Electricity subsidies remain necessary to help vulnerable households and remote communities access power, but the Philippine government needs to improve targeting mechanisms to reduce leakages and ensure long-term sustainability, according to experts at a recent webinar organized by state-run policy think tank Philippine Institute for Development Studies (PIDS).

Presenting the study “Making Electricity Subsidies Work: Cross-Country Lessons for Philippine Energy Policy,” PIDS senior research fellow Kris Francisco said the country’s major electricity subsidy programs continue to play an important role despite mounting fiscal and implementation challenges.

These include the universal charge for missionary electrification (UCME), lifeline rate, and senior citizen discount programs.

“We treat electricity as a basic need,” Francisco said, noting that electricity subsidies help households participate more productively in the economy and support broader development goals.

The study found that under earlier consumption-based eligibility arrangements, more than 60 percent of households in many regions qualified for lifeline rate benefits, raising concerns that the subsidies were not being sufficiently targeted toward those most in need.

Francisco said electricity consumption alone may not be an accurate proxy for poverty.

“Lower consumption does not necessarily mean that a household is poorer,” she said. “Consumption thresholds alone are not enough to identify poor households and should be complemented with household welfare data.”

She explained that some low-income households may appear to consume more electricity because they share meters with other families, while some higher-income households may keep electricity consumption low through solar panels or energy-efficient appliances.

The study also pointed to rising subsidy costs, particularly for UCME, which supports electricity access in off-grid and remote areas.

According to the study, UCME expenditures increased to a projected ₱28.6 billion in 2024 from ₱7.05 billion in 2020.

Despite these concerns, Francisco stressed that the study does not recommend removing electricity subsidies.

“We are not recommending the removal of these cross-subsidies because we believe they are serving an important equity goal,” Francisco said. “Our priority is simply to improve targeting and reduce leakages.”

To improve program delivery, the study recommended strengthening the integration of existing welfare and administrative databases, including the Philippine Statistics Authority’s (PSA) family income and expenditure survey (FIES), the Department of Social Welfare and Development’s (DSWD) Pantawid Pamilyang Pilipino Program (4Ps) and Listahanan databases, and utility consumer records.

Reacting to the findings, Department of Energy (DOE) power market development division officer-in-charge (OIC) Antonio Barcelona said recent reforms have already addressed some of the weaknesses identified in earlier lifeline rate arrangements.

Barcelona cited Republic Act (RA) No. 11552, which linked eligibility for the lifeline rate program to 4Ps beneficiaries and indigent households certified by local government units, reducing reliance on electricity consumption thresholds alone.

For UCME, Barcelona said the subsidy remains necessary for missionary or off-grid areas where power generation costs remain substantially higher due to dependence on diesel-based generation.

To reduce long-term subsidy dependence, he highlighted the DOE’s graduation policies and ongoing hybridization projects integrating renewable energy technologies into off-grid systems.

According to Barcelona, these reforms help ensure that electricity subsidies remain focused on households and communities facing high power costs and limited access to reliable electricity.

Both Francisco and Barcelona agreed that electricity subsidies continue to serve an important social and economic function, but stressed that programs must remain efficient, equitable, and financially sustainable.