NGCP ordered to stop charging customers for franchise tax
The Energy Regulatory Commission (ERC) ordered the National Grid Corp. of the Philippines (NGCP) to stop passing on to consumers the 3-percent franchise tax—amounting to around 1 centavo per kilowatt-hour (kWh)—it pays to the government a month after lawmakers pressed the regulator to review the policy.
In a statement on Thursday, the ERC said it “unanimously resolved” to suspend Resolution No. 07, Series of 2011, which allows the inclusion of the franchise tax in the monthly transmission costs billed to distribution utilities, thus passing on the costs to consumers.
“The Commission continuously examines its existing rules and regulations to determine whether the mandates under the Electric Power Industry Reform Act of 2001 are faithfully fulfilled. With the consumers’ interests in mind, as well as upholding the rule of law, the Commission resolved to suspend [the resolution] by unanimous vote,” it said.
10% per month
Transmission charges account for 10.1 percent of a Manila Electric Co. (Meralco) customer’s total monthly bill.
For a household consuming 200 kWh a month, the franchise tax translates to more or less P2.
Section 9 of Republic Act No. 9511 requires the country’s lone grid operator to pay a franchise tax equivalent to 3 percent of all gross receipts derived by NGCP from its operation under its franchise.
While the regulator has yet to issue a directive effectively suspending the 2011 resolution, ERC Chair Monalisa Dimalanta explained that their decision was based on previous Supreme Court rulings.
“Based on the review of our legal services, the franchise tax is in the nature of a direct tax that, as early as 2002, the Supreme Court has ruled is the sole responsibility of the franchise holder and cannot be passed on to consumers,” Dimalanta told reporters.
The official was referring to a 2002 Supreme Court ruling against Meralco saying that public utilities were prohibited from including income taxes under operating expenses that are charged to consumers.
Sen. Sherwin Gatchalian, vice chair of the Senate committee on energy, last month urged the ERC to stop allowing NGCP to pass on the franchise tax to consumers.
Dimalanta had responded by saying that her office had already started deliberations on the issue.
NGCP spokesperson Cynthia Alabanza said they would wait for the official resolution suspending the 3-percent franchise tax inclusion before addressing the matter.