Press Release
July 29, 2010

Enrile seeks lower electricity rates

Senator Juan Ponce Enrile has filed two bills seeking lower electricity rates. The Electricity Reduction Act of 2010 will remove the disparities in the tax/royalty treatment of indigenous resources not covered by Republic Act No. 9513, otherwise known as the Renewable Energy Act of 2008, while the other Senate bill would impose a uniform franchise tax on distribution utilities enjoying legislative franchise in lieu of any and all taxes collected by the government.

The Electricity Reduction Act of 2010 provides that the government share "shall henceforth be utilized and applied to reduce the commodity price of the indigenous energy resources sold by a service contractor for generation of electricity such that the Government Share is effectively reduced, as it is hereby reduced, to three percent (3%) of the net proceeds from the sale of the energy resource over the life of the relevant service contract."

According to Enrile, this will "directly result in reducing the commodity prices of these energy resources as they are utilized for electricity generation, which reduction will translate into lower electricity rates to the Filipino consumers. In the Meralco franchise area alone, a reduction of government royalties will mean a reduction of electricity rates to as much as P0.50/kWh for all customers."

The Department of Energy, in consultation with the Energy Regulatory Commission, shall issue the rules and regulations implementing the proposed law. The other Enrile-authored bill seeks to revert to the previous system where the franchise tax is being required of distribution utilities not only to allow the industry players to enjoy a more equitable tax regime. More importantly, the imposition of a franchise tax which is directly absorbed by the franchisee will free the consumers from shouldering additional pass on charges.

The Enrile bill wants distribution utilities to pay a franchise tax equivalent to three percent (3%) of their Gross Distribution Income derived from the distribution business granted under the Distribution Utility's legislative franchise. The tax shall be "in lieu of all taxes, such as income tax, value added tax, business taxes, licenses, and any and all taxes, duties, fees, and charges of any kind, nature or description levied, established or collected by any government authority whatsoever, whether local or national, on its franchise, rights, privileges, receipts wheeling charges, revenues and profits and upon its machineries, equipment, supplies, meters, poles, wires, transformers, insulators, capacitors, transportation equipment, substations, facilities, and all other real and personal property actually used or intended for use by the Distribution Utility to provide electric power distribution services to the consumers."

The bill defines Gross Distribution Income as "gross income derived by a Distribution Utility from all its income less all transmission and generation charges on the distributed electricity which are passed on to the consumers and excluding all universal charges imposed under Republic Act No. 9136 as well as charges determined by Energy Regulatory Commission to be passed on to the consumers."

Enrile seeks the immediate passage of the bills on the ground that it is the policy of the State to promote the public interest by ensuring the affordability and steady supply of electricity to the end-users.

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