The cost of electricity in the Philippines is one of the most expensive in Asia in current times. As a consequence, foreign investors are discouraged from putting up production sites in the country. Those who do, either out of optimism or unmitigated zeal, end up pulling out and relocating elsewhere in Southeast Asia, where electricity bills are less prohibitive. Many simply farm out their production needs to factories and sweatshops in mainland China.
When foreign investors withdraw from the Philippines and relocate to other countries, more Filipinos join the unemployment line. To say the obvious, that’s bad news for the Philippine economy.
Electricity is expensive in the Philippines today because of the multi-layered process by which electricity is purchased and distributed to consumers. It becomes even more expensive because Congress enacted a law which allows electric power distributors like the Manila Electric Company to charge their so-called “systems-generated losses” to consumers.
As far as the existing legal arrangement is concerned, “systems-generated losses” are losses supposedly incurred by the power distributor in the course of selling electricity to its consumers —homes, offices, establishments, and local government units. This term seems broad enough to include the cost of pilfered electricity, as well as stolen equipment and supplies used by the power distributor in servicing its customers.
The amount corresponding to the “systems-generated loss” of each month is calculated by the power distributor, and this cost is passed on to the consumer on a proportionate basis, depending on the extent of the consumer’s actual monthly energy consumption.
In other words, if a consumer uses one percent of the total electricity sold by the power distributor for a particular month, the same consumer must pay the power distributor an amount equivalent to one percent of the total “systems-generated loss.” That amount is in addition to the cost of electricity the consumer actually used for that particular month.
The actual figures corresponding to the “systems-generated loss” is supposedly calculated by the power distributor. Whether these figures are correct, or whether they are subjected to an external audit, is unclear. As a result, many consumers suspect that the amounts they are required to pay for “systems-generated loss” are arbitrary figures.
What is more unsettling is that power distributors are allowed to charge the cost of all the electricity, supplies, and equipment supposedly pilfered from them to the “systems-generated loss” which the consumer must pay for. This includes electricity, supplies, and equipment stolen due to the failure of the power distributor to observe care and diligence.
In other words, the cost of the electricity, supplies, and equipment stolen from the power distributor, including those stolen because of the administrative incompetence of its officers or employees, or the negligence of its personnel, or insufficient security services, are charged to the consumer.
Precisely because of this existing arrangement (where the helpless consumer is made to pay for every loss), there is no incentive for the power distributor to exercise due diligence to prevent the pilferage of electricity and the theft of company supplies, and equipment. Why should the power distributor observe diligence when somebody else will answer for the power distributor’s incompetence and recklessness? Why should the power distributor spend money to hire more competent administrators, more efficient engineers, and more reliable security personnel to minimize, if not eliminate pilferage, when the consumer is required by law to shoulder the cost of such pilferage? No other business enterprise has it this good, and with the support of legislation, too!
There is more bad news for the consumer. The amount of money the consumer must pay as his share of the monthly “systems generated loss” is subjected to a value-added tax (VAT)! Imagine that! The consumer must pay a twelve percent tax for electricity the consumer did not use in the first place! Moreover, that’s tax paid by the consumer for the power distributor’s inefficient operations! In fine, that’s state-supported extortion plain and simple.
In past congresses, at least two bills seeking to do away with this onerous “systems-generated loss” racket were filed in the House of Representatives. Not a single hearing was held regarding either of them.
The VAT the government collects pursuant to this “systems generated loss” runs to billions of pesos every year. Eliminate the “systems-generated loss” and you eliminate the VAT. Maybe this is the reason why the government during the past six years refused to put an end to this racket.
For the record, the Liberal Party was in power during the six years comprising both congresses. LP stalwart Leni Robredo, the current vice president whose highly controversial victory is being contested by ex-Senator Ferdinand “Bongbong” Marcos Jr., was a member of the House during the last Congress. She didn’t do anything to stop this racket.
The electric power industry is a public utility, which means that it is a business coupled with a very high degree of public interest. Under the law governing public utilities, and because of the big investments needed in the business of power distribution, the State is obligated to protect a public utility from cut-throat competitors. In exchange for this protection, the public utility is not allowed to impose prohibitive charges on its customers. The “systems-generated loss” allowed by existing legislation goes against this pro-people blueprint.
The good news is that one congressman and one senator have filed separate bills, once again seeking to dispense with the “systems-generated loss” racket. Filing these bills is not enough, though. The committees on energy of both the House and the Senate must act on these bills quickly and cause the immediate enactment of remedial legislation against this state-tolerated anomaly.
It’s about time this institutionalized racket is halted. The public interest demands it.
