EDITORIAL – Addressing ‘bill shock’

Among the most applauded parts of President Marcos’ fifth State of the Nation Address was his call for the removal of the system loss charge and its value-added tax from power bills.

It was the President’s response to complaints about “bill shock” for electricity, and reports that the country now has the highest power rates in Southeast Asia.

High power costs and unreliability of electricity service in several areas have been among the top concerns raised by both local and foreign investors in this country.

Power rates have surged since the US and Israel attacked Iran on Feb. 28 this year, sending world crude prices skyrocketing.

Coal accounts for about 60 percent of actual electricity generation in the Philippines. Some three-fourths of that coal is imported.

In his SONA, the President pushed for an expansion of power generation through renewable energy, but this shift will take time. Removing the system loss charge, through an amendment of the Electric Power Industry Reform Act of 2001, can be accomplished faster, especially with the support expressed by lawmakers for the proposal.

Energy players, however, have warned that the removal of the system loss charge may not necessarily lead to a reduction in power costs, unless safeguards are firmly in place. They also warned that the move, unless properly implemented, could worsen the unreliability of power supply especially in underserved areas.

The system loss charge goes to power producers, which transmit the electricity to distributors through the national grid. As electricity travels through wires and multiple transformers from power plants to end users, energy is lost. Illegal connections and electricity theft add to the system loss. Power distribution companies collect this pass-through charge and remit it to the power generators and national grid.

Energy officials have set meetings with industry players to ensure that the system loss charge, once abolished, would not simply be renamed or incorporated into other items that will still be reflected in electricity bills.

The President’s call for the scrapping of the system loss charge and its VAT have raised expectations of a reduced electric bill shock. He must ensure that the expectations are met, without compromising the viability of the power producers.