VAT removal on system loss charges may reflect in November: ERC
Consumers may see a decrease in their electricity bills soon, as the removal of the value-added tax on system loss charges will likely take place in November, according to the Energy Regulatory Commission.
In an interview with Super Radyo dzBB, ERC chairperson Francis Saturnino Juan said that their goal is to implement as soon as possible the circular issued by the Bureau of Internal Revenue, which removes the 12% VAT on the charge.
"Nakipagpulong nga ang ERC sa mga stakeholders noong Biyernes para ma-plantsa 'yung mga mechanics nito," Juan said.
"So hopefully by October, consumption natin ay mag-e-effect na 'yung walang VAT sa system loss charge, at ito ay makikita na natin sa November na bill na matatanggap natin," he added.
According to him, the VAT removal only applies to the system loss charge, as the generation, transmission, and distribution of the electricity will still be charged.
"Ang ating nagawa lang na paraan ay yung interpretation ng system loss bilang government-mandated purchase at na-justify base dito 'yung pagtatanggal ng VAT para sa system loss," Juan explained.
"Ang kilowatt-hour na konsumo halimbawa ay 200 kWh, ang magiging VAT ng system loss component nito ay mga nasa 200. Kaya ang 1% ay nasa P20 hanggang P30, depende kung ang utility mo ay electric cooperative," he continued.
For now, their goal is to explore what other charges can be eventually removed to help bring down consumers' overall electricity bills.
However, Juan noted that other factors could still affect electricity prices in the coming weeks, particularly the rising cost of crude oil in the global market due to the ongoing conflict in the Middle East.
“Ang susunod na mga linggo pa, titignan natin kung ano ang epekto ng pagtaas ng presyo ng krudo sa pandaigdigang pamilihan dahil baka maka-apekto ito sa presyo ng panggatong na ginagamit sa ating planta,” he said.
Under BIR's new circular, the system loss charge will be recognized as a government-mandated pass-through cost excluded from VAT purposes, potentially lowering the amount passed on to consumers through their electricity bills.
The system loss charge covers the electricity lost as power travels from generation facilities to consumers. It's computed based on a customer’s kilowatt-hour consumption and accounts for about 5% of a typical Meralco bill.
For the tax treatment to apply, the allowable system loss charge must be separately identified in the billing statement, invoice, or similar document. Generation companies, the National Grid Corporation of the Philippines, distribution utilities, electric cooperatives, and other affected taxpayers must also comply with applicable ERC rules and tax regulations.
In his 2026 State of the Nation Address, President Ferdinand Marcos Jr. called for the removal of the system loss charge from consumers' electricity bills.
"Hindi naman kasalanan ng consumer kung bakit nagkaroon ng system loss, kaya hindi naman tama na kailangan sila pa ang pagbabayarin dito," he said.
