The revised uniform taxation applied by the Bureau of Customs (BoC) on imports of Indonesian coal used for power generation will drive up electricity tariffs, industry players say.

As noted, the magnitude of tariff increases in electricity bills could range from P0.10 per kilowatt hour (kWh) to P1.70 per kWh for larger scale coal-fired power plants – primarily those in in the 600 megawatt band. installed capacity range.

According to Frank Thiel, President of the American Chamber of Commerce of the Philippines (AmCham) and Managing Director of Quezon Power, the new memorandum No. 242-2022 issued by the Operations Assessment and Coordination Group (AOCG) of the Bureau of Customs ” does not take into account the different CVs of coal (calorific values), nor the different indexes used to contract and fix the price of coal.

It was pointed out that the benchmark applied by the BOC to July coal shipments, in particular, had been at the rate of $319 per metric ton (MT); but such a flat rate imposition on tax assessments is considered to have a disastrous effect; particularly on the unwanted rise in electricity bills – in stark contrast to President Ferdinand Marcos Jr.’s campaign promise to make electricity rates more affordable for Filipino consumers.

Thiel said the AOGC memo “also doesn’t follow market forces, because coal is a commodity; it is simply looking to price a package of x/MT, regardless of the contract details behind the shipment. »

He further stated that “unfortunately, the BOC’s approach – based on simulations – can increase electricity tariffs by up to 1.70 pesos per kWh when considering a 600 megawatt plant”.

Similarly, the Philippine Independent Power Producers Association Inc (PIPPA) reported that

“If there is no distinction between the valuation of low-CV coal and high-CV coal, generators who have designed their plants to run on low-CV coal will be forced to bear an increased cost fuel caused by additional taxable taxes and landed costs – caused by valuing low-CV coal as if it were high-CV coal.

The Group of Generation Companies (GenCos) pointed out that “the said fuel cost increase will result in higher production rates for consumers.” The benchmark that would have been applied by the BoC is Harga Batubara Acuan (HBA), which is an index based on average high CV coal prices.

PIPPA President and Executive Director, Anne Estorco-Montelibano, in her letter to Customs Commissioner Yogi Filemon Ruiz, pointed out that to determine the potential impact on the generation rate of the increased duties due to enforcement of the memo, the gensets “had run a simulation and found that for every $100/MT increase in coal prices, it translates to an increase in production cost of P1.70 per kWh – on the base of a representative 600 MW plant.

She cited, in particular, that one of the PIPPA producer members who had received a shipment of imported coal had been assessed duties and taxes amounting to 26.5 million pesos if based on the actual price, based on the invoice, paid for the shipment.

However, when the revised valuation was applied as anchored on indiscriminate application of tax policy under BOC Notice AOGC No. 242-2022, this same production company was already imposed a higher high reaching 49.5 million pesos; or a difference of 23 million pesos compared to the initial assessment.

“Translated into a rate per metric ton, said assessed value differential is similar to an increase in the cost of coal of up to $5.70 per metric ton,” PIPPA said.

Montelibano pointed out that “compared and proportionate to the simulation above, this results in an increase in the production rate of P0.10 per kWh which will ultimately be borne by consumers as a higher fuel cost.”

In the opinion of the GenCos, the assessment based on invoicing when imposing taxes on coal imports remains the most prudent system and it also has a solid legal basis mainly

pursuant to Sections 700 and 701 of the Customs and Tariff Modernization Act (CMTA), which mandates the primary use of the transaction value system – or the price actually paid for the goods when sold for export to the Philippines – in tax assessments for shipments.

PIPPA added that “coal is a commodity and is traded globally. As prices are based on prevailing supply and demand and other market forces, prices based on the Newcastle Index, the HBA – the index shown in Note No. 242-2022 – and other international coal indices are dynamic and will change as the market evolves. .”
Source: Manila Bulletin