ERC approves pass-on taxes to consumers

Published February 8, 2021, 6:30 AM by Myrna M. Velasco
https://mb.com.ph/2021/02/08/erc-approves-pass-on-taxes-to-consumers/

The Energy Regulatory Commission (ERC) has approved the integration of pass-through taxes in the electric bills that will be dispatched by distribution utilities (DUs) to their customers.

In a recently issued resolution, the regulatory body has allowed the pass-on of taxes being levied to private DUs and electric cooperatives, including real property tax (RPT), local franchise tax and business tax.

ERC defended its decision, citing its mandate to allow recovery of pass-through taxes in the bills shall take effect immediately following compliance to publication requirements for the new rule.

The power industry regulator stipulated that its ruling had been anchored on a Supreme Court decision in August 2015, wherein it rendered that power utility giant Manila Electric Company (Meralco) may qualify to recover RPT on certain machinery used in its operations, as based on the prescriptions of the Local Government Code.

The high court then ruled that “Meralco’s transformers, electric posts, transmission lines, insulators, and electric meters are no longer exempted from real property tax and may qualify as ‘machinery’, subject to RPT.”

The ERC qualified that before handing down its verdict on the DUs’ pass-on of taxes, it carried out public consultations with all affected stakeholders all over the country.

Several groups of distribution utilities – including the Private Electric Power Operators Association (PEPOA) and the Philippine Rural Electric Cooperatives Association (PHILRECA), also filed their petition before the ERC for them to be authorized on pass-through taxes incurred from their operations.

The regulatory body reiterated it had done extensive consultations since 2019; and had solicited industry comments and inputs before firming up its rule-making on these pass-through taxes.

“The Commission noted that the subject matters of petitions were focused on the recovery of real property taxes alone and thereby resolved to initiate rule-making motu propio to consolidate the rules on recovery of all pass-through taxes,” the ERC has stated in its resolution.

There had been no specific instruction from the industry regulator yet if the new pass-through taxes shall be reflected as separate line item in the electric bills.