A measure granting free electricity to low-consumption households and dismantling the cross-subsidy system was filed by House Majority Leader Ferdinand Alexander “Sandro” A. Marcos, replacing it with a direct government subsidy aimed at making power more affordable and equitable nationwide.

House Bill (HB) No. 2700, or the proposed “Free Electricity for Low-Consumption Households Act,” seeks to institutionalize a Direct Government Subsidy that will fully cover electricity bills of qualified households within a defined monthly threshold, while exempting the subsidized portion from the 12% value-added tax (VAT).

Marcos said, “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.”

Recently, President Ferdinand R. Marcos Jr. announced that low-income and marginalized families now have easier access to electricity subsidies.

Under Marcos’ measure, an Eligible Household refers to 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 ₱2,000, whichever is lower, subject to certification by the Energy Regulatory Commission (ERC) and the Department of Energy (DOE).

The solon said that while “unquestionably noble in intent,” 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.

Citing a December 2024 study by the Philippine Institute for Development Studies led by research fellow Dr. Kris A. Francisco, Marcos said lifeline discounts vary per distribution utility (DU) due to differing financial capacities and customer characteristics.

It found that under DU-level cross-subsidies, poor households in low-income areas can end up subsidizing other poor households. It also noted that subsidized electricity is still subject to a 12% VAT, “effectively taxing both contributors and recipients.”

The bill aims to shift from cross-subsidization to a direct government subsidy to address distortions in the current system and remove the burden on other consumers.

Marcos said 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.

The measure provides that all Eligible Households whose consumption does not exceed the Monthly Consumption Threshold shall be covered by the Direct Government Subsidy.

If a household exceeds the threshold in a particular billing period, it will shoulder the entire bill for that month without subsidy.

But such temporary ineligibility will not automatically disqualify it from availing of benefits in succeeding billing periods, subject to continued compliance with eligibility criteria.

The bill mandates that distribution utilities 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 (CoA) 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.