Senator Mark Villar is seeking to exempt electricity system loss charges from the 12 percent Value-Added Tax (VAT), arguing that consumers should not have to pay taxes on power they did not actually use.

Villar filed Senate Bill No. 2392, which proposes amending Section 109 of the National Internal Revenue Code to remove VAT from system loss charges imposed by distribution utilities and electric cooperatives. The measure covers technical and non-technical system losses that are recoverable under rules set by the Energy Regulatory Commission (ERC) pursuant to 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 (Our principle is simple: if the consumer did not consume the electricity, they should not be taxed for it. Filipinos are already paying high electricity bills, and they are also being charged for system losses that are not their fault. We should therefore immediately remove additional charges that can be reduced),” Villar said.

System loss refers to electricity that does not reach consumers because of losses occurring within the distribution system. These may be technical losses, which naturally occur as electricity travels through power lines and equipment, or non-technical losses arising from electricity theft, inaccurate meters, unmetered consumption and human error.

Under existing rules, allowable system losses can be passed on to consumers and generally comprise about 5 percent to 6 percent of an electricity bill, according to the explanatory note of Villar's measure.

The proposal comes as efforts continue to reduce electricity costs nationwide. The ERC has also recommended eliminating VAT on system loss charges, maintaining that the tax should be imposed on electricity actually consumed rather than power lost before reaching customers.

Villar said the measure is particularly important as Filipino households continue to face high electricity rates. He cited data showing that the Philippines ranked among the countries with the highest electricity costs in ASEAN as of June 2026 and was also among the most expensive in Asia.

“Hindi makatarungan na ang consumer na nga ang sumasagot sa system loss, papatawan pa ito ng VAT (It is unfair for consumers to shoulder the system loss and then be charged VAT on top of it). 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.

He said even relatively small reductions in electricity bills could translate into substantial savings when applied to millions of households, particularly low- and middle-income families dealing with rising daily expenses.