The Energy Regulatory Commission (ERC) prohibited power distributors from passing on penalties and interest charges stemming from late local tax payments to consumers, tightening oversight of how utilities recover levies.

In a move intended to insulate monthly electricity bills from “unjust charges,” the regulator issued revised guidelines clarifying that while distribution utilities and electric cooperatives may recover legitimate local taxes, they must absorb the costs of their own financial delinquencies.

The ERC directive covers real property taxes, local franchise taxes, and business taxes.

ERC Chairperson Francis Saturnino Juan said in a statement that the updated rules are designed to strike a balance between maintaining the financial health of the power sector and shielding captive customers from “price pains” caused by utility mismanagement.

Under the new framework, any recovery of taxes must undergo a rigorous verification process to ensure the costs are valid and reasonable.

“By requiring transparency and strict monitoring, we are empowering consumers to better understand their electricity bills while ensuring that distribution utilities remain financially viable,” Juan said.

To enforce the new policy, the commission is implementing its stricter reporting regime. Utilities are now required to submit comprehensive documentation and regular reports both before and during the implementation of tax-related rate adjustments.

The ERC will also apply a post-validation and confirmation mechanism to any other “just and reasonable” costs tied to taxes levied by local government units.

The regulator underscored a zero-tolerance policy for inaccurate billing, stating that any over-collection must be refunded to consumers.

Conversely, utilities may adjust for under-collection in future billing cycles, provided the claims are documented within a strictly defined period.

To improve transparency, the ERC mandated that these taxes appear as distinct line items on consumers' bills, specifically labeled as RPT, LFT, or business tax charges.

The commission also addressed the recovery of tax arrears from previous years. While such recoveries are permitted, they remain subject to strict conditions and exclude any accumulated penalties or interest.

For electric cooperatives, the ERC added an extra layer of protection, requiring the formal consent of member-consumers before old tax debts can be passed through to the billing cycle.

The move follows a broader push by the regulator to modernize the country’s aging power rate structures and increase accountability among the nation’s private and provincial power providers.