VAT removal from system loss charge may take effect next month – ERC

The removal of value-added tax (VAT) on the widely unpopular system loss charge by electricity distributors may take effect as early as next month, Energy Regulatory Commission (ERC) Chairperson Francis Saturnino Juan said on Wednesday. At a congressional budget hearing, Juan said the ERC already laid down Resolution No. 26, which will remove the VAT imposition on system loss charges. This move is seen as a step towards easing the burden of electricity bills for consumers. The system loss charge is collected by power distributors to recover electricity losses incurred during transmission and distribution. However, it has been a long-standing source of consumer dissatisfaction due to questions regarding its calculation and transparency. The VAT exemption is expected to theoretically lead to a reduction in electricity bills. However, the actual impact on the final charges will depend on the specific pricing of each power distributor and other components of the electricity tariff. The ERC hopes that this measure will alleviate the burden on the public and enhance trust in electricity pricing. In the Philippines, energy costs represent a significant portion of household budgets, and electricity rate fluctuations directly affect the lives of citizens, especially low-income households. This VAT exemption could be seen as part of efforts to support public welfare amid rising inflationary pressures.