Making Electricity Subsidies Work: Cross-Country Lessons for Philippine Energy Policy

Electricity subsidies serve diverse policy goals but pose significant fiscal, efficiency, and equity challenges. This paper focuses on the Philippines’ three major electricity subsidy mechanisms: the Universal Charge for Missionary Electrification (UCME), the Lifeline Rate, and the Senior Citizen Discount, situating their design and outcomes within a broader international evidence base. Recent empirical work from peer-reviewed journals and international organizations is synthesized to identify design features associated with improved efficiency and equity. The analysis emphasizes prevalent mechanisms such as increasing block tariffs, cross-subsidy mechanisms, time-variant pricing, and targeting approaches. A systematic review examines how these mechanisms perform across different contexts and assesses their transferability to the Philippine setting, considering the country’s institutional capacity, political economy constraints, and electricity market structure. Key findings highlight recurring design flaws, including pressures for fiscal sustainability, leakage and mis-targeting of benefits, and regressive distribution patterns, as well as effective practices such as targeted, transparent, and administratively feasible reforms that align subsidies with intended vulnerable groups. The paper concludes with implications for policy design, implementation, and future research directions, emphasizing the value of international lessons to inform fiscally sustainable and socially equitable electricity subsidies in the Philippines. Comments to this paper are welcome within 60 days from the date of posting. Email publications@pids.gov.ph.