What’s behind the ‘subsidy’ charges in your electricity bill?

The Manila Electric Company (Meralco) recently came under fire from netizens after several of its customers noted substantial increases in their power bills.

Many consumers blamed charges on their electricity bills, such as “Lifeline” and “Senior Citizen” items, describing them as unfair and a way to pad Meralco’s bottom line during an energy crisis.

Meralco issued a statement to address allegations, saying that the other charges found in power bills are mostly fees mandated by the government, describing them as public policy charges.

Here’s the breakdown of the other charges found on electricity bills:

Mandated subsidies

Subsidies such as the “Lifeline” and senior citizen discounts for those consuming 100 kilowatt-hours (kWh) or less in a particular month can be found here. Low-income customers and senior citizens can enjoy a discount of up to 5%, and this is subsidized by all other customers.

According to the Energy Regulatory Commission (ERC), the Lifeline Subsidy Rate is outlined in Section 73 of the Electric Power Industry Reform Act of 2001 (EPIRA). This has been further enhanced by two laws extending the Lifeline Subsidy Rate to include beneficiaries of the Pantawid sa Pamilyang Pilipino (4Ps) program.

“To achieve this legislative objective, ERC Resolution No. 2, Series of 2026, established a uniform national subsidy charge of P0.01/kWh. This charge is collected from subsidizing end-users to support 4Ps beneficiaries and qualified marginalized end-users, who receive a 100% discount for consumption up to 50 kWh,” read part of an ERC statement.

Meralco earlier announced a P0.5335/kWh increase in power rates, which is equal to an additional P107 in the electricity bills of residential customers consuming around 200 kWh. While higher generation charges due to the depreciating peso were a big factor to the increase, Meralco also noted that the new discount structure of the Lifeline Subsidy Rate took effect in April.

The ERC also said subsidies for senior citizens are mandated under the Expanded Senior Citizens Act of 2010. Under this law, distribution utilities are required to provide a subsidy of at least 5% to senior citizens who consume no more than 100 kWh a month.

“Instead of incorporating the cost of these discounts into the DUs’ distribution rates, the ERC opted to treat it solely as a pass-through cost to avoid any over- or under-recoveries for the DUs,” the power regulator said.

Under-recovery means a company recouped an amount less than the expenses it incurred, while over-recovery means the utility collected more than it spent on the subsidy.

Funding renewable energy shift

Another expense included in a distribution utility’s other charges is the Feed-in Tariff Allowance (FIT-All), a charge required to adopt the Feed-in Tariff (FIT) program under the Renewable Energy (RE) Act of 2008.

The FIT program was designed to encourage investments in clean and renewable energy sources and reduce the country’s reliance on imported fuels by offering guaranteed rates and priority connections.

The ERC explained that, beginning January, all on-grid customers will be charged a FIT-All fee of P0.2011/kWh.

“This charge ensures that FIT-eligible plants receive the full payment of revenues from the FIT-All fund administrator based on their guaranteed rates for each kWh of energy they generate and actually deliver to the grid,” it said.

Aside from FIT-All fees, consumers were also charged P0.0371/kWh for the Green Energy Auction Allowance (GEA-All) to support the country’s renewable energy targets under the RE Act.

The Marcos Jr. administration earlier set bold goals to have 35% of the country’s power sourced from renewable energy, while clean power sources should comprise half of the energy mix by 2040.

Universal charges

The universal charge is a mandatory fee paid by all electricity consumers under Section 34 of EPIRA to fund “missionary” electrification, watershed rehabilitation, and the National Power Corporation’s stranded obligations.

The ERC explained that the universal charge is imposed on all consumers connected to the grid – including those under Meralco – to subsidize the cost of electricity for off-grid and microgrid areas in the country.

The power regulator also clarified that all distribution utilities, not just Meralco, profit from any of the aforementioned charges as they are considered pass-through costs. These are third-party costs passed to the consumer without adding in any overhead or profit.

“DUs serve as collecting agents, remitting the amounts to the appropriate entities. The ERC did not independently invent or create these charges; they are imposed in accordance with existing laws and policies,” it said.

In a press conference on Monday, April 27, Energy Secretary Sharon Garin said any amendments to these government programs or subsidies must be tackled by Congress since these are charges mandated by various laws.

“Nasa batas kasi (It’s in the law)… So I’m sure when Congress passed this law, there were extensive consultations that were done,” Garin, also a former lawmaker, said. – Rappler.com