Power System Loss– One of the "7 Wonders" in our Electricity Bill

Don’t mistakenly understood the “7 Wonders” in the title of this post as something outstanding or astonishing. In the contrary, it makes you wonder why it’s there in our monthly electricity bill and shouldered by many consumers.

The EPIRA (Electric Power Industry Reform Act/RA 9136) is not mentioning the System Loss nor the Anti-Electricity and Electric Transmission Lines/Materials Pilferage Act of 1994 (RA 7832) is discussing thoroughly about it. So, what the hell is a SYSTEM LOSS?

System Loss is an operational cost in the power generation that is pass on to the consumers at a rate determined by the Energy Regulatory Commission (ERC) every year and collected by the power utility companies in its monthly bill to the consumers.


In this VECO electric bill,the Systems Loss is shown as part of the Generation and Transmission Charges.

Still confused how the System Loss became part of our monthly bill? Thanks to the EPIRA and the RA 7832 for allowing power utilities to recover that operational cost by passing it on to consumers. The ERC, as the implementing agency of the EPIRA, determines every year the ceiling how much System Loss shall be collected by the power companies like VECO (Visayan Electric Company). The rate is now pegged at 8.5% from as high as 14.5% of the total System Loss incurred by a power company.

Our monthly electricity bill is now unbundled by means of segregating the various components in the electricity bill such as generation, transmission and distribution. It gives us also the chance to be informed how much are we paying in every aspect of our electrical consumption including the taxes.

In our monthly bill, there are seven (7) operational costs that have been passed on to the consumers. Here are the rates for each charge and the sample costs for each charge based on my bill above which totalled to P435.74:

  • System Loss Charge @ P0.9853/kWh (P212.82)
  • Subsidy on Lifeline Charge @ P0.0986/kWh (P21.30)
  • Senior Citizen Subsidy Rate @ P0.0002/kWh (P0.04)
  • Missionary Electrification @ P0.1163/kWh (P25.12)
  • Environmental Charge @ P0.0025/kWh (P0.54)
  • ICERA (Incremental Currency Exchange Rate Adjustment) @ P0.0159/kWh (P3.43)
  • Local Franchise Tax and Value Added Taxes @ 12% for Generation, Transmission, System Loss, Distribution, Others (P122.49)

Subsidy on Lifeline Charge, is used by our power company (VECO) to defray the discount given to small electricity consumers or those who consumed below 100kWh every month. If your consumption is higher than 100kWh you’ll be part of those subsidizing the bills of the small consumers. So, VECO is not the one giving the discount! lol


Chart from VECO website.

Senior Citizen Subsidy Rate, is also used by VECO to defray the discount given to consumers who are Senior Citizens. So, old folks must be thankful to the rest of the consumers not to VECO.

Missionary Electrification, is also used by VECO in providing electricity to “Unviable Areas” where there are less consumers like the mountain and remote areas. So, mountain folks must be thankful to their counterparts in the flat lands.

Environmental Charge, is not clear how VECO used this fund. I’m just guessing they might used it to defray the expenses in protecting the environment from possible destruction by their operations.

ICERA, is the mechanism allowed by ERC that is used to recover the “increase in principal payments of foreign denominated loans that may be brought about by the peso devaluation”. If the current exchange rate shows that the peso is devaluating, then more ICERA charge shall be paid by the consumers in order for VECO to recover that additional amount added to their loans.

Local Franchise Tax, is collected by VECO to “recover the local franchise tax imposed by the local government in your city or municipality from 1994-2000, which was not passed on the consumers”. So, the consumers are made to pay the Franchise Tax.

Value Added Tax, as we all knew is a pass-it-on tax aimed to ensure tax collection. VECO is able to recover their paid input taxes by charging it to us in the form of VAT. Unfortunately, the ordinary consumers has no one to pass on  the VAT ending him the one paying partly VECO’s taxes to the government.

The System Loss we help paying for VECO is both technical and non-technical system losses. It is the electricity that is lost during the distribution of power from the generating plants to VECO’s receiving point up to our electrical meters.

I tried also scanning the 100-page Implementing Rules and Regulations of the EPIRA but there is no mention about System Loss. It’s not even included in the Definition of Terms. So, i have to scan this technical report on “Losses in Electric Power Systems” at the School of Electrical Engineering of the Purdue University in Indiana to know more about System Loss.


According to the report, losses in the transmission system could incur due to the resistance of the conductors like electrical wires used in transmitting the power. This is line resistance. The losses can be reduced by increasing the voltage level that the line is carrying but would incur substantial expenses in transformers and insulators.

Transmission lines would incur high losses when carrying full load of current while the electricity demand of the area served is only modest. In order to reduces losses, transformers are employed in carrying electricity. However, transformers have also losses on its own.

Another contributor in System Loss during transmission is the use of AC Transmission System. To reduce losses, transmission system used the High Voltage Direct Current (HVDC) Transmission System which allows high voltage transmission and is only limited by the amount of heat that the line can tolerate.

In summary, System Loss is too complex to be understood by the consumers. What most of us thought of System Loss are the pilferages of electricity like electrical theft which VECO maybe charging us to recover the losses. Understanding all of those charges i enumerated above would derive a conclusion that VECO is really doing business without spending much losses. 😦

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