Coal tax to hit power customers

By Alena Mae S. Flores – December 10, 2017 at 09:30 pm

Customers of Manila Electric Co. will experience higher generation charges of P0.0455 per kilowatt-hour, once the government slaps a P300 excise tax on every metric ton of coal.

Meralco said in a position paper on the coal tax that any move of government toward increasing the excise tax on coal would impact significantly on electricity consumers across all sectors―residential, commercial and industrial.

“An increase in the excise tax on coal would result in higher generation charge and would impact distribution utilities depending on how much they are sourcing from coal,” Meralco’s position paper signed by first vice president Ivanna dela Pena stated.

Meralco said based on simulations, consumers of electric cooperatives that secured 100 percent from coal sources would see a potential P0.1412 per kWh increase in their bills once the higher excise tax on coal was implemented.

Energy Secretary Alfonso Cusi earlier warned that a higher excise tax on coal would negatively affect the Philippines’ global competitiveness ranking.  “Coal tax…will make our tariff higher and make the Philippines more uncompetitive,” Cusi said.

Cusi expressed concern that the higher coal tax would push up power prices.  “It’s a problem that we are facing because we all know that our tariff is one of the highest, if not the highest in Asia.  With the passage of additional tax for coal, that would really have an impact,” the energy chief said earlier.

Meralco sources 31.4 percent of its generation supply to captive end-users from coal.

“Coal is a major source of fuel source for power generation in the Philippines. Increasing the existing excise tax on coal will only result in higher electricity prices, which will reduce the country’s competitiveness vis-a-vis Asean neighbors,” Meralco said.

Meralco said customers were already burdened by government impositions such as the universal charge,feed-in tariff allowance, energy tax, local franchise tax and value added tax which is equivalent to 14 percent or P1.05 per kWh out of the P7.37 per kWh overall average rate in July.

Meralco said there were additional government impositions, such as royalties for indigenous energy sources and excise taxes, that were embedded in the cost of generation passed on by generators.

“The impact of an increase in the excise tax on coal will translate to a higher generation charge, as well as VAT, since coal has a 12-percent VAT,” it said.

Meralco said an increase in the excise tax on coal would also be reflected in the transmission charge and system charge.

It said raising the excise tax on coal may take away gains from the country’s increased competitiveness.

The power distributor said the Philippines was already leading the way on environmental sustainability despite coal being a major source of fuel for power generation.

The Philippines bested 124 other countries such as Denmark, Switzerland and Sweden in 2016 under the World Energy Trilemma Index.

“Since the Philippines is already a leader in environmental sustainability because of the implementation of existing renewable and low-carbon policies, raising the excise tax on coal with the objective of further improving energy sustainability may only worsen the country’s ranking on energy equity, with little or no improvement in its ranking on environmental sustainability,” it said.

Angelito Lantin, Meralco PowerGen Corp. senior vice president said the impact of the higher excise tax on coal would be neutral “because fuel cost is pass through” but consumers stood to suffer.

“Power is already heavily taxed….You want to promote renewable but the problem by promoting renewable is they are attacking coal.  If you attack coal and you try to increase the price of coal so that renewable can compete, it is the consumes who will suffer,” he said.