Hike in Coal Excise Tax to trigger spikes in power rates

The proposed three tiered increment in excise tax for coal as fuel for power generation was objected to because of anticipated spikes that such could trigger on the electric bills of consumers.

This was rationally raised by Senate Committee on Energy Chairman Sherwin T. Gatchalian on his manifestation of opposition to the increases in coal excise tax to be enforced on “staggered basis” of R100, then R200 and later on at R300 per metric ton as propounded under the Tax Reform for Acceleration and Inclusion (TRAIN) Bill. That will be tranches of increases from currently at R10 per metric ton.

Spikes in electricity rates due to the tax imposition, the senator added, would be unavoidable for Filipino consumers because 50 percent of the country’s electricity supply relies on coal-fed power generation.

The lawmaker said “the impact of R100 increase in excise tax on coal will be R4.70 increase in the bill of an average consumer consuming 200 kilowatthours (kWh) every month.”

At R200 excise tax, the cost impact will roughly double to R9.57 for the same consumption bracket of consumers; and at R300 excise tax, it will be a higher cost burden of R14.35.

Gatchalian coherently stated “the proposal on increasing the excise tax on coal seems sound if it will reduce carbon emissions in our country, but since this is a pass-on charge, there is no incentive for the coal companies or the coal power producers to reduce the consumption of coal because this will just be passed on to the consumers.”

It is worth noting that close to 60 percent of the rate component in the electric bill accounts for the generation charge – wherein the fuel for power generation such as coal, gobbles up bulk of the cost.

The lawmaker’s lament is anchored on the fact that “the consumers basically have no choice but to accept what is being billed to them every month.”

Beyond “financial distress” it will have on households, Gatchalian similarly warned on probable “repulsive effect on investments” when industrial users of electricity would be hit.

He stressed that industries may equally suffer as they are “going to be burdened directly by the increase in excise tax on coal.”

Reference:

Velasco, M. M. (November 29, 2017). Hike in coal excise tax to trigger spikes in power rates. Manila Bulletin. Retrieved from https://www.pressreader.com/philippines/manila-bulletin/20171129/281973197970711