President Ferdinand Marcos Jr. reduced the real property taxes (RPT) imposed on independent power producers for 2025, warning that steep local tax assessments risk triggering financial instability for state power agencies and disrupting electricity supply.
Executive Order 106, signed Nov. 28, slashes all RPT liabilities, including special levies under the Special Education Fund, on power generation facilities of IPPs operating under build-operate-transfer schemes and similar contracts with government-owned or -controlled corporations.
Under the order, liabilities for 2025 and all previous years up to that period will be recomputed using a lower assessment level of 15% of the fair market value of property, machinery, and equipment, depreciated by 2% annually.
Any payments already made above the recalculated amount will be credited to future tax obligations. All interest and penalties on deficiency payments are also condoned.
The move follows disputes between IPPs and local government units, many of which have asserted that the companies are not entitled to the tax privileges granted to GOCCs engaged in power generation. Some LGUs have threatened to auction off IPP assets to enforce collection.
While IPPs remain liable for RPT, the order notes that a substantial portion of the taxes has been contractually assumed by the National Power Corp. and the Power Sector Assets and Liabilities Management Corp., liabilities ultimately backed by the national government.
The Department of Finance warned that enforcing the higher assessments, some pegged at up to 80%, could burden state power firms with massive obligations, derail fiscal consolidation efforts, destabilize energy prices, and risk cross-defaults.
The EO also underscored the threat to grid stability, citing that affected IPPs supply an estimated 1,085 megawatts. Their shutdown, it said, could force consumers to rely on more expensive alternatives or face rotating outages.
Under the Local Government Code, the president may condone or reduce RPT when public interest requires.
President Marcos directed the Department of the Interior and Local Government, in coordination with the DOF, to monitor compliance among LGUs, with a progress report due within 6 months.
