Consumer Welfare Month is celebrated every October. This year is the 29th year that we recognize the role of consumers in nation building. The Supreme Court in its 2019 decision on Maynilad, Manila Water and MWSS says that “ Filipino consumers have become such persons of disability , deserving protection by the State , as their welfare are being increasingly downplayed , endangered , and overwhelmed by business pursuits “. It adds “that with the birth of privatization of many basic utilities, including the supply of water, the State is in a continuing battle on excessive pursuit of profit, rather than purely the public interest.”
Indeed, there is more bad news forthcoming for the consumers across the country in terms of added costs to our electricity bills.
I am referring to a Petition Numbered ERC Case No. 2021-002 RM to amend ERC Res. 02, Series of 2021, allowing the pass-through of Real Property Tax, Local Franchise Tax and Business Tax to the electricity bills of all consumers across the country. The Petition seeks to allow recovery of local taxes (RPT, LFT, BT) paid on prior years under a Tax Recovery Adjustment Clause (TRAC), which are paid whether the assets are located or inside the franchise areas.
The petition justified that the pass through will enable distribution utilities to operate viably, but at the expense of the consumers. There is a process in the Energy Regulatory Commission called Rule Making where a “public consultation” is conducted to evaluate and resolve whether the petition should be granted or denied. I attended such “public consultation” on September 28, 2021 covering a petition by an association of 18 private distribution utilities, 10 in Luzon and 4 each for Visayas and Mindanao.
The petition seeks to “SHIFT” to consumers the Real Property Taxes the utilities paid for the past 10 years to various local government units in addition to the current real property tax. The petition also seeks to consolidate the Local Franchise and Business Tax that have been passed through in our electricity bills in the past into one such Rule. It was clarified by the hearing officer that a “public consultation “in a Rule Making petition is not an exercise of “quasi-judicial function” by ERC.
It meant that there was no need for stipulation of facts, submission of pretrial brief, presentation of evidence, presentation of witness, intervention and opposition. What is only needed is the submission of position paper or comment by any interested party.
To me, it now appears that at the end of the “public consultation, “ the ERC is ready to promulgate a rule. Anyone who does not agree to a promulgated Rule cannot move to reconsider such rule, but only has the option to elevate and question the Rule in another venue or court. It was a learning process.
I “intervened“ because distribution utilities wanted ERC to retroact 10 years back all real property tax, local franchise tax and business tax, that were paid to the local government units and SHIFT to all consumers the payment of said taxes as part of the pesos per kilo watt hour of electricity that we consume and pay. This SHIFTING of taxes was brought about by a decision of the Supreme Court issued in 2015 that electric posts, transformers, transmission lines, insulators, and electric meters are no longer exempted from real property tax and may qualify as “machinery” subject to real property tax under the Local Government Code.
When that happened, the ERC allowed the SHIFTING of the real property taxes to the cost of electricity that consumers pay. The ERC rule should be applied prospectively, however, the distribution utilities wanted retroactive SHIFTING of real property taxes to cover for the past 10 years. What also surprised me is the fact that the proposed amendment making the ERC Rule retroactive was ready and presented in the “public consultation.”
In any event, I will exhaust all legal remedies to require the ERC to reverse itself. Simply, Real Property Tax, Local Franchise Tax and Business Tax are examples of Direct Taxes that are solely and exclusively paid by the statutory taxpayer and are not allowed to be SHIFTED to the cost of electricity that we consume and pay.
As the Supreme Court says, “the State is in a continuing battle against the pursuit of excessive profit rather than purely the public interest”.
Atty. Vic Dimagiba President, Laban Konsyumer Inc.
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