Senator Mark A. Villar is pushing to remove the 12-percent Value-Added Tax (VAT) imposed on system loss charges in electricity bills, saying consumers should not be taxed for electricity they did not actually consume.
Villar filed Senate Bill No. 2392, which seeks to exempt the system loss component charged by distribution utilities and electric cooperatives from VAT by amending Section 109 of the National Internal Revenue Code. The measure covers recoverable technical and non-technical system losses allowed by the Energy Regulatory Commission (ERC) under the Electric Power Industry Reform Act 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 systems 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 that is lost before reaching consumers. This includes technical losses that naturally occur as power travels through the distribution system, as well as non-technical losses caused by factors such as electricity pilferage, inaccurate metering, unmetered consumption, and human error. Allowable system losses may currently be passed on to consumers and typically account for around five to six percent of an electricity bill, according to the explanatory note of Villar’s bill.
The proposal comes amid renewed efforts to bring down electricity costs in the country. The ERC has similarly recommended removing VAT on system loss charges, arguing that the tax should apply to electricity actually consumed by customers rather than power lost within the distribution system.
Senator Villar adds that the proposal is particularly timely as Filipino households continue to contend with high electricity costs. He also cites alarming data that the Philippines is among the highest electricity rates in ASEAN as of June 2026 and as well as among the highest in Asia.
‘Hindi makatarungan na ang consumer na nga ang sumasagot sa system loss, papatawan pa ito ng VAT. We have to make electricity charges fairer and ensure that every peso paid by Filipino families corresponds as much as possible to the electricity and services they actually receive,’ Villar stressed.
The senator added that even modest reductions in monthly electricity bills can provide meaningful relief when accumulated across millions of households, particularly for low- and middle-income families whose budgets are already stretched by everyday expenses.
‘Sa bawat bawas sa singil sa kuryente, may dagdag na puwedeng ilaan ang pamilya para sa pagkain, pamasahe, gamot, at edukasyon. This is a practical reform that can translate directly into savings for our consumers,’ Villar said.