Meralco seeks reconsideration of coal tax

By Danessa Rivera (The Philippine Star) | Updated December 11, 2017 - 12:00am

http://www.philstar.com/business/2017/12/11/1767085/meralco-seeks-reconsideration-coal-tax

MANILA, Philippines — Manila Electric Co. (Meralco) is asking the government to reconsider the increase in coal excise tax as the impact will mostly be felt by consumers through higher electricity rates.

In its position paper, Meralco said while it recognizes the government’s efforts to improve tax collection, it merits a more careful study since the tax increase will raise electricity rates nationwide.

“Coal is a major fuel source for power generation in the Philippines. Increasing the existing excise tax on coal will only result in higher electricity prices, which will reduce the country’s competitiveness vis-a-vis ASEAN neighbors,” the power distributor said.

For coal generators, Meralco senior vice-president Angelito Lantin said the effect of higher coal tax is neutral because of the fuel cost pass-through.

“Consumers will suffer from the additional tax, definitely,” he said.

Based on data from the Department of Energy (DOE), the Philippines uses 79.7 percent of total coal consumption for power generation and 15.2 percent for cement plants in 2015. 

In 2016, power generated by coal-fired plants accounted for 34.6 percent of installed generating capacity and 47.7 percent of gross generation.

As a major fuel source, generation costs of coal-fired power plants represent a significant portion of the generation charge in the electricity bill.

In July, Meralco’s overall rates was at P7.37 per kilowatt-hour (kwh), of which P3.93 per kwh is for generation, excluding value added tax (VAT).

“An increase in the excise tax on coal would result in higher generation charge and would impact distribution utilities depending on how much they are sourcing from coal,” Meralco said, noting that it sources 31.4 percent of its generation supply from coal.

Apart from the generation charge, Meralco said the excise tax on coal would also be reflected in the transmission charge and system loss charge.

It said the National Grid Corp. of the Philippines (NGCP) procures ancillary service from generators to ensure grid security and reliability.

Meanwhile, the system loss charge is a composite of the generation and transmission at the actual level or the cap as approved by the Energy Regulatory Commission (ERC).

Last month, the Senate rushed to approve the Tax Reform for Acceleration and Inclusion (TRAIN) bill, which included a coal excise tax increase from P10 per metric ton to P100 per metric ton on the first year, P200 in the second year and P300 in the third and succeeding years.

Based on estimates, the impact of a P100 increment in the excise tax on coal will translate to a P4.78 increase in the electricity bill of an average household that consumes 200 kilowatt hours (kwh) a month; a P200 hike is equivalent to a P9.57 increase; a P300 raise, to P14.35; and a P600 increase, to almost P29, said Sen. Sherwin Gatchalian, who chairs the Senate committee on energy.