'Free electricity' proposed for low-consumption households under new bill

House Majority Leader and Ilocos Norte Rep. Alexander “Sandro” Marcos is pushing for free electricity for households with "low consumption."

Marcos made the proposal under House Bill 2700 or the Free Electricity for Low-Consumption Households Act which provides government subsidy for electricity bills of qualified households within a defined monthly threshold and exempts the subsidized portion from the 12% value-added tax (VAT).

The bill defines an eligible household as a residential consumer whose average monthly consumption over the preceding three months does not exceed 135 kilowatt hours (kWh), or whose monthly bill does not exceed P2,000, whichever is lower, subject to certification by the Energy Regulatory Commission (ERC) and the Department of Energy (DOE).

If a household exceeds the threshold in a particular billing period, it will shoulder the entire bill for that month without subsidy. However, such temporary ineligibility will not automatically disqualify it from availing of benefits in succeeding billing periods, subject to continued compliance with eligibility criteria.

“Electricity is a basic necessity of modern life. This bill seeks to institutionalize a Direct Government Subsidy for low-consumption households, granting them free electricity within a reasonable monthly threshold and, eventually, phasing out the current system of cross-subsidization,” Marcos said.

“The current system of electricity subsidies, delivered through the lifeline rate for indigent consumers and the senior citizen discount, is implemented through cross-subsidies, where other consumers shoulder the cost. With this measure, low-income and marginalized families now have easier access to electricity subsidies,” Marcos added.

'Distortions'

The lawmaker cited a December 2024 study by the state-run Philippine Institute for Development Studies which revealed that lifeline discounts vary per distribution utility (DU) due to differing financial capacities and customer characteristics.

The same study showed that under DU-level cross-subsidies, poor households in low-income areas can end up subsidizing other poor households, and that subsidized electricity is still subject to a 12% VAT, which effectively imposes a tax on both contributors and recipients.

“The bill aims to address distortions in the current system and remove the burden on other consumers. Likewise, it will also allow transparent validation and exclusion of ineligible households based on a defined threshold, eliminate VAT on subsidized amounts, unify implementation, and ensure that public funds directly benefit eligible households,” Marcos said.

Further, the bill mandates distribution utilities to issue zero-charge electricity bills to validated eligible households and submit verified reimbursement claims to the DOE, subject to stringent audit by the Commission on Audit to prevent leakage and ensure accountability.

To prevent duplication and disruption, the measure provides for a two-year transition period during which the direct government subsidy will coexist with the existing lifeline rate and other electricity subsidies.

During this period, the DOE and ERC, in coordination with other agencies, will review whether to fully replace the lifeline rate, allow both programs to coexist with separate beneficiary scopes, or adopt other recommendations.

“In enacting this measure, Congress affirms that electricity is a necessity which the State must make affordable and accessible,” Marcos said.

Marcos added the Philippines has to keep up with its Southeast Asian neighbors, which already provide government subsidies on electricity bills in varying degrees, such as Indonesia, Vietnam, Thailand, Singapore, Myanmar, and Lao PDR.

“In order to bring better relief to low-income households than that afforded by the existing lifeline rate under the EPIRA (Electric Power Industry Reform Act), a direct subsidy scheme needs to be instituted,” he said.

Based on government records, the Lifeline Rate Subsidy Program only covers around 334,000 consumers as of November 2025 or just 11% of the around three million beneficiaries of the Pantawid Pamilyang Pilipino Program (4Ps). —VAL, GMA Integrated News