ERC moves to scrap VAT on system loss charge ahead of Congress action

Abi Sarabia M., Philippine Canadian Inquirer
August 12, 2026

Photo courtesy: Philippine Information Agency

The Energy Regulatory Commission (ERC) is working to remove the 12 percent value-added tax (VAT) on the system loss charge in electricity bills even before Congress passes legislation addressing the issue, ERC Chairperson Atty. Francis Saturnino Juan said.

Juan said the commission is coordinating with the Bureau of Internal Revenue (BIR) to implement the VAT removal ahead of a full legislative resolution on the system loss charge itself, which remains under deliberation in Congress.

The move follows President Ferdinand Marcos Jr.’s call during his State of the Nation Address for the system loss charge to no longer be passed on to consumers.

According to Juan, while lawmakers continue deliberating the complete removal of the system loss charge from consumers’ bills, the ERC and BIR are finalizing an agreement to fast-track the elimination of VAT on the charge in the meantime.

Separately, the Department of Energy (DOE) said it is still studying how to eliminate system loss altogether, with Energy Secretary Sharon Garin noting that the current focus is on non-technical system loss, which is caused mainly by pilferage, or the theft of electricity.

Garin distinguished this from technical system loss, which refers to electricity lost along transmission lines as it travels from generation companies to the grid. She said no country has achieved zero technical system loss.

The secretary said a multiagency task force has been formed to address the non-technical losses. 

“The major issue now is how do we address non-technical because due to pilferage. We are created a multiagency Task Force, the National Electrification Agency ah Administration, ERC, even NAPOCOR, TRANSCO, DOE para po hanapan po ng paraan (to look for a solution). Now, our objective is to have zero on that, na i-eliminate siya (to eliminate it),” Garin said.

The task force includes the National Electrification Administration, the ERC, the National Power Corporation (NAPOCOR), the National Transmission Corporation (TRANSCO), and the DOE.

Garin said each concerned government agency is preparing its own proposed budget or policy reforms aimed at eliminating system loss charges from electricity bills, though no timeline was given for when these measures would take effect.