Senior lawmakers in the House of Representatives have filed House Bill (HB) No. 10602, aimed at eliminating the 12% Value-Added Tax (VAT) currently levied on recoverable system loss charges in power statements.
Introduced by Senior Deputy Speaker Ferdinand Hernandez and House Committee on Ways and Means Chair Miro Quimbo, the measure aims to ease energy costs in response to President Marcos Jr.’s recent State of the Nation Address (SONA).
The proposed legislation would apply exclusively to system loss charges approved by the Energy Regulatory Commission (ERC).
Quimbo emphasized that the bill provides immediate, direct savings for households while balancing the financial realities faced by distribution utilities—especially small electric cooperatives operating in rural areas.
“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 No. 10602 complements HB No. 10430, a broader proposal filed by House Speaker Faustino “Bojie” Dy III and Majority Leader Sandro Marcos that seeks to abolish recoverable system loss charges entirely under the Electric Power Industry Reform Act (EPIRA).
Quimbo noted that exempting system loss from VAT rectifies a fundamental fairness issue in the current tax structure while broader policy debates continue.
“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,” he said.
“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,” Quimbo added.
Because VAT is intended as a tax on actual consumption, charging it on lost electricity places an unnecessary burden on households.
Lawmakers frame the bill as a sustainable, fiscally responsible approach to delivering targeted relief to Filipino families without disrupting essential grid services.
“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.