QuestionsQuestions (ERC Resolution NO. 02, S. 2006)
Its legal basis is Section 43(f) of Republic Act No. 9136 (EPIRA), which requires that electricity rates allow recovery of just and reasonable costs enabling distribution utilities to operate viably.
TRAC is designed to recover franchise and business tax arrearages (paid prior to the implementation of the approved tax formula) from customers through a per-kWh charge, subject to ERC verification and specific limitations.
Electric Cooperatives (ECs) registered under Presidential Decree No. 269 where local franchise and business taxes are levied within their franchise area.
FT and BT are computed using: FT = DC of the customer bill x (Ft + Bt), where DC is Distribution Charges in the customer bill, and Ft and Bt are the local franchise and business tax rates, respectively.
It refers to the total amount representing distribution charges from the time the unbundled rates were approved; alternatively, it may refer to the total customer bill excluding receipts from NPC/Transco and universal charges (as defined in the guidelines).
The franchise and business tax rates imposed by LGUs must be approved by the ERC prior to recovery. The EC must file a formal request with the ERC including a certified true copy of a valid local tax ordinance and other relevant data for verification.
Within thirty (30) days from submission of complete documents, the ERC shall verify accuracy and validity and issue an order confirming the tax rates to be levied.
The submitted franchise and business tax rates are deemed final and confirmed.
FT/BT applies to recovery from the effectivity of the ERC-approved franchise and business tax formula. TRAC applies only to franchise and business tax arrearages paid prior to the implementation/effectivity of the approved tax formula.
TRAC = (Lft^a + Bt^a) / S, where Lft^a is local franchise tax arrearages excluding penalty/surcharge, Bt^a is business tax arrearages excluding penalty/surcharge, and S is projected kWh sales for the proposed recovery period (as determined/verified by ERC).
Consumers cannot be charged taxes imposed prior to the effectivity of the contract of service with the electric cooperative; recovery is limited to arrearages computed based on distribution charges and supported by a valid local tax ordinance, excluding penalty and surcharge.
TRAC operates until the total franchise and business tax arrearages have been fully recovered.
A certified true copy of the local tax ordinance and other relevant documents as may be required by the ERC.
Certified true copies of prior years’ tax assessment, local tax ordinances, official receipts, projected kWh sales for the proposed recovery period, and other relevant documents required by the ERC.
They must appear as separate line items under “Government Revenues,” specifically: Local Franchise Tax (% of sub-total II & III), Business Tax (% of sub-total II & III), Tax Recovery Adjustment Charge, plus VAT and universal charges as applicable.
On or before the 25th day of each month, ECs shall provide the ERC with all collections related to TRAC for the prior month; ERC verification then leads to the confirmation/establishment of amounts per kWh (subject to timelines in the guidelines).
Over-recovery is subject to a carrying charge based on the 91-day T-bill rates plus 300 points, and the amount will be refunded to consumers within the period prescribed by the ERC.
Yes. Where good cause appears, the ERC may allow an exception if it is in the public interest and not contrary to law, rules, and regulations. An EC must submit a proposed alternative mechanism/formula for ERC approval before recovery/refund is allowed.