recovered.” 

As a “carrot” to electric utilities, Gatchalian cited the bill seeks to mandate the ERC to implement a performance incentive scheme to encourage them to reduce their system losses instead of passing them on to their customers.  

Thus, failure to comply with the caps imposed in the bill would “subject both the ERC and the distribution utilities to administrative penalties.”

Methinks, this is already a compromise to public utilities since they are still allowed to recover their systems losses, though at reduced maximum cap of five percent.

Navotas Rep. Tobias Tiangco, a co-author of the HB 942, batted to remove all together system losses from being charged to electric consumers. The House committee on energy, however, has deleted this particular provision in Tiangco’s bill.

It is still not comforting for us all electric consumers because we will soon feel the impact of the Tax Reforms for Acceleration and Inclusion (TRAIN) that took effect already. Among other things, TRAIN raised the tax rates of diesel and fuel which run majority of power plants of Meralco and other electric utilities.

So hopefully these proposed bills will be passed into law so that it could at least mitigate the additional burden of TRAIN imposed on us electric consumers. 

Once approved into law, these measures will effectively amend these provisions of the EPIRA that have babied these utilities all these years. These big babies can no longer have their cake and eat it, too.