DOE mulls ‘no pass-on policy’ on initial coal TRAIN tax

At the initial excise tax rate of R50 per metric ton, the Department of Energy (DOE) is advancing a policy idea that the generation companies (GenCos) will initially absorb the cost impact, instead of passing it on in the bills of the Filipino ratepayers.

This is the main reason then why the DOE is requiring data and information submission from coal plants – chiefly on cost impacts that the initial rate of excise tax would have on their operations.

The R50/metric ton excise tax is the first phase of the tax impositions under the Tax Reform for Acceleration and Inclusion (TRAIN) Act of the Duterte administration. That will go up to R100 per metric ton next year; and to a higher R150 per metric ton in 2020.

“Our questions are: what is the cost impact of the R50/metric ton to the operation of the coal plants? So can they absorb that cost and will just merely offset the cost by improving the efficiency of their operations?” the energy chief queried.

He indicated that the idea of the DOE is to possibly forego the tax cost pass-on in the initial year of the TRAIN implementation, but the final decision will only come once the GenCos turn over all the data and information being mandated by the DOE for submission.

Based on initial calculation of power utilities,

the R50 per metric ton excise tax will result in R0.01 per kilowatt hour (kWh) hike in the generation cost of the coal plants – which to the government is a very measly amount compared to the so-called externalities and assault to the environment that they have been causing.

Cusi, nevertheless, noted that “we don’t want to pre-empt anything. I will wait for their submissions first. Although what I can say is: the DOE already has its own calculations, so we have basis of assessing their cost impact submissions.”

He added “I want to check what their computations are and then from there, we will assess what they can do on absorbing the cost.”

The country’s power mix thrives on coal-fired generation for baseload capacity, and with the intensifying debate on ‘dirty versus clean energy’ technologies, coal plants are already being pressured on embracing carbon tax impositions.

Had the TRAIN excise taxes not been designed for pass-on to consumers, that could have served as the country’s initial foray into enforcement of carbon taxes directly impacting on the coal plants operations.

But that goal is negated because the law still inflicts upon the Filipino public to shoulder such charges via their electricity bills.