MANILA — The Energy Regulatory Commission (ERC) is under scrutiny after admitting it issued a resolution allowing the National Grid Corporation of the Philippines (NGCP) to pass on its 3-percent franchise tax to consumers.

ERC Chairperson Monalisa Dimalanta confirmed that the ERC approved NGCP’s petition in 2011, suspending it only in 2023.

Dimalanta explained that the body cannot issue a refund for the amounts passed on to consumers, as it was the Commission’s directive, and NGCP was merely complying with the resolution. This has sparked calls from lawmakers to hold ERC officials accountable for approving the measure.

Rep. Dagooc Says ERC to Be Held Accountable for Passing Burden to Consumers

During a House Committee on Ways and Means hearing, APEC Party-List Rep. Sergio Dagooc questioned the legal accountability of the ERC in allowing NGCP to pass the franchise tax burden to consumers.

However, the solon stressed that NGCP acted based on the ERC’s resolution and should not be blamed for the move.

“Hindi naman nila ipasa iyon kung wala yung resolusyon na iyon, kung hindi sila pinahintulutan ng regulator,” Dagooc said, absolving NGCP of any responsibility.

BIR Confirms NGCP’s Steady Payment of Franchise Tax

The Bureau of Internal Revenue (BIR) further supported NGCP, with Commissioner Romeo Lumagui Jr. confirming that the grid operator has been diligently paying its 3-percent franchise tax as required by law. Lumagui assured the public of the strict enforcement of ERC Resolution No. 10, following the issuance of BIR Revenue Memorandum Circular 24-2024, which now prohibits NGCP from passing the tax onto consumers.

“NGCP has been religiously paying its franchise tax to BIR,” Lumagui stated during the hearing.

From 2016 to 2022, NGCP paid a total of P21 billion in franchise taxes, with annual payments ranging between P1.3 billion and P1.5 billion, as reported by Dimalanta.

In response to the controversy, Rep. Dagooc called for a deeper investigation into the legal implications for ERC officials who approved the 2011 resolution. “What is the possible legal accountability on the part of the body that approved the resolution authorizing NGCP to pass on the 3% franchise tax to consumers?” Dagooc asked.

Albay Solon Acknowledges Franchise Tax to Attract Investors, Calls for Refund Mechanism for Consumers Affected by Tax Burden

Meanwhile, Committee Chairperson Albay Rep. Joey Salceda, who was part of former President Gloria Arroyo’s economic team, acknowledged that the 3-percent franchise tax was set as part of efforts to make TransCo, the former government-owned operator of the transmission grid, more attractive to investors during its privatization. This ultimately led to its sale and the transfer of operations to NGCP.

While the privatization strategy aimed to boost investment in the energy sector, it has since raised questions about the fairness of passing tax costs onto consumers.

Furthermore, Salceda called for a refund mechanism for consumers affected by the pass-through of franchise tax payments. Salceda argued that any excess revenues above the government-approved rate should be returned to the public.

“Anything above WACC (Weighted Average Cost of Capital) belongs to the people or belongs to the state,” Salceda said, stressing that profits generated by utilities like NGCP should benefit consumers.

The controversy over the franchise tax highlights the ongoing debate over the roles and responsibilities of regulatory bodies and private companies in the energy sector, with lawmakers urging further scrutiny of past decisions that affect consumers.

📷 ERC