Senator Mark Villar is pushing for the swift removal of the 12 percent value-added tax (VAT) applied to system loss charges on monthly power bills, arguing that Filipinos should not face tax burdens for electricity they do not consume.
Villar introduced Senate Bill No. 2392, which seeks to amend Section 109 of the National Internal Revenue Code to exempt system loss collections by electric distribution utilities and cooperatives from VAT.
The proposed exemption applies to both technical and non-technical system losses that distribution firms are currently permitted to pass on to consumers under Energy Regulatory Commission (ERC) guidelines and the Electric Power Industry Reform Act (EPIRA) of 2001.
“Simple lang ang prinsipyo natin: kung hindi naman nakonsumo ng consumer ang kuryente, hindi siya dapat singilin ng buwis para rito. Mataas na nga ang binabayaran ng ating mga kababayan sa kuryente, may system loss pa na hindi naman nila kasalanan. Kaya dapat nating alisin agad ang mga dagdag na singil na maaari namang bawasan,” Villar said.
System loss refers to electricity dissipated along power grids prior to reaching end-users. This encompasses technical losses inherent to line transmission, as well as non-technical losses stemming from unauthorized hookups, meter tampering, unmetered power draw, and related factors.
Under existing regulations, utilities may pass allowed system loss expenses on to retail customers, which typically account for roughly five to six percent of a standard monthly bill.
The legislative measure aligns with broader efforts to curb domestic electricity expenses. The ERC previously advocated for removing VAT from system loss fees, asserting that taxation should strictly apply to actual power consumption rather than dissipated energy.