THE Energy Regulatory Commission (ERC) has formally issued a resolution suspending the passing-on of the 3-percent franchise tax by the National Grid Corporation of the Philippines (NGCP) to its customers.
ERC Resolution No. 10 signed by the four commissioners and chairperson Monalisa Dimalanta on August 8, takes effect immediately. The resolution was posted late Tuesday on its website.
The resolution effectively suspends the March 2011 ERC resolution that allowed distribution utilities (DUs) to include in their monthly transmission cost the NGCP’s franchise tax.
Early this month, the ERC announced it approved the suspension of its 2011 resolution. However, it needed to formalize its directive via the issuance of another resolution.
In issuing ERC Resolution no. 10, series of 2023, the agency cited a Supreme Court decision that disallowed public utilities from passing on certain taxes as operating expenses to the public. Such taxes, the SC ruled, must be shouldered by the income earner who receives the benefit of the state and that the same cannot be unduly passed on to consumers, by way of tariff, since said tax was paid not for the consumers’ benefit but for the benefit of the business entity earning the income.
“Upon careful deliberation and in consideration of the declarations of the SC, the Commission deems it consistent with established jurisprudence, and in the best interest of the public, to suspend the implementation of Resolution No. 7, series of 2011 and the passing-on of the three-percent national franchise tax of NGCP to its customers,” the ERC ruled.
The ERC vowed to continuously examine its existing rules and regulations to determine whether the mandates under the Epira are faithfully fulfilled.
The NGCP has yet to issue a formal comment on ERC resolution no. 10.
Earlier, NGCP spokesperson Atty. Cynthia Alabanza said the resolution does not give a “special consideration” as the 3-percent franchise tax is based on gross receipts, unlike a regular income tax, which will be derived from net income.