Archive for March, 2018

effect of TRAIN LAW on power rates

Republic Act 10963 otherwise known as Tax Reform for Acceleration and Inclusion (TRAIN) was enacted into law, which took effect on January 1, 2018, and brings lots of changes in terms of taxation. While the Tax Reform is expected to remove or to reduce the personal income tax of wage earners, it increases taxes on fuels, tobacco and beverages. With the increase of tax in fuel, the member-consumers must prepare for the impact of TRAIN Law particularly in our electricity bills. COAL is one of the major sources of fuel for power generation in the Philippines, and San Miguel Corporation (SMEC), our power supplier, uses COAL as FUEL. On TRAIN Law, there is an increase on the existing excise tax on coal, which was included by SMEC starting its January 2018 Billing of NORSAMELCO particularly on Energy Fee. Below is the simulation of increase in Generation Rate as an effect of Train Law;
Generation Charge
(Energy Fee)
December 2017 
(without TRAIN Law)
January 2018
FUEL Component
(with TRAIN Law)
Increase of VAT per kWh
  It clearly shows that the fuel component in our generation charge on December 2017 is only 2.927, but it increased to 3.0036 in January 2018 billing because of the Train Law. There is a total increase of Php0.0766 per kWh. TRAIN Law has also an effect on our Transmission Services. Before, the National Grid Corporation of the Philippines (NGCP) has no 12% value-added tax (VAT) on regulated transmission services, but under Section 86 of RA 10963 or TRAIN Law, the NGCP’s VAT exemption on transmission services provided in Section 9 of Republic Act 9511 of their franchise was repealed. Hence, NGCP’s transmission services are now subject to 12% VAT, this is in addition to the existing 12% VAT on ancilliary services. Below is the VAT simulation of Transmission Rate as an effect of Train Law;
BILLING DETAILS December 2017 January 2018
VAT on Ancillary Services Php90,444.40 Php85,507.63
VAT on Regulated Transmission Services Php454,638.62
TOTAL VAT Php90,444.40 Php540,146.25
Transmission VAT Php0.0122 Php0.0733
  Note: The pass-on charges on generation goes to San Miguel Corporation (SMEC), our power supplier for 2018 and the pass-on charges on transmission goes to National Grid Corporation of the Philippines (NGCP), while the taxes are pass-on charges shouldered by member-consumers and will be collected by NORSAMELCO and such will be remitted to national government.

Billing Rate

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