THE call by President Marcos in his State of the Nation Address last week to remove the system loss charge from consumer electricity bills is still a hot topic of conversation, but I am already looking past that. Having developed what I believe will be the solution (see my column from Sunday, Aug. 2) that the powers-that-be will settle on, eventually, if they even get around to actually passing the required legislation, which is by no means assured, I think some attention should be given to the “hidden” fees in our electricity bills.
These are not literally “hidden,” as they are itemized line by line on our electric bills, but they were omitted from the president’s speech, and have been pointedly ignored by eager-beaver lawmakers looking to score points with the public and curry favor with the administration in the days since by announcing new inquiries and introducing new bills to deal with the system loss issue. Out of sight, out of mind, and the reason anyone on the government side does not wish to bring them up is obvious; if they did, it would complicate the narrative that makes the electricity industry the bad guy in high power rates.
These charges of which I speak are the taxes and subsidies that make up roughly 4 percent of one’s electricity bill, excluding the value-added tax (VAT) on generation, transmission and distribution charges — the VAT that applies to the system loss charge is already being addressed — because that is a different and more complicated issue. These other charges include taxes to local governments, various subsidies to disadvantaged social classes, subsidies for renewable energy (RE) development, and the government’s by now ancient debt burden from the pre-Epira days of subsidized power.
Just for clarification, in the discussion that follows I will be referring to my own Meralco bill for July (which I just paid over the weekend) as an example, because I am a very average customer as far as Meralco is concerned; my electricity consumption for July amounted to 291 kilowatt-hours (kWh). Bills for customers who use a lot more or lot less electricity, or have different suppliers will be impacted more or less by the various charges I will describe.
Taxes
As I said, I’m not touching the VAT for now, but there are two other taxes that I am fairly certain most consumers are not aware of, and probably would be annoyed about if they realized what they were. The first is the real property tax (RPT) levy, which comprises property taxes paid to local governments for the land and physical facilities owned or controlled by electricity distributors for the infrastructure required to deliver services — customer service or administrative offices, switching yards or transformer stations, maintenance facilities, and the like. On my bill (again, customers in different places may see a different charge), this amounts to P0.0065 per kWh, which is almost inconsequential; out of my total July bill of just over P4,500, the RPT charge was only P1.89.
If it were up to me to decide, I would let this one pass; property taxes are a key source of revenue for local governments, the electricity distributor is indeed occupying property, and the service I receive as an electricity consumer depends on the distributor doing so. However, there is another tax, which is inexplicably related to this one, that is absolutely infuriating, and could be fairly considered a regulator-enabled ripoff of electricity customers, no matter where they are. This is the local franchise tax (LFT), a levy imposed on electricity distributors so that they may do business in an LGU’s jurisdiction. On the Meralco bill, it is charged at 0.55 percent of the VAT-able amount of the bill plus the RPT charge.
This charge is pure opportunism on the part of LGUs, and unfortunately, it has been facilitated by a recent decision of the Energy Regulatory Commission (ERC), with Resolution No. 9 of 2026. Paying the franchise tax to a local government should be an option; if you want to do business in a certain locality, you have to pay the tax, but if you don’t want to pay the tax, you can choose not to do business there. However, electricity service is a vital, non-optional public service; a distribution utility or electric cooperative does not have the option that other types of businesses do. With the Mandanas decision a couple of years ago that rightfully increased the local government share of national tax revenue, the LFT is completely unnecessary, and insistence that it be retained is pure greed, at the expense of local consumers. It should be abolished entirely.
Universal charges
The RPT and LFT account for about 0.51 percent of one’s bill, which is a modest amount — about P24.25 on my last bill — but various “universal charges” and subsidies account for a much bigger share; about 3.52 percent of the total bill, or about P160 of my most recent bill. These charges include:
– The missionary electric subsidy for difficult-to-reach areas, paid to the National Power Corp. (NPC) through its Small Power Utilities Group (SPUG), at a rate of P0.2662/kWh.
– The RED CI charge (renewable energy developers’ cash incentive), which is a subsidy given to developers of RE in missionary electricity areas, authorized by the Renewable Energy Act of 2008 (Republic Act 9513), and charged at P0.0101/kWh.
– National Power Corp. (NPC) stranded debt costs, which are debts incurred by the NPC prior to the implementation of the Electric Power Industry Reform Act (Epira) of 2001. Those debts were the result of years of subsidized power rates, and are still, 25 years later, being charged to consumers at P0.0428/kWh. Per the Murang Kuryente Act (RA 11371), no new debt charges are imposed on consumers, but the old ones persist.
– DU (distribution utility) stranded contract costs and equalization taxes and royalties: Although these do not usually appear on customer bills per the terms of RA 11371 and the older Executive Order 100 of 2002, being paid out of government funds such as the Malampaya Fund, there is no legal provision preventing them from being charged to consumers.
– Feed-in-tariff allowance (Fit-All) for RE development, offered as an incentive to developers to offset the difference between actual and market rates for generation, and charged to consumers at P0.2011/kWh. One of the highly annoying things about this charge is that the Department of Energy (DOE), in its inscrutable and highly questionable wisdom, has set different rates for different types of RE, which is logically insupportable. However, the overall authority for imposing the Fit-All is provided for by the Renewable Energy Act of 2008 (RA 9513).
– Green energy auction allowance (GEA-All): Another incentive for RE developers that the DOE made up out of thin air, in spite of there being no legal basis to do so. The ERC has suspended the Gea-All during the current “energy emergency,” and it should stay that way permanently.
– Senior citizen subsidy and lifeline subsidy, charged to consumers at P0.0001/kWh and P0.01/kWh, respectively. Subsidies to disadvantaged classes of consumers, which is fine, but these should not be the responsibility of consumers, but rather the government. To add insult to injury, the senior citizen subsidy is also subject to VAT.
Again, if all of these were absorbed by the government, as they should be, the amount of relief would be modest — on my own example bill, it would have saved me about P190 — but it would be a significant signal of acknowledgment of consumer concerns. In the wake of the system loss frenzy, many industry and outside analysts have rightly emphasized that generation charges, which make up between 55 and 70 percent of consumer electricity bills, should be the focus of cost-reduction efforts. However, removing the unnecessary charges is a good place to start, since it is much easier to do that immediately than it is to build new power plants, which are the ultimate solution to high energy costs.
ben.kritz@manilatimes.net
Bluesky: @benkritz.bsky.social
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