ERC suspends pass-on costs of NGCP’s franchise tax


The Energy Regulatory Commission (ERC) has suspended the 3% tax pass-on to consumers, which is part of the monthly transmission costs billed to Distribution Utilities (DUs), imposed by the National Grid Corporation of the Philippines (NGCP).

Under the Republic Act No. 9511 or the “An Act Granting the National Grid Corporation of the Philippines a Franchise to Engage in the Business of Conveying or Transmitting Electricity Through High Voltage Back-Bone System of Interconnected Transmission Lines, Substations and Related Facilities, and for Other Purposes,” The ERC allowed the inclusion of 3% franchise tax in the monthly transmission costs that is integrated into the electric bills of consumers.

In a report by the Manila Bulletin, ERC said that with this suspension, there will be at least a Php 0.01 per kilowatt rate reduction in the bills of the consumers. 

“With the consumers’ interests in mind, as well as upholding the rule of law, the Commission resolved to suspend ERC Resolution No. 07, Series of 2011, by unanimous vote,” ERC said.

The industry regulator cleared that once the suspension is effective, the franchise tax cannot be passed on to consumers in their following billing. This directive will be formalized when the commission issues a resolution. 

According to Senate Committee on Energy Vice Chairman Sherwin T. Gatchalian, consumers should not bear the burden of covering the government dues owed by the grid corporation.

In a calculation performed by Congress, households using 200 kilowatt-hours (kWh) of energy annually could potentially save approximately Php 37.32 per year without the pass-through cost. 

The ERC subsequently examined the legal basis for the resolution, taking into account a Supreme Court decision from 2002 that prohibited the inclusion of income tax as part of tariffs passed on to consumers. 

Gatchalian proposed that the franchise tax payment should not be classified as an operating expense. Instead, it is regarded as an obligation of the NGCP, to replace income tax.