DoE reviewing tax scheme on power

We need to have a better analysis of the taxes that are imposed on the energy sector

The Department of Energy said it will reevaluate tax schedules on the power system to guarantee the protection of electricity consumers.

At the sidelines of a forum hosted by the Makati Business Club on Monday, Energy Secretary Raphael Perpetuo Lotilla committed to studying how taxes possibly contribute to the prices of electricity in the country.

“We need to have a better analysis of the taxes that are imposed on the energy sector… We should be able to see whether or not we have a rational tax for the energy sector,” Lotilla said.

The DoE chief listed that “value-added tax, we also have excise tax, the VAT on the excise tax, the VAT on system losses, and so many elements add to the (power) cost.”

Carbon tax under study

Relatedly, the Energy chief said the DoE also wants to deliberately and systematically study the proposal on the carbon tax to help determine its effects in the sector.

It can be recalled that in December 2022, the Energy Regulatory Commission issued Resolution 14, Series of 2022, entitled “A Resolution Adopting the Revised Rules Governing the Automatic Cost Adjustment and True-Up Mechanisms and Corresponding Confirmation Process for Distribution Utilities.”

The order, which took effect this year, updated the regulatory framework on recovery of costs.

ERC chairperson Monalisa Dimalanta said the issuance was the first step to achieve transparency in electricity pricing as it allows more information to be available to consumers.

Distribution utilities are currently allowed to collect pass-through costs from customers, which are on top of the Distribution Charge or the payment for use of the DUs facilities.

The DUs collect these amounts from electricity consumers and pay the generation companies for energy generated and the system operator for the use of transmission facilities.

Tax, pass-through expense

Other pass-through charges include taxes, Feed-in Tariff Allowance or FIT-All, and Universal Charges, which are all remitted by the DUs to the government.

Under the 2022 revised rules, the pass-through costs to be collected should only cover generation charges or the payment for the supply of electricity; transmission charges or the payment for the use of the high voltage transmission grid; and other subsidies and mandatory payments like a lifeline and senior citizen subsidies.

Recent policy developments that affect consumer bills such as Distributed Energy Resources, Green Energy Option Program, Net Metering, and Lifeline Program for Marginalized End-Users, among others, are also included in the 2022 Revised Rules.

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