Sherwin Gatchalian

Don’t let public pay pay 3% franchise tax, NGCP told

July 10, 2023 Camille P. Balagtas 219 views

SEN. Sherwin Gatchalian urged the Energy Regulatory Commission (ERC) to stop allowing the National Grid Corporation of the Philippines (NGCP) from passing on to electricity consumers the 3% franchise tax it is supposed to pay the government.

“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,” said Gatchalian, the vice chairperson of the Senate Committee on Energy.

He pointed out that an ordinary household with a 200 kWh monthly consumption in the Meralco franchise area could have saved an estimated P37.32 per year had the ERC not allowed NGCP to pass on its franchise tax to consumers.

At a hearing conducted by the Senate Committee on Energy, it was confirmed by ERC chairperson Monalisa Dimalanta that NGCP is allowed to pass on to consumers a franchise tax of 3% of all gross receipts derived from its operation in lieu of income tax and other taxes due to an ERC resolution, specifically ERC Resolution No. 7 Series of 2011.

But according to Gatchalian, a 2002 Supreme Court decision has emphasized that income tax, which is not an operating expense, cannot be passed on by a utility to consumers.

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.

“Thus, the ERC should recant its 2011 resolution which included the 3% franchise tax as part of the total monthly transmission cost. As a mere regulating body, the ERC cannot supersede the SC decision,” he said.