Electricity bills are officially getting a micro-discount.
The Bureau of Internal Revenue (BIR) just dropped Revenue Memorandum Circular No. 097-2026, officially removing the 12% value-added tax (VAT) previously tacked onto allowable system loss charges passed down by power utilities.
Under the updated directive, system loss charges, so long as they stay within the ceiling capped by the Energy Regulatory Commission (ERC), will now be classified as a government-mandated pass-through expense. Translation: no more 12% tax layer added to that specific line item on your monthly bill.
“For consumers, the practical effect is straightforward: once the new rules become effective, VAT will no longer be imposed on the allowable system loss portion of the electricity bill,” BIR Commissioner Charlito Martin Mendoza confirmed in a press release.
“That means a lower amount will be passed on to consumers on covered billings and transactions,” he added.
Decoding ‘System Loss’
System loss represents the gap between the power produced at generation plants and the actual electricity that reaches household outlets and business meters. This disparity occurs during transmission and distribution due to a mix of technical resistance and non-technical factors, like illegal connections.
The tax authority made sure to clarify that this isn’t a total VAT wipeout across your whole electric statement. The tax break applies exclusively to the allowable system loss component, which power utilities must explicitly itemize on billing slips.
“Every peso saved by consumers counts. This may be one part of a broader effort to bring down electricity costs, but it is relief that can be implemented under existing law,” Mendoza emphasized.
“While Congress continues to consider wider reforms on electricity charges and taxes, the BIR is acting on the measures within its authority that can reduce the burden on consumers,” he added.
Following the SONA Mandate
This administrative pivot directly aligns with President Ferdinand “Bongbong” Marcos Jr.’s State of the Nation Address (SONA), where he urged lawmakers to overhaul the Electric Power Industry Reform Act (EPIRA) and ban system loss fees, alongside their corresponding VAT, from being passed onto end-users.
System loss pass-throughs have long remained a point of contention in national energy debates, as lawmakers weigh consumer relief against grid stability.
Distribution giant Manila Electric Company (Meralco) has previously flagged concerns that outright bans or heavy restrictions on system loss recovery could compromise the operational capacity and financial solvency of distribution utilities.
While full-scale legislative overhauls surrounding energy taxes continue to wind through Congress, the BIR’s latest circular serves as immediate administrative relief for Filipino rate-payers.