Top leaders from the House of Representatives have filed a measure seeking to exempt electricity consumers from paying the 12 percent Value-Added Tax (VAT) on the much-panned system loss charges.

Filed by Senior Deputy Speaker South Cotabato Cotabato 2nd district Rep. Ferdinand Hernandez and Committee on Ways and Means Chairman Marikina City 2nd district Rep. Miro Quimbo, the measure, House Bill (HB) No. 10602, was described Wednesday, Aug. 5 as a fiscally responsible and consumer-oriented complement to ongoing efforts in the House to lower electricity costs.

These were seen as offshoots of President Marcos' pronouncements during his July 27 State of the Nation Address (SONA) before a joint session of Congress.

According to Quimbo, the VAT exemption in HB No. 10602 will apply only to the Energy Regulatory Commission (ERC)-approved recoverable distribution system loss charges reflected in electricity bills.

Quimbo explained that the bill advances the objective of reducing electricity costs for Filipinos while also recognizing the realities faced by the country’s power distribution sector.

“Everyone agrees that consumers deserve lower electricity bills. The question is how we provide that relief without unintentionally weakening smaller electric utilities and cooperatives that keep the lights on, particularly in far-flung communities,” said the economist-solon.

The proposal comes as discussions continue on HB No. 10430, earlier filed by Speaker Faustino “Bojie” Dy III and Majority Leader Sandro Marcos, which seeks to remove recoverable system loss charges under the Electric Power Industry Reform Act (EPIRA) —a direct response to President Marcos’ call in his SONA that consumers should not shoulder the burden of system loss.

“Removing the VAT on system loss charges is a straightforward way of lowering electricity bills today," Quimbo said.

"As Congress continues to fine-tune longer-term reforms, we can already correct one clear inequity: consumers should not be taxed on electricity they never actually consumed,” he said, referring to the concept of system loss.

According to the veteran lawmaker, VAT is a tax imposed whenever value is added to consumption. Since it is not consumed by the consumer, no value is added, and therefore VAT should not imposed, Quimbo explained.

“Our proposal addresses the tax treatment of system loss. Whether broader reforms to the system loss mechanism are eventually adopted is a separate policy discussion. What is clear is that if there is no actual consumption, there should be no VAT,” he added.

Quimbo emphasized that his measure forms part of broader efforts in Congress to provide targeted tax relief to Filipino families without compromising the fiscal sustainability of government or the operational viability of the country's power sector.

“Every peso saved on an electricity bill matters. This proposal provides meaningful relief to consumers while ensuring that reforms remain practical, balanced, and sustainable,” he said.