MANILA ELECTRIC CO. (Meralco) has asked the Energy Regulatory Commission (ERC) to factor in the new local franchise tax rate imposed by Biñan City in Laguna province, and reflected in its customers’ electricity bills in the area.
Meralco said the city government imposed a higher tax on businesses enjoying a franchise as computed based on their gross annual receipts, which include both cash sales and sales on account realized during the preceding calendar year within Biñan.
The distribution utility is also asking that it be able to recover the differential local franchise tax for 2017 from customers in the said city.
The company said on Nov. 22, 2016 that the city enacted an ordinance that imposed a local franchise tax (LFT) on businesses enjoying a franchise at a rate of 75% of 1% of the gross annual receipts. The previous rate was 50% of 1%, which took effect on Aug. 12, 2010.
“Subsequently, the Office of the City Treasurer of Biñan, Province of Laguna issued a Notice of Assessment to the Applicant in the amount of P32,560,202.99. As [Meralco] was already able to pay the amount of P16,280,101.49 for LFT for the 1st to 3rd Quarter of 2017 based on the old rate at the time of the assessment, [it] only needs to settle/pay the balance… of (P16,280,101.50),” the company said.
It said the balance is broken down as P5,426,700.50 for the LFT due for the fourth quarter of 2017 using the old rate; and the amount of P10,853,401 representing the differential LFT or the difference between the old and the new rate, on or before Oct. 20, 2017 to avoid the imposition of surcharges and penalties.
Meralco is seeking authority to recover the differential LFT at a rate of P0.0117 per kilowatt-hour (kWh) and carrying cost in the amount of P352,781 at a rate of P0.0004/kWh or the total amount of P11,206,182 at a rate of P0.0121/kWh from the customers of Biñan for a period of 12 months.
Meralco has a legislative franchise to operate and maintain a distribution system in the cities and municipalities of Metro Manila, Bulacan, Cavite and Rizal, and certain cities, municipalities and barangays in Batangas, Quezon, Pampanga and Laguna.
As such it is authorized to charge all its customers for their electric consumption at the rates approved by the ERC.
Meralco is not authorized to unilaterally change the franchise fee rate component on customer’s bills. If it needs to change the rate due to any changes in franchise fee obligations, it is required to petition the ERC for such authority and include in its filing all documentation necessary to verify the changes.
Under ERC regulations, a distribution utility is to await the commission’s clearance before the inclusion and imposition of local government taxes in its customer’s retail rates. — Victor V. Saulon
