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TWENTIETH CONGRESS

First Regular Session

HOUSE BILL No._1633

Introduced by Representative Paolo Henry M. Marcoleta

EXPLANATORY NOTE

The Philippines continues to grapple with one of the highest costs of electricity
in Southeast Asia, a situation that has persisted due to several factors that contribute
to the continuing energy problem of the country. These factors include deregulation
of power generation, transmission bottlenecks, high distribution losses, reliance on
imported fuel for power plants, and an unrealistic regulatory asset base, among
others. These factors cumulatively lead to elevated operating expenses that deter
investment and contribute to the persistently high cost of electricity that places a
significant burden on Filipino households and businesses.

In 2024, the generation charge for electricity experienced multiple increases,
primarily driven by several economic and market factors. The average household
consuming 200 kWh monthly saw an increase of Php0.1839 per kWh, primarily due
to a rise in the generation charge, influenced by higher costs from the Wholesale
Electricity Spot Market (WESM) and “sweetheart deals” in Power Supply
Agreements (PSAs).

Specifically, WESM charges rose by Php0.2531 per kWh due to tight supply
conditions, while PSAs saw a P0.1050 per kWh increase due to the weakening peso.
Increases in the generation charge for electricity in 2024 highlight the complex
interplay between currency fluctuations, supply chain issues, and market conditions.
As the costs associated with power generation continue to rise, consumers may need
to adjust their budgeting for electricity expenses and consider energy saving
measures.


Given these challenges, this measure seeks to exempt the sales of electricity
from the twelve percent (12%) value-added tax (VAT). The goal is to alleviate
operational costs and, consequently, reduce the price of electricity for end-users.
Lowering the cost of electricity would not only ease the financial burden on
households and enterprises but also stimulate economic activity by increasing
disposable income and boosting domestic consumption.

The removal of VAT from electricity sales is likewise anticipated to enhance
the competitiveness of local industries and improve business confidence, thereby
supporting the development of a more inclusive and resilient energy system. By
addressing a key cost component of power, this reform may contribute to a more
sustainable economic growth and a higher quality of life for all Filipinos.

In view of the foregoing, the immediate passage of this bill is earnestly sought.

PAOLO RY M. MARCOLETA
Representative, SAGIP Party-List


WC eVaunnune

Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

TWENTIETH CONGRESS
First Regular Session

HOUSE BILL NO. 1633

Introduced by Representative Paolo Henry M. Marcoleta

AN ACT
EXEMPTING ELECTRICITY SALES FROM VALUE-ADDED TAX,
FURTHER AMENDING FOR THE PURPOSE SECTIONS 108 AND 109
OF THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED

Be it enacted by the Senate and House of Representatives of the Philippines in
Congress assembled:

SECTION 1. Short Title. — This act shall be known as “Mas Murang
Kuryente Act.”

SEC. 2. Section 108 of the National Internal Revenue Code of 1997, as
amended, is hereby further amended to read as follows:

“Sec. 108. Value-added Tax on Sale of Services and Use or Lease of
Properties. ~

“(A) Rate and Base of Tax. ~ There shall be levied, assessed and
collected, a value-added tax equivalent to twelve percent (12%) of
gross receipts derived from the sale or exchange of services, including
the use or lease of properties.

“The phrase “sale or exchange of services” means the performance of
all kinds of services in the Philippines for others for a fee,
remuneration or consideration, including those performed or
rendered by construction and service contractors; stock, real estate,


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commercial, customs and Immigration brokers; lessors of property,
whether personal or real; warehousing services; lessors or
distributors of cinematographic films; persons engaged in milling
processing, manufacturing or repacking goods for others; proprietors,
operators or keepers of hotels, motels, rest houses, pension houses,
inns, resorts; proprietors or operators of restaurants, refreshment
parlors, cafes and other eating places, including clubs and caterers;
dealers in securities; lending investors; transportation contractors
on their transport of goods or cargoes, including persons who
transport goods or cargoes; common carriers by air and sea relative
to their transport of passengers, goods or cargoes from one place in
the Philippines to another place in the Philippines; fsates—of
1-distributi jes i i" 5 A

services of franchise grantees of [eleetrie—utilities] telephone and
telegraph, radio and television broadcasting and all other franchise
grantees except those under section 119 of this Code, and non-life
insurance companies (except their crop insurances), including surety,
fidelity, indemnity, and bonding companies; and similar services
regardless of whether or not the performance thereof calls for the
exercise or use of the physical or mental faculties. The phrase “sale or
exchange of services” shall likewise include:

“XXX.”

SEC. 3. Section 109 of the National Internal Revenue Code of 1997, as

amended, is hereby further amended to read as follows:

“Sec. 109. Exempt Transactions. ~ (1) Subject to the provisions of
Subsection (2) hereof, the following transactions shall be exempt from
the value-added tax:

XXX

“(AA) xxx.; fand}

“(BB) xxx;


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(CC) xxx;
“(DD) xxx:

“(EE) SALE OF ELECTRICITY BY GENERATION,
TRANSMISSION, AND DISTRIBUTION COMPANIES AND
ELECTRIC COOPERATIVES; AND

(FF) SERVICES OF FRANCHISE GRANTEES OF ELECTRIC
UTILITIES.”

SEC. 4. Separability Clause. - If any provision or part of this Act is
declared invalid or unconstitutional, the remaining parts not affected shall remain
in full force and effect.

SEC. 5. Repealing Clause. - All laws, presidential decrees, executive
orders, letters of instructions, administrative orders, proclamations or
administrative regulations that are inconsistent with the provisions of this Act
are hereby repealed, amended, or modified accordingly.

SEC. 6. Effectivity. - This Act shall take effect fifteen (15) days after its
publication in the Official Gazette or in a newspaper of general circulation.

Approved,