In a bid to ease burden on Filipino ratepayers, two senior lawmakers have introduced legislation to remove the 12-percent value-added tax (VAT) levied on distribution system loss charges.
Authored by House Committee on Ways and Means Chairman Miro Quimbo (Marikina) and Senior Deputy Speaker Ferdinand Hernandez, House Bill No. 10602 targets system loss fees that are approved by the Energy Regulatory Commission (ERC) and billed directly to households.
The authors framed the bill as a balanced, fiscally grounded initiative designed to trim electric bills without endangering the operational integrity of power distribution companies, especially rural electric cooperatives.
“Everyone agrees that consumers deserve lower electricity bills. The question is how we provide that relief without unintentionally weakening smaller electric utilities and cooperatives that keep the lights on, particularly in far-flung communities,” Quimbo said.
HB 10602 enters the legislative pipeline alongside House Bill No. 10430, a related measure authored by Speaker Faustino “Bojie” Dy III and Majority Leader Ferdinand Alexander “Sandro” Marcos. While HB 10430 proposes the total repeal of recoverable system loss charges under the Electric Power Industry Reform Act (EPIRA)—aligning with directives from President Ferdinand R. Marcos Jr.—the new bill focuses immediately on the tax treatment of those charges.
“Removing the VAT on system loss charges is a straightforward way of lowering electricity bills today. As Congress continues to fine-tune longer-term reforms, we can already correct one clear inequity: consumers should not be taxed on electricity they never actually consumed,” Quimbo said.
Quimbo pointed out a fundamental flaw in taxing lost power: because VAT is designed to tax actual consumption, applying it to power dissipated during distribution is an administrative anomaly.
“Our proposal addresses the tax treatment of system loss. Whether broader reforms to the system loss mechanism are eventually adopted is a separate policy discussion. What is clear is that if there is no actual consumption, there should be no VAT,” he added.
According to the Marikina representative, HB 10602 fits into a wider legislative strategy to deliver targeted relief to households while safeguarding overall state revenues and grid stability.
“Every peso saved on an electricity bill matters. This proposal provides meaningful relief to consumers while ensuring that reforms remain practical, balanced, and sustainable,” Quimbo said.