Describing electricity as a "basic necessity of modern life", House Majority Leader Ilocos Norte 1st district Rep. Sandro Marcos is pursuing a measure that would grant free electricity to low-consumption households.

Rep. Marcos' House Bill (HB) No. 2700, or the proposed “Free Electricity for Low-Consumption Households Act" will dismantle the current cross-subsidy system, and replace it with a direct government subsidy aimed at making power more affordable and equitable nationwide.

Specifically, it seeks to institutionalize a Direct Government Subsidy that will fully cover electricity bills of qualified households within a defined monthly threshold, while exempting the subsidized portion from the 12 percent value-added tax (VAT).

“This bill seeks to institutionalize a Direct Government Subsidy for low-consumption households, granting them free electricity within a reasonable monthly threshold and, eventually, phasing out the current system of cross-subsidization,” the presidential son said.

Under Rep. Marcos' measure, an eligible household refers to a residential consumer whose average monthly consumption over the preceding three months does not exceed 135 kilowatt-hours (kWh), or whose monthly bill does not exceed P2,000, whichever is lower, subject to certification by the Energy Regulatory Commission (ERC) and the Department of Energy (DOE).

He said that while “unquestionably noble in intent", the current system of electricity subsidies — delivered through the lifeline rate for indigent consumers and the senior citizen discount — was implemented through cross-subsidies, where other consumers shoulder the cost.

Recently, President Marcos announced that low-income and marginalized families now have easier access to electricity subsidies.

Citing a December 2024 study by the Philippine Institute for Development Studies led by research fellow Dr. Kris A. Francisco, Rep. Marcos said lifeline discounts vary per distribution utility (DU) due to differing financial capacities and customer characteristics.

The study found that under DU-level cross-subsidies, poor households in low-income areas can end up subsidizing other poor households. It also noted that subsidized electricity is still subject to a 12 percent VAT, “effectively taxing both contributors and recipients".

Marcos said the bill aims to shift from cross-subsidization to a direct government subsidy to address distortions in the current system and remove the burden on other consumers.

He said it will also allow transparent validation and exclusion of ineligible households based on a defined threshold, eliminate VAT on subsidized amounts, unify implementation, and ensure that public funds directly benefit eligible households.

The measure provides that all eligible Hhuseholds whose consumption does not exceed the Monthly Consumption Threshold shall be covered by the Direct Government Subsidy.

If a household exceeds the threshold in a particular billing period, it will shoulder the entire bill for that month without subsidy. However, such temporary ineligibility will not automatically disqualify it from availing of benefits in succeeding billing periods, subject to continued compliance with eligibility criteria.

The bill mandates that DUs issue zero-charge electricity bills to validated eligible households and submit verified reimbursement claims to the DOE, subject to stringent audit by the Commission on Audit (COA) to prevent leakage and ensure accountability.

To prevent duplication and disruption, the measure provides for a two-year transition period during which the Direct Government Subsidy will coexist with the existing lifeline rate and other electricity subsidies.

During this period, the DOE and ERC, in coordination with other agencies, will review whether to fully replace the lifeline rate, allow both programs to coexist with separate beneficiary scopes, or adopt other recommendations.

“In enacting this measure, Congress affirms that electricity is a necessity which the State must make affordable and accessible,” Rep. Marcos said.

The bill also notes that, with the exception of the Philippines, Association of Southeast Asian Nations (ASEAN) countries already provide electricity subsidies in varying degrees, including Indonesia, Vietnam, Thailand, Singapore, Myanmar and Lao PDR.

“Therefore, in order to bring better relief to low-income households than that afforded by the existing lifeline rate under the EPIRA (Electric Power Industry Reform Act), a direct subsidy scheme needs to be instituted,” Rep. Marcos said, as he called for the immediate passage of the bill.