Higher power rates seen with TRAIN 2

MANILA, Philippines — The second package of the Tax Reform for Acceleration and Inclusion (TRAIN) Law may result in higher electricity rates for consumers and impact the renewable energy sector, according to consumer group Laban Konsyumer Inc.

In a statement, LKI president and former trade undersecretary Victorio Dimagiba said they have warned Finance Secretary Carlos Dominguez that power rates may rise due to TRAIN 2.

“We are monitoring the removal of incentives in the power sector under the Train-2, particularly in  the renewable energy industry. Everything will be subjected to 12 percent value-added tax,”Dimagiba said.

Section 15 (g) of Republic Act 9513 or the Renewable Energy Act states that “the sale of fuel or power generated from renewable sources of energy, such as but not limited to biomass, solar, wind, hydropower, geothermal, ocean energy and other emerging energy resources such as fuel cells and hydrogen fuels, shall be subject to zero percent value-added tax (VAT).”   

Dimaguiba said TRAIN 2 is an additional burden to the consumers on top of the first tax reform package.

The finance department earlier admitted during a Senate hearing that it did not compute the indirect effect of the  TRAIN-1 Law on inflation. 

Bangko Sentral ng Pilipinas Deputy Governor Diwa Gunigundo earlier said only 0.7 percentage points or 12.2 percent of the 5.7 July inflation rate could be attributed to the direct effect of the tax reform law.

Non-profit think tank Ibon Foundation said the government’s TRAIN-1 is among the biggest factors driving the inflation rate and further inflationary surges are likely to happen in 2019 and 2020 when the next two rounds of additional taxes on oil products take effect. 

“The price increases from TRAIN are very permanent and even if inflation rates moderate this does not mean that prices will be lower. It is grossly deceitful for economic managers to give the impression or claim otherwise,” Ibon said.

Advocacy group Center for Energy, Ecology and Development (CEED) earlier said the scrapping of incentives under the Renewable Energy Law of 2008 would further slow down the development of clean and indigenous resources and only promote coal-based projects.

“Although it has been 10 years since the RE Law was passed, the first subsidy under the law has only been implemented less than four years ago. Its intended effect, which is to kickstart RE investments, has not yet been felt,” CEED legal officer Avril de Torres previously said.

Under the Renewable Energy Law, only the feed-in tariff (FIT) system, the net-metering for RE end-users and renewable portfolio standards (RPS) have only been enforced.

TRAIN 2 will call for the removal or reduction of incentives promoting renewable energy development.