PHILIPPINE Rural Electric Cooperatives Association, Inc. asked the Energy Regulatory Commission to treat rural property tax as a pass-through cost that can be collected from customers.

THE ENERGY Regulatory Commission (ERC) has given stakeholders until Feb. 28 to comment on a petition filed by electric cooperatives to treat rural property tax (RPT) as a pass-through cost that can be collected from customers.
In its petition, the Philippine Rural Electric Cooperatives Association, Inc. (Philreca) asked the ERC to issue the necessary rules allowing the pass-through nature of the tax as it called the proposal “valid and timely considering that local government units (LGUs) had assessed and collected RPT” from electric cooperatives (ECs).
“The RPT should therefore be allowed to be a pass-through charge to the ECs member-customers subject to post verification and confirmation by the Commission similar to the Local Business and Franchise Tax,” Philreca said.
The association said the need for ERC rule-making became more urgent after the decision of the Supreme Court in the case of Manila Electric Co. versus Lucena City’s assessor and treasurer, where it affirmed that transformers, electric posts, transmission lines, insulators and electric meters are not exempted from RPT under the LGUs.
“The RPT is the lifeblood of the LGUs authorized by the Local Government Code of 1991 (Republic Act No. 7160) and thus the collection and payment thereof can no longer be avoided by ECs,” Philreca said.
“The ECs have no option but to pay the RPT otherwise the LGU can exercise its right to levy the real properties of the ECs to enforce collection thereof and thereby hamper the ECs from performing its mandate of providing electric service to its member-customers,” it added.
The association also said their existing tariff does not provide for surplus funds through a return on rate base and depreciation like those of private distribution utilities.
It said while private utilities can exercise certain degree of flexibility by charging the RPT against their surplus funds, the ECs are constrained to fund the same from their meager internally generated funds.
It added that in most cases, the funding come from loans obtained from the National Electrification Administration and financial institutions. Philreca also pleaded for other relief “deemed just and equitable.”
The ERC has set the hearing and public consultation on the petition between March and April in venues in Luzon, Visayas and Mindanao. — Victor V. Saulon