A broader legislative push to review electricity pricing in the Philippines is gaining momentum in the Senate, with multiple proposals now targeting taxes and pass-through charges in consumer power bills under ongoing hearings of the Senate (Proactive Response and Oversight for Timely and Effective Crisis Strategy) PROTECT Committee.

The latest initiative comes from Senator Risa Hontiveros, who on Monday filed Senate Bill No. 2076 seeking to remove value-added tax (VAT) on systems loss charges, arguing that consumers should not be taxed for electricity that was never actually delivered.

The move adds to a growing cluster of Senate actions examining the structure of electricity bills, including system loss caps, subsidies, and distribution-related charges, as lawmakers respond to sustained public concern over rising power costs.

Senator Hontiveros’ measure is a proposed amendment to the National Internal Revenue Code (NIRC), which governs the country’s VAT system. Hontiveros’ bill seeks to clarify that system loss charges are not subject to VAT, effectively removing them from transactions treated as taxable consumption.

System loss is defined in the bill as “the difference between the electrical energy delivered to the distribution system (energy input) and the energy delivered to the residential household consumers (energy output).”

By anchoring the change in the tax code, the proposal directly targets the legal basis for VAT application on electricity bill components currently passed on to consumers.

‘Double burden’ on consumers

Hontiveros said the existing structure places an unfair burden on households already grappling with high electricity prices.

“Itong VAT sa systems loss ay dobleng pasakit at insulto: Pinagbabayad na nga tayo ng systems loss na hindi natin napakinabangan, tapos pagbabayarin pa tayo ng buwis dito. We must immediately end this unfair arrangement, especially now that electricity costs are going up,” Hontiveros said.

(“The VAT on systems loss is a double burden and insult: we are already being made to pay for electricity losses we did not benefit from, then we are taxed for it. We must end this unfair arrangement immediately, especially as electricity costs continue to rise.”)

She added that VAT should not apply to charges that do not represent actual goods or services consumed.

“VAT is a consumption tax on goods and services. Systems loss charges – which represents losses in the distribution and delivery of electricity, are neither goods nor services purchased by power consumers. Hindi dapat pinapatawan ng VAT diyan ang mga pamilyang nagbabayad ng kuryente,” she said.

(“VAT is a consumption tax on goods and services. Systems loss charges—which represent losses in electricity distribution and delivery—are neither goods nor services purchased by consumers. Families paying for electricity should not be taxed for this.”)

Hontiveros’ proposal comes as the Senate PROTECT Committee continues hearings scrutinizing electricity pricing components, including pass-through charges embedded in monthly bills. 

The push also aligns with earlier Senate initiatives seeking to reduce system loss caps and improve efficiency in electricity distribution, which have long been flagged as contributing to elevated power costs. 

The VAT-on-system-loss measure is part of a wider wave of Senate proposals aimed at restructuring electricity costs, including calls to review subsidies, reassess pass-through charges, and investigate alleged excessive or “inflated” billing components by distribution utilities.

Some lawmakers have also pushed for amendments to the Electric Power Industry Reform Act (EPIRA), with proposals linked to the Senate PROTECT Committee seeking to address perceived inefficiencies and controversial charges passed on to consumers, including those attributed to distribution utilities.

Hontiveros said the VAT removal is only the first in a planned package of measures to ease electricity costs, particularly for low-income households facing inflationary pressures and external cost shocks.

“Maghahain pa tayo ng karagdagang panukalang batas sa Senado para bawasan ang pasanin ng power consumers kada buwan, at kahit papaano ay makatipid ang pamilyang Pilipino ngayong panahon ng krisis,” she said.

(“We will file additional bills in the Senate to reduce the monthly burden of power consumers so Filipino families can save, even a little, during this period of crisis.”

As the Senate expands its review of electricity taxes and pass-through charges, including system loss and subsidies, should reforms focus on tax relief, stricter utility regulation—or a full redesign of how Philippine electricity pricing is structured?

Follow Power Philippines on Facebook and LinkedIn or join our Viber community for more updates.