ERC: Scrapping of VAT on system loss charges likely to reflect in November electricity bill

The scrapping of the value added tax (VAT) on the allowable system loss charges imposed by power utilities is likely to reflect in consumers' November electricity bill, the Energy Regulatory Commission (ERC) said on Sunday.

The ERC said that it already talked to stakeholders to fast-track the implementation of the circular issued by the Bureau of Internal Revenue (BIR).

"Nakipagpulong nga ang ERC sa mga stakeholders nu'ng Biyernes para ma-plantsa 'yung mga mechanics nito. 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," said ERC chairperson Francis Saturnino Juan in an interview with Super Radyo dzBB.

(The ERC met with stakeholders on Friday to iron out its mechanics. So hopefully, the scrapping of VAT on the system loss charge will take effect by our October consumption, and we will already see this in the November bill that we will receive.)

LIVE sa DZBB: Atty. Francis Saturnino Juan, chairperson, Energy Regulatory Commission (ERC)

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Under Revenue Memorandum Circular 097-2026, issued Monday, September 14, the BIR said system loss charges within the cap approved by the ERC will no longer be subject to 12% VAT, as they will be treated as government-mandated pass-through costs.

The ERC pointed out that what will only be scrapped for the meantime is the VAT imposed and not yet the whole system loss charge.

"'Yung VAT lang ng system loss ang mawawala. 'Yung system loss charge natin ngayon ay tumatayo 'yan sa associated na generation at transmission costs nu'ng mga kuryenteng nawawala. Pero hiwalay ito sa generation talagang binabayaran natin, transmission at distribution. 'Yung VAT diyan ay hindi natin matanggal dahil 'yan ay nasa batas," Juan explained.

(Only the VAT on the system loss will be removed. Our current system loss charge represents the associated generation and transmission costs of the electricity that is lost. However, this is separate from the generation, transmission, and distribution that we actually pay for. We cannot remove the VAT on those because that is mandated by law.)

The ERC official also said that the VAT on system loss charge ranges between P20 to P30.

The Department of Energy earlier said that households, particularly those consuming 200 kilowatt-hours of electricity, can expect savings of at least P20 on their electricity bills once the VAT on system loss charge is scrapped. —KG, GMA News