Akbayan Party-list Rep. Chel Diokno has welcomed the Energy Regulatory Commission’s (ERC) commitment to remove the 12-percent value-added tax (VAT) on electricity system loss charges, while warning that the pledge must translate into concrete relief for consumers.
During the House Committee on Appropriations’ hearing on the Department of Energy (DOE) budget on September 2, 2026, Diokno pressed ERC Chairperson Francis Saturnino Juan on when Filipinos could expect to feel the impact on their bills. “So many of our fellow citizens fall victim to ‘bill shock’ whenever they receive their electric bills,” Diokno said, referencing President Ferdinand Marcos Jr.’s earlier call to remove the system loss charge and the tax imposed on it.
According to the ERC, it is coordinating with the Bureau of Internal Revenue (BIR) on a Revenue Memorandum Circular to strip the VAT from the charge. Juan said implementation could come as early as October or November, telling lawmakers that if the BIR circular is released in October, the earliest the change could reach consumer bills would be November. The regulator would then direct distribution utilities to revise their billing format accordingly.
The mechanism rests on ERC Resolution No. 26, Series of 2026, which reclassified system loss as a pass-through cost rather than income earned by generation companies, the National Grid Corporation of the Philippines, and distribution utilities. That reclassification means the charge should not form part of gross receipts subject to the 12-percent VAT. BIR Commissioner Charlito Martin Mendoza said the bureau will issue the corresponding circular 15 days after the resolution’s publication, noting that consumers should not pay VAT on electricity that never reaches their homes or businesses.
Removing the tax alone is projected to save consumers roughly P6 billion annually, according to the Philippine Information Agency.
Eliminating the system loss charge itself, however, remains a longer-term effort. Energy Secretary Sharon Garin cautioned that regulators cannot simply order utilities to stop collecting it. “You cannot just say ERC, i-zero mo na ‘yan. So we have to go on phases,” she said, adding that the process will take significant time and money. The DOE said it needs roughly six months to build a plan with electric cooperatives to address non-technical losses such as electricity theft and pilferage. Estimates cited during the hearing suggest the broader effort could require around P7 billion in investments.
Diokno maintained that a commitment is not enough. He called on the government to accelerate its actions so that household expenses can be reduced as soon as possible, saying consumers will be waiting for both the VAT removal and the eventual elimination of the system loss charge.
