SONA 2026 on energy

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Among the notable pronouncements of President Marcos in his State of the Nation Address (SONA) 2026 last Monday related to energy are the following: (1) removal of system loss (SL) charge via EPIRA amendment, (2) power generation expansion by up to 10,000 megawatts (MW) from 200 mostly renewables projects (3) indigenous oil-gas development and (4) affirmation of nuclear energy.

Point (1) is the most controversial. The President said, “…tanggalin na natin ang system loss na pinapasa sa consumer at kinakarga sa bill na pinapatungan pa ng value-added tax… Therefore, we, the people, request – no, we demand for the immediate amendment of the EPIRA, and to prohibit charging system loss against consumers including the value-added tax thereon.”

I say controversial because SL in electricity is governed mainly by physics and not by politics. There are two types of SL. One is technical or due to physics, as electricity travels through wires and cables, there is resistance and dissipation at the conduction level. A 100 MW from the power plant, when distributed to many houses and offices via many wires and cables can become 90-95 MW only.

The other is non-technical or due to thefts and cheats, those illegal connections, electricity theft and jumper lines. These occur at the distribution level, not at generation or transmission levels.

The main source of SL is the technical side and it cannot be avoided. Like buying a 500-gram steak, when it is cooked it shrinks to 400 grams or so, the other 100 grams are evaporated moisture of the meat. Or when buying lumber, say 2x2 inches and 12 feet long,  after the planer to make it smooth and cut to desired length, it becomes 1.8 x 1.8 inches and 11 feet long, the removed parts are the system loss of that lumber.

If the government will insist that the SL should not be paid by the consumers, then taxpayers will pay for it via subsidy. If the distribution utilities or electric cooperatives are forced to absorb it, many of them will go bankrupt while those that are able to survive will have little or no leeway to improve other facilities like stronger and taller poles and wires. Either way we will be courting blackout nationwide and it is a lot worse than paying the SL charge.

One compromise may be that the SL be incorporated and added to the generation charge, just one item instead of two.

The system operator NGCP does not charge consumers for transmission technical SL. I learned that NGCP is able to minimize SL by installing and maintaining specialized equipment such as capacitor banks and statcom. Cool.

On point (2), yes we should keep expanding our power capacity and generation. In 2025, the Philippines produced only 129 terawatt-hours (TWH) of electricity, lower than our neighbors with smaller population: Thailand with 200 TWH, Malaysia with 210, Taiwan with 289, Vietnam with 329 TWH. The bulk of their power generation is from coal and/or gas.

I think the proposed “Sariling Kuryente” bill that refers to rooftop solar and home battery is unnecessary as it is being done now by many households and offices. These days, daytime prices are lower than nighttime prices partly because of the high entry of solar, both rooftop and utility or grid-scale with no battery.

The MTerra Solar is a good example of grid-scale solar. When completed it will have a 3,500 MW capacity plus 4,500 GWH of battery storage. So even in the evening the solar plant can still dispatch electricity to the grid, reducing the price gap between cheaper daytime and higher nighttime prices while contributing to grid stabilization.

On point (3), yes the Malampaya service contract expansion and the 14 petroleum service contracts would help develop our indigenous hydrocarbons. Hydrogen gas development is part of the 14 contracts. In addition we should aspire to have more or bigger refinery, more petrochemical plants and manufacturing facilities.

On point (4), nuclear energy was prominent in SONA 2022, then not mentioned in the next three SONAs and now it is back, good. It should complement the buildup of more data centers in the country that require huge power at stable, continuous and non-fluctuating supply. Nuclear has high capex but low opex.

Finally, while the President has mentioned oil, gas, hydrogen, solar, wind, biomass, hydro, geothermal, nuclear, he has not mentioned even once coal. Coal is less than 40 percent of total installed capacity but contributed nearly 60 percent of total power generation.

So if removal of system loss charge is not a good option to help bring down electricity prices in the country, what are the other options? Here is my list.

One, expand more thermal power sources like coal and gas baseload plants, and oil as peaking plants, stop or temper the noise on early decommissioning of coal plants. With thermal plants there is no need for battery storage, store the fuel input and not the electricity output. There is also little need for ancillary services by NGCP. So both  generation and transmission cost will be lower.

Two, quick rehabilitation and privatization of existing hydro plants still managed by PSALM. Magat hydroelectric plant (HEP) has original installed capacity of 360 MW, became 380 MW after it was privatized. Ambuklao HEP has original capacity of 75 MW, became  112.5 MW after it was privatized. Both Magat and Ambuklao are owned by SN Aboitiz Power.

Three, slowly reduce the universal charge for missionary electrification (UCME), subsidy to off-grid islands and provinces by on-grid customers nationwide. Currently it is P0.27/kwh, ultimately it should become zero. The off-grid areas should have their own baseload coal,  gas or small nuclear plants that are cheaper than the existing gensets running on diesel.