The Department of Energy (DOE) has forged a compromise with the Bureau of Customs (BOC) that the tax rate to be levied on imported coal being utilized for power generation shall be computed based on "transaction value" instead of a "uniform tax rate" that is referenced on Newcastle Index of Australia or the Harga Batubara Acuan (HBA) index for high calorific value (CV) coal being shipped from Indonesia.

“Together with the BOC, they have re-assessed and they have checked the implementation of the Customs Modernization Law, so instead of having a reference value as the law says, it should be the transactional value,” Energy Undersecretary Sharon Garin said.

The energy official was referring to an agreement reached between the two agencies relative to the implementation of the recently issued Memorandum Order No. 242-2022 of the Assessment and Operations Coordinating Group (AOCG) of the Customs Bureau -- which in the view of the power generation companies (GenCos) “does not consider the different coal CVs (calorific values), nor does it consider the different indexes used to contract and price coal.”

Because of the tax policy synchronization concurred to by the DOE and BOC, Garin indicated that Filipino consumers had been spared from feared uptick in electricity rates – wherein if the earlier prescribed uniform tax rate had been imposed, such could have triggered rate hikes ranging from P0.10 to P0.30 per kilowatt hour (kWh) in the electric bills.

“As we speak, the collectors have been informed to use ‘transactional value’ if there’s no suspicious transactions. With this move of the BOC and the DOE, the advantage will be on the consumers – the prices won’t be affected, the price won’t increase because of wrongly implementing what is currently in the law,” the energy official stressed.

To recall, the industry-members of the Philippine Independent Power Producers Association Inc. (PIPPA) raised with the BOC that the uniform tax rate it has been enforcing on Indonesian coal imports could drive up power rates between P0.10 to P1.70 per kWh – and the higher cost adjustment could be suffered by the bigger scale coal-fired facilities that are of the 600-megawatt per generating unit configuration.

In the simulations drawn up by PIPPA, it was specifically shown that for every US$100 per metric ton (MT) increase in coal prices, this translates to an increase in generation cost of PhP1.70 per kWh, if set on a 600MW representative power plant.

Relative to the AOCG memorandum of the BOC, it was noted that the tax assessment reference being applied had been a rate of $319 per metric ton.

As PIPPA qualified, such fixed rate imposition on tax assessment does not make any distinction

between the valuation of low and high CV coal imports, therefore, even if the Philippine power plants are designed to run on lower CV coal, they are – by the AOGC edict, forced to pay higher taxes that are based on the tax assessment for higher CV coal.

Consequently then, the power producers emphasized that “the said increase in fuel cost will translate into higher generation rates for the consumers.”

To stem that predicament for the consumers, “the BOC and the DOE and the stakeholders have been vigilant on this and have been working together, I think this speaks volume because of the convergence of the different efforts of the different agencies, we were able to protect the interest of the consumers,” Garin asserted.