Quezon bent on auctioning off Pagbilao plant over back taxes

PAGBILAO power plant, which faces Tayabas Bay in Pagbilao town in Quezon province, is a major producer of electricity that is critical to the supply of Luzon. PHOTO COURTESY OF TEAM ENERGY

LUCENA CITY―The Quezon provincial government is bent on putting the 735-megawatt coal-fired thermal power plant in Pagbilao town on the auction block to collect the P690-million real property tax that it said is due the local government.

“We’re seriously thinking of putting all taxable properties into public auction. We’re now studying all legal issues,” Board Member Ferdinand Talabong said last week.

Talabong, a lawyer, said the provincial government would seek the Supreme Court’s opinion on the constitutionality of Executive Orders No. 27 and 173 issued by then President Benigno Aquino III relating to tax issues involving the plant.

“In order to clarify whether or not the tax condonation made by former President Aquino is correct, just and lawful, it is for the best interest of the people of our province to bring the issue to the Supreme Court,” he said.

Team Energy (TE), the operator of the Pagbilao plant, said the issue on the settlement of real property tax is a matter between the national government on one hand, and the provincial and municipal governments on the other.

“It is clearly stated in our Energy Conversion Agreement (ECA) with the … government in 1991 that said taxes are to the account of the national government,” Froilan Gregory Romualdez III, TE head of external affairs, said in a statement.

TE is a joint venture of Japanese firms Tokyo Electric Power Co. and Marubeni Corp. Aside from the Pagbilao plant, it operates other generating facilities acquired from the United States-based Mirant Corp. in 2007.

According to the company’s website, the 735-MW plant in Pagbilao can produce at most 16.8 million kilowatt hours (kWh) of electricity daily or over 6 billion kWh annually. It is undergoing expansion to generate an additional 420 MW next year.

Romualdez said that while TE is not a direct party to the case, the firm continues to work with local officials and national agencies in addressing the matter.

“We deeply value our relationship with the provincial and local government, and through constant dialogue and coordination, we remain optimistic that this matter shall be resolved to the satisfaction of all parties,” he said.

The provincial government’s plan to auction off the plant may meet strong opposition from the national government due to the facility’s contribution to supply the power needs in Luzon, Talabong said.

“We appeal to President Duterte not to condone the plant’s back taxes. He should not repeat what former President Aquino did during his term,” he said.

In 2010, the province tried but failed to collect P6.1 billion in back taxes from TE despite a Supreme Court decision favoring the collection by the Quezon and Pagbilao governments.

Aquino issued EO 27 in February 2011 that stopped the provincial government from collecting the unpaid real property taxes. He had said he could not allow local governments to collect back taxes from independent power producers (IPPs) because it would threaten the financial stability of the government and the stability of energy prices.

The forcible collection of taxes by local government, he said, could also increase power costs.

In 2014, Aquino issued EO 173 that reduced the real property taxes earlier assessed on facilities of IPPs dealing with government-owned or controlled corporations in a bid to prevent an increase in power rates.

To compensate for the loss, Aquino offered to provide P1.5 billion worth of development projects and programs.

But Quezon officials said the provincial government received only P1.2 billion worth of projects, including the P750-million funding assistance from Malacañang in 2011 from the Disbursement Acceleration Program (DAP). The Supreme Court, in 2014, declared parts of DAP unconstitutional.

Talabong blamed the EOs for the loss of an estimated P5 billion, representing 85 percent of the assessed real property taxes, condoned by Aquino.