The Philippine Independent Power Producers Association (PIPPA) said Wednesday it supports measures to lower consumer electricity costs but urged lawmakers to ensure policy changes remain tax-neutral and non-disruptive to the energy sector.
The industry group backed a proposal to shift the funding of social subsidies from electricity bills to the national budget, saying the move would lower direct rates and more accurately reflect the true cost of power generation. Under the Electric Power Industry Reform Act of 2001, non-lifeline consumers currently fund a lifeline rate subsidy for low-income users at a rate of P0.01 per kilowatt-hour.
PIPPA warned that a separate proposal amending EPIRA to mandate private distribution utilities to absorb 50 percent of the lifeline subsidy cost—while prohibiting them from passing those costs to end-users—would harm the industry.
“Mandating DUs to absorb 50 percent of the subsidy costs out of their own pockets could strain their financial liquidity,” PIPPA said in a position paper.
“If DUs face financial shortfalls, they may default on or delay their payments to GenCos,” it said.
The association said that cross-subsidies inflate retail electricity costs for non-beneficiaries and make power appear artificially expensive. To prevent disruptions to existing power supply agreements, the group proposed conducting a comprehensive financial impact study before implementing changes to assess the long-term implications on utilities and the broader power sector.
PIPPA president Anne Estorco-Montelibano cited the need for balanced legislation.
“Proposed laws should protect the delicate balance of consumers and investors, allowing an efficient mechanism for recovery, credit, or refund,” Estorco-Montelibano said.
The group also said that input value-added tax recovery should remain protected under any legislative changes. Making generation sales VAT-exempt could prevent generators from crediting input VAT, creating stranded tax costs for capital-intensive generation projects and plants with major fuel, operations and maintenance, or capital expenditure inputs.
PIPPA said that under a partial or full VAT exemption, the law should include a mechanism allowing generators to recover, credit, refund or otherwise neutralize input VAT attributable to electricity supply.
The group said that VAT changes should not reopen generation rates or impair power supply agreements, Wholesale Electricity Spot Market settlement arrangements or supply contracts.
