A militant lawmaker on Tuesday warned that the passage of the proposed Tax Reform for Acceleration and Inclusion will also result in a permanent spike in power rates, apart from increasing rental costs, price of liquefied petroleum gas and other necessities.
Bayan Muna Party-List Rep. Carlos Zarate said that based on initial computations on simulations of industry insiders and research of Bayan Muna, the proposed higher excise tax on diesel and bunker fuel oil used in power generation will increase the cost of generation by around P1.50 per kilowatt hour if the fuel consumption rate is pegged at 0.25L/kWh.
“Of course, the increase in generation cost as a result of higher excise tax on diesel and bunker fuel oil will depend on the share of oil-fired generation to overall power plant portfolio,” Zarate said.
“This means that compared to the Luzon and Visayas, grids with a less-than-five percent share of power generation from oil-fired plants, price increases may be higher in Mindanao since oil accounts for around 20 percent of power generation in the grid,” Zarate added.
Zarate also noted that as of January 2015, 11 electric cooperatives in Mindanao with an estimated 241 MW of additional capacity from modular generator sets that use of diesel or bunker fuel would be affected by the increase in excise tax on oil as well as the revocation of value-added tax exemption of cooperatives.
“Furthermore, the electricity price in off-grid or NPC SPUG [National Power Corporation-Small Power Utilities Group] areas in the hinterlands may also increase as these areas source power from generator sets that also use diesel or bunker fuel. At least a third of these areas operate their generator sets for 24 hours,” Zarate said.
Additionally, Zarate said the estimated impact on the generation cost does not yet include the effect on wholesale electricity spot market prices since price offers of oil-fired plants may adjust with new excise taxes.
“Thus, when there is another Malamapaya shutdown or there are again simultaneous power plant shutdowns, then the effect on our power rates would be enormous,” Zarate said.
He said that higher excise taxes would also affect the universal charge for missionary electrification since diesel is a major fuel source for off-grid electrification.
“This will enable power providers in this program would most probably ask for an increase in the subsidy provided by electricity consumers in the main grid since the disparity between electricity costs in the main grid and off-grid will increase,” he said.
“We will continue to oppose the passage of the tax reform package because this measure would hit majority of Filipinos and it leaves the poor and the middle class at a disadvantage,” Zarate said.