The Energy Regulatory Commission (ERC) is establishing legal ground for the targeted revocation of a previous resolution allowing pass-through of the 3.0-percent franchise tax of transmission firm National Grid Corporation of the Philippines (NGCP) to electricity consumers.
“Our legal team is doing a research, but we started deliberations on that issue already. Hopefully, our legal can come back to us for answers on the questions that we raised, so we can resolve that already,” ERC Chairperson Monalisa C. Dimalanta said.
She qualified that if the Commission cannot find any legal ground for that policy (pass-through of franchise tax), then the resolution has “no leg to stand on” and a consequent scrapping of the resolution by ERC.
Dimalanta stated that based on the initial outcome of the Commission’s research, there was already a Supreme Court decision rendered in 2002, staying that “direct taxes cannot be passed on, then the ERC resolution was 2011.”
On that account, she conveyed that “We really need to understand what was the basis of the previous Commission which allowed the pass-through (of franchise tax), in spite of the Supreme Court decision.”
In a recent public hearing, Senate Committee on Energy Vice Chairman Sherwin T. Gatchalian had called on 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.”
He stressed “the ERC should stop the pass-through. Consumers should not be paying for what the NGCP owes the government. The practice should be terminated as soon as possible.”
According to the legislator, for consumers in the 200-kilowatt hour (kWh) consumption bracket, if the franchise tax pass-through is stopped, that will redound to P37.32 per kWh reduction in the monthly electric bill of an ordinary residential end-user within the franchise area of Manila Electric Company.
Gatchalian primarily pointed out that the SC ruling in 2002 has stipulated that “income tax, which is not an operating expense, cannot be passed on by a utility to consumers.”
Taking cue from that precept then, he indicated that “in the case of NGCP, the franchise tax is not an operating expense. Moreover, 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.”
The solon thus noted “the ERC should recant its 2011 resolution which included the 3.0-percent franchise tax as part of the total monthly transmission cost,” with him specifying that “as a mere regulating body, the ERC cannot supersede the SC decision.”
