MANILA ELECTRIC CO. (Meralco) is asking the Energy Regulatory Commission (ERC) for provisional authority to adjust the price of electricity in its power supply agreement (PSA) with a plant in Pagbilao after the tax reform law raised the excise tax on coal.
The rate hike application, jointly filed by Meralco and Therma Luzon, Inc., sought an increase in the power generation cost to P0.0187 per kilowatt-hour (kWh) this year, P0.0425/kWh in 2019, and P0.0667/kWh in 2020 and beyond, should the extension of their PSA is approved.
Republic Act No. 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) Law raised the excise tax on domestic and imported coal starting on Jan. 1, 2018.
“Among other things, the TRAIN Law increased the excise tax on coal from P10.00/metric ton to P50.00/metric ton, effective January 1, 2018. This tax is to increase year-on-year, up to P150.00/metric ton for coal, effective January 1, 2020,” their joint application said.
Ahead of the ERC hearing on the application in September, the companies are asking for provisional authority to adjust the terms of their PSA, and for Meralco to start collecting the rate increase from its customers. The generation cost is collected by Meralco from its customers. It is then remitted to the power generation company.
Aside from the power plant’s generation cost, Meralco is also asking for its own captive generation cost at P0.0013/kWh for 2018, P0.0030/kWh for 2019 and P0.0047/kWh for 2020.
“It bears emphasis that in its Decision dated 17 December 2012, the Honorable Commission recognized the pass-through nature of fuel costs, which include the excise tax on coal,” the companies said.
Meralco said the increase in the excise tax for coal is a mandatory imposition of the TRAIN Law and will have to be included in the monthly fees chargeable to and payable by the distribution utility and consequently recoverable from its customers.
Meralco and Therma Luzon secured ERC approval for their PSA in 2012 for 350 megawatts (MW). They have a pending application to extend the contract when it ends next year. The extended contract from Dec. 26, 2019 to Dec. 25, 2022 is also sought to factor in the higher excise tax on coal.
Meralco has a legislative franchise to distribute electricity in the cities and municipalities of Metro Manila, Bulacan, Cavite and Rizal, and certain areas in Batangas, Laguna, Quezon and Pampanga. It is authorized to charge its customers for their electricity consumption at the rates approved by the ERC.
Therma Luzon is the independent power producer administrator that manages and controls the contracted capacity of the 700-MW coal-fired power generating facility in Pagbilao, Quezon. — Victor V. Saulon