The Energy Regulatory Commission (ERC) has ordered the suspension of the three percent tax pass-on to consumers levied on transmission firm National Grid Corporation of the Philippines.

With this order, ERC Chairperson Monalisa C. Dimalanta said there will be at least P0.01 per kilowatt rate reduction in consumers’ bills. 

In a statement to the media, the regulatory body emphasized that its Commissioners rendered a “unanimous decision” on the scrapping of the pass-through franchise tax cost, which was previously being enforced on the strength of ERC Resolution No. 07, Series of 2011.

Under that old rule set forth by the ERC, it allowed “the inclusion of the 3.0-percent franchise tax of NGCP in the monthly transmission costs billed to distribution utilities,” that in turn, is subsequently integrated into the electric bills of 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,” the industry regulator stipulated.

The ERC specified that “once effective, the NGCP franchise tax can no longer be passed on to consumers on the following billing month,” adding that “the Commission will formalize its directive in a resolution to be issued.”

The Senate Committee on Energy prodded the ERC “to stop allowing NGCP from passing on to electricity consumers the 3.0-percent franchise tax it is supposed to pay the government.”

As asserted by Senate Committee on Energy Vice Chairman Sherwin T. Gatchalian, “consumers should not be paying for what the NGCP owes the government,” with him stressing that such practice “should be terminated as soon as possible.”

In the calculation of the legislative body, if the tax pass-through cost will be ditched, consumers in the typical 200-kilowatt hour (kWh) usage bracket could save as much as P37.32 per year.

The industry regulator thus reviewed the legal ground of the 2011 ERC resolution, considering the fact that there was already a decision of the Supreme Court issued in 2002, disallowing the pass-on of income tax as component of tariffs pass-on to consumers.

Gatchalian opined that in the case of NGCP, it cannot consider its franchise tax payment as operating expense – instead, such must be treated as an obligation of the transmission firm in lieu of income tax.

“The franchise tax, according to the NGCP franchise, is in lieu of income tax. As such, NGCP should not be allowed to pass on its franchise tax to consumers…. as a mere regulating body, the ERC cannot supersede the SC decision,” the lawmaker stressed.