Electricity rates to rise by 8¢/kWh due to TRAIN

By: Ronnel W. Domingo - 05:26 AM January 10, 2018

https://business.inquirer.net/243848/electricity-rates-rise-8%C2%A2-kwh-due-train

Consumers of electricity may see their monthly bills rise by 8 centavos per kilowatt-hour (kWh) as early as next month, being the “most immediate” impact of the new tax regime on the power industry, according to Manila Electric Co.

This means that a typical household that uses 200 kWh a month will pay P16 more for electricity services.

Meralco vice president Lawrence S. Fernandez said in an interview that the newly enacted Tax Reform for Acceleration and Inclusion (TRAIN) law, which took effect on Jan. 1, reimposed the value-added tax on wheeling charges.

Wheeling charges—which National Grid Corp. of the Philippines collects from utilities like Meralco—cover services for the transmission of electricity from power plants to distribution facilities.

Section 86 of the TRAIN law or Republic Act No. 10963 repeals laws or provisions of laws that provide VAT exemptions.

Such provisions include Sec. 9 of RA 9511—signed into law in December 2008—which granted a franchise to NGCP, allowing the company to engage in the power transmission business. NGCP took over the management and operations of the assets that belong to National Transmission Corp. or Transco.

Sec. 9 of the NGCP franchise law states that “payment by grantee of the concession fees due to PSALM (Power Sector Assets and Liabilities Management Corp.) under the concession agreement shall not be subject to income tax and value-added tax (VAT).”

“The reimposition of the VAT on wheeling charges will translate to 7 centavos per kilowatt-hour,” Meralco’s Fernandez said.

“As for the effect of the coal tax and the excise tax on petroleum products, this will have [a combined] effect of an additional one centavo per kilowatt-hour for our customers,” he added.

Fernandez said the projection of a one-centavo increase was based on Meralco’s supply mix in November 2017. He said one-third of the distribution giant’s supply of electricity was coming from coal-fired power plants.

Also, Meralco was relying partly on oil-fired generators for supply when daily demand was at its peak.

The TRAIN law raises the tax on coal from P10 per metric ton previously to P50 per ton this year. The coal tax would rise further to P100 per ton in 2019 and to P150 per ton in 2020.

As for the excise tax on fuel oil used for industrial purposes including power generation—which previously does not carry an excise tax—this will now be levied at a total of P2.80 per liter including the 12-percent value-added tax (VAT).

The tax on fuel oil will have an additional levy of P2.24 per liter in 2019 and a further P1.68 per liter in 2020. Thus, in 2020, taxes on fuel oil—excise plus VAT—will be at P6.72 per liter.

“We (Meralco) will reflect the effects of the TRAIN program in our monthly bill to our customers as soon as our suppliers put these in their bill to us,” Fernandez said, referring to NGCP and power producers.

“If suppliers bill us this January, Meralco customers will see the TRAIN’s effects in their February bill,” he added.

Last week, the Department of Energy said consumers might not feel the effects of higher taxes on coal on electricity services until the start of the summer since companies maintain stocks good for at least a month.