Published
By Myrna M. Velasco
The Department of
Energy (DOE) indicated that it intends to scrutinize the coal contracts of
power producers and establish if there are provisions mandating pass on of
costs relating to excise taxes.
In a statement to the
media, Energy Secretary Alfonso G. Cusi stressed that “we will look into coal
contracts and scrutinize provisions as to whether there is a provision on
pass-on of excise tax.”
Nevertheless, it is
clear under Section 43 (f) of the Electric Power Industry Reform Act (EPIRA)
that taxes are part of the pass-on costs in the rates, as the law prescribes that
rate-setting “must allow the recovery of just and reasonable costs…”, and in
the latter rules set forth by the Energy Regulatory Commission (ERC),
recoveries shall cover taxes and government-incurred fees in the delivery of
electricity service.
It was further noted
that if tax pass-on had been part of the ERC-approved power supply agreements
(PSAs) and transmission charges, then in the cost impact pass-on of the excise
taxes on coal and fuel for power generation, “automatic mechanism will govern,”
and will just be subject to post-audit by the ERC.
The energy department
has also been requiring power generation companies to submit their respective
coal inventories, so the government can gauge how soon the resulting rate hike
from the Tax Reform for Acceleration and Inclusion (TRAIN) Act will be
reflected in the electricity bills.
Cusi further qualified
that they similarly “directed all distribution utilities to require from their
suppliers the basis of any additional charges that may emanate from the TRAIN
Law.”
He noted that such must
include “explanation on the implementation of excise taxes vis-à-vis the
minimum inventory requirement for both coal stocks and diesel products.”
As detailed out by ERC
Spokesperson Floresinda B. Digal in a Senate hearing, the various components
that will bear cost increases due to the TRAIN’s implementation would be the
transmission charge of the National Grid Corporation of the Philippines (NGCP),
the generation charge due to excise taxes on coal and other fuel for electricity
generation; system loss charge and the subsidy component for missionary
electrification.
On the generation
charge, Sebastian R. Lacson, president and chief operating officer of Therma
South, Inc. of the Aboitiz Group, pointed out that on top of the excise tax on
coal, there would also be tax on cost impact on their use of light fuel oil
(LFO) for the start-up processes of their power facilities.
“Depending on the
contracts that we have, that (tax on light fuel oil) has effect as well,”
Lacson said, while adding that for those with lower volume of fuel buffer, pass
on of cost increases may come sooner.
Digal, emphasized, that
based on data they have on hand, some generation companies may already start
passing on higher costs in February billing; while the others could be in March
or April this year.
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