NPC seeks okay to hike power rates, cites TRAIN

By BusinessMirror -  June 4, 2018 By Lenie Lectura &  Jovee Marie N. dela Cruz

https://businessmirror.com.ph/npc-seeks-okay-to-hike-power-rates-cites-train/

THE National Power Corp. (NPC) is seeking approval to increase its power rates by P0.8293 per kilowatt-hour this year, mainly on account of higher taxes brought about by the Tax Reform for Acceleration and Inclusion (TRAIN) law.

“Due to the TRAIN law, the fuel cost will increase by P0.8293 per kilowatt-hour [kWh] in 2018, P1.4815 per kWh in 2019, P1.9919 per kWh in 2020. The impact of the increase in fuel cost will greatly affect NPC’s power-plant operations if the corresponding cost will not be immediately recovered by NPC as incurred,” the state firm said in its 19-page application filed with the Energy Regulatory Commission (ERC).

The NPC application was submitted even as the clamor among lawmakers for a suspension of the TRAIN-mandated higher fuel excise rates gained momentum at the weekend.

Following an increase in revenue collection for the first four months of 2018, Party-list Rep. Gary C. Alejano of Magdalo said last Sunday the government can now afford to suspend excise taxes on fuel products under the TRAIN law.

Alejano said the government can afford to suspend excise taxes on fuel products as the tax revenue has reached P927.4 billion, or P58.2 billion more than the target of P869.2 billion.

Earlier, the Bureau of Internal Revenue reported that the net gain from the implementation of the TRAIN reached P12.5 billion in the first quarter of the year.

“As crude oil prices [rose] dangerously in the world market, so did our revenues. since we collected more than the projected values, we can afford to slash excise taxes to mitigate the damaging effects TRAIN has on the people,” Alejano said.

NPC’s mandate affected

MEANWHILE, the NPC said in its application for an increase in its power rates that the Electric Power Industry Reform Act of 2001, mandates it to provide power generation and associated power-delivery systems in missionary areas or those islands and communities not connected to the main transmission grid.

In2017 NPCsaid itoperates275small power utilities group (SPUG) plantsin 189 municipali­ties across 34 provinces in the country.

It said electricity prices will be affected since the NPC-SPUG uses diesel and bunker fuels in its power plants. “There shall be an increasein fuelcost duetoexcisetax that must be imposed pursuant to the said law which, in turn, translates to an increase in the operating cost in the SPUG areas,” NPC said.

The TRAIN law affects all the electricity end users in both main grids and off-grids.

NPCadded thatthehigherfuelcosttranslates to an increase in the operating cost in the SPUG or missionary areas, effectively contributing to the increase in the universal charge for mission­ary electrification (UCME), which the main grid customers alsopayalongwithoff-grid customers.

“Hence, it isimperative to adjust the SAGR [Subsidized Approved Generation Rate] to address the impact of fuel cost due to excise tax on NPC’s operating expense in order to mitigate the impact of the TRAIN law to main grid customers,” its application said.

NPC said the existing subsidized approved generation rate is based on 2003 cost levels, which was approved in 2011. “The fuel cost has increased to about 114 percent since the last level of SAGR approval in CY 2003 even without the TRAIN law,” it said.

The TRAIN law is a key plank of the govern­ment’s CTRP, with the goal of creating a more effective system of tax collection. Package 1, which became effective on January 1, cut in­dividual income-tax rates but imposed higher fuel excise rates and taxed sugar-sweetened beverages. The higher fuel cost has been blamed in many sectors for jacking up infla­tion to five-year highsin April, but government economists said TRAINwas not solely to blame for rising prices because supply issues in rice and certain food products, as well as interna­tional developments that impacted global oil prices, were also factors to consider.

The Departments of Agriculture (DA) and of Tradeand Industry(DTI)arealsomoving toensure profiteers do not hide behind the TRAIN law.

The DepartmentofEnergy(DOE),foritspart, announced last week the release of draft rules fortheunbundled energypricingsystem,meant to ensure transparency in the way oil players price their products. Two more final hearings are scheduled this month on the draft rules, which the DOE expects to finalize by end-June.

The unbundled pricing reports required of petroleum stakeholders are mandated by the oil deregulation law passed two decades ago.

House initiative

THE Department of Finance (DOF) as well as HouseCommittee onWaysand MeansChairman Dakila Carlo E. Cua of the Lone District of Quirino hadearlier expressedwillingnesstosuspendthe excise tax on fuel as well as to cut the value- added tax (VAT) rate, under certain conditions.

According to Alejano, suspending the ex­cise taxes would be a genuine alternative to cushion the blow from TRAIN—something that, he said, the Duterte administration has yet to provide.

“The government chooses to be passive and insensitive to the Filipino people when it should be actively seeking ways to ease the burden of the increasing cost of living. The money from the unconditional-cash trans­fers is not enough to cover all the increases brought by TRAIN law. Hoping for the best is an admirable Filipino trait, but, it is never an effective government policy,” he lamented.

Alejanosaidprovidingthepoorwithfinancial breathing room amid price hikes takes priority, but, maintained that this was only the first step.

Last Saturday President Duterte said he will leave it to Congress to decide whether or not to amend or suspend the TRAIN law.

Currently, three measures in the House seek to suspend or review the implemen­tation of the new tax-reform law to ease inflation pressures and slow down the de­cline in the purchasing power of the peso.

World crude prices easing

MEANWHILE, Party-list Rep. Ciriaco S. Calal- ang of Kabayan said excise tax on fuel can stay as latest Dubai crude oil futures point to a gradual easing.

“At this time, I believe we can breathe some sigh of relief about world crude oil prices. Lat­est Dubai crude oil futures point to a gradual easing and continuing downward trend line of the price of Dubai crude oil, although there are some upward pressures,” he said.

“The earlier-feared $80 per barrel level would likely be avoided because the futures prices show peaking at close to $75 in June 2018, then sliding toward $69 for June 2019, and further slipping to about $65 for Decem­ber 2019,” he said.

Considering theselatest figures, thelaw- maker said the DOF would not have reason to suspend the excise tax on imported oil and fuel on the basis of the authority it is given by the TRAIN law.

“It looks like Dubai crude oil will stay above $70 until May or June next year. Our country started feeling the pain as crude prices approached $70. Considering this, safety nets must still be activated and de­ployed. For June 2022, when the term of President Duterte ends, the Dubai crude futures price is at about $54,” he said.

“Unless some new events and factors emerge over the next months to upset the Dubai crude oil forecasts, we now see a gradual easing of inflation pressures on the Philippine economy,” Calalang added.