THE OPERATOR of the Wholesale Electricity Spot Market (WESM) has projected ongoing tax reform to increase overall electricity prices progressively until 2020, when the price hike could be as high as P0.1311 per kilowatt-hour (/kWh).
Francis Saturnino C. Juan, president of the Independent Electricity Market Operator of the Philippines, Inc. (IEMOP), placed the increase this year with the imposition of new or higher taxes on fuel at P0.0904/kWh, increasing to P0.1111/kWh in 2019.
“This is the price impact, say, on Meralco (Manila Electric Co.) or a utility given a set of assumptions — they are getting (electricity) from certain suppliers that will be running on this fuel pero (but) they will also get a portion of their requirement from the spot market,” he said in an interview after an energy forum last week.
IEMOP took over WESM operations from the Philippine Electricity Market Corp. (PEMC) last week.
“There is no one-to-one correlation of the increase in the tax rate and the increase in the electricity rate of a particular utility. It will all depend also on the sourcing of that particular utility,” he clarified.
He said the simulation for the estimated incremental increase in power prices used actual data from Meralco.
“That is the incremental (rate increases)… since the prices of fuel have already gone up, then that will add to the increase in the electricity rate,” Mr. Juan explained.
“That will be passed on also to the consumers of these distribution utilities.”
Of the projected overall power rate increase this year, the IEMOP computation expects generation charge to account for P0.0204, or 22.6% of the total. The corresponding figures for 2019 and 2020 are P0.0411 or 37% and P0.0611 or 46.6%, respectively.
The market operator placed Meralco’s average supply mix that makes up the generation charge at 31% coal, one percent oil, 15% WESM and 53% other energy resources, which it did not break down.
Republic Act No. 10963, or Tax Reform for Acceleration and Inclusion Act (TRAIN), this year added P2.65 per liter to the price of gasoline as excise tax, P0.32 per liter as value-added tax (VAT), or a total of P2.97 per liter, the Department of Energy had said.
For diesel, the law resulted in an increase of P2.50 per liter in excise tax and P0.30 in VAT, or a total of P2.80 per liter. Diesel — consumed by public utility vehicles — used to be free of VAT and excise tax.
A succeeding tax reform tranche will add P2.24 per liter to the price of gasoline and P2.24 per liter for diesel in both excise tax and VAT. For 2020, the price increases for gasoline and diesel are P1.12 and P1.68 per liter, respectively.
RA 10963 also raised the excise tax on domestic and imported coal starting Jan. 1, 2018 to P50 per metric ton (/MT) from P10/MT. The tax will increase up to P150/MT on Jan. 1, 2020. — Victor V. Saulon