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Local Franchise Republic of the Philippines ENERGY REGULATORY COMMISSION San Miguel Avenue, Pasig City IN THE MATTER OF THE APPLICATION FOR AUTHORITY TO INCLUDE IN CUSTOMER'S BILL A TAX RECOVERY ADJUSTMENT CLAUSE (TRAC) FOR FRANCHISE TAXES PAID IN THE PROVINCE OF LAGUNA AND BUSINESS TAX PAID IN THE MUNICIPALITIES OF PANGIL, LUMBAN,PAGSANJAN AND PAKIL ALL IN THE PROVINCE OF LAGUNA ERC CASE NO. 2013-002 CF FIRST ,LAGUNA ELECTRIC COOPERATIVE, INC. (FLECO), Applicant. x- - - - - - - - - - - - - - - - - - - - - - - x DECISION Before this Commission for resolution is the application filed on January 8, 2013 by the First Laguna Electric Cooperative, Inc, (FLECO) for authority to include in its customer's bill a Tax Recovery Adjustment Clause (TRAC) for franchise taxes paid to the Province of Laguna and business taxes paid to the Municipalities of Pangil, Lumban, Pagsanjan and Pakil, all in the Province of Laguna. In the said application, FLECO alleged, among others, that: 1. It is a non-stock non-profit electric cooperative (EC) duly organized and existing under and by virtue of the laws of the Republic of the Philippines. It is represented by its Board President, Mr. Gabriel C. Adefuin, It has its principal office at Barangay Lewin, Lumban, Laguna; " ERC CASE NO. 2013-002 CF DECISION/April 28, 2014 Page 2 of 18 2. It is the exclusive holder of a franchise issued by the National Electrification Administration (NEA) to operate an electric light and power services in the Municipalities of Cavinti, Pagsanjan, Lumban, Kalayaan, Paete, Pakil, Pangil, Siniloan, Famy, Mabitac, and Sta. Maria, all in the Province of Laguna; 3. The Office of the Provincial Treasurer of Laguna assessed it of its arrears on its basic franchise tax liabilities for the following years: Taxable Gross Franchise Taxable Year Receipt Tax Year (PhP) (PhP) . 2007 85,813,974.07 2008 429,069.87 2008 84,663,541.25 2009 423,317.70 2009 95,977,795.73 2010 479,888.95 2010 154,707,214.16 2011 773,536.07 2011 77,978,171.04 2012 389,890.86 Total 2,495,703.45 Governor's Permit Add: 100.00 Fee PTO Certification Fee 50.00 Grand Total 2,495,853.45 4. It paid the basic franchise tax to the Province of Laguna in the total amount of PhP2,495,853.44, as follows: Official Receipt No. Payment CV No. and Date and Date (PhP) 128702 - 7/25/12 LA 0148339 - 7/30/12 624,075.86 128867 - 8/28/12 LA 037141 -8/31/12 623,925.86 129027 - 9/25/12 LA0394999 - 9/28/12 623,925.86 129178 -10/25/12 LA0532725 - 10/30/12 623,925.86 Total 2,495,853.44 • ERC CASE NO. 2013-002 CF DECISION/April 28, 2014 Page 3 of 18 5. It proposes to recover the franchise tax paid in six (6) months recovery period using a projected kWh sales of 36,371,005 kWh, to wit: Summary of the Projected kWh Sales for Eleven (11) Municipalities of Laguna Area Projected kWh Sales Cavinti 4,057,269 Pagsanjan 15,483,761 Lumban 9,822,585 Kalayaan 4,151,986 Paete 7,970,152 Pakil 4,494,293 Pangil 4,980,924 Siniloan 10,609,928 Famy 2,543,747 Mabitac 4,185,502 Sta. Maria 4,439,850 Total Divide by 2 72,742,010 2 Six Months Projected kWh Sales 36,371,005 6. The proposed Tax Recovery Adjustment Charge (TRAC) is PhPO.0686/kWhr computed as follows: Total Paid/Unpaid Franchise Tax PhP2,495,583.44 Projected Semi-annual kWh Sales for Eleven (11) Municipalities in Laguna, within the franchise area of the applicant 36,371,005 kWhr TRAC PhPO.0686/kWhr • ERC CASE NO. 2013-002 CF DECISION/April 28, 2014 Page 4 of 18 7. The Office of the Municipal Treasurer of Pangil, Laguna assessed it of its arrears on its basic business tax liabilities for the following years: Taxable Business Tax Particulars Years (PhP) Municipal Taxes and Fees 2011 1,650.00 Mayor's Permit 2012 775.00 Gross Sales Tax-1St Qtr. 2012 6,345.00 Gross Sales Tax-2na Qtr. 2012 6,345.00 Gross Sales Tax-23r Qtr. 2012 6,345.00 Gross Sales Tax-4th Qtr. 2012 6,345.00 TOTAL 27,805.00 8. It paid the basic business tax to the Municipality of Pangil, Laguna in the total amount of PhP27,805.00 as follows: CV/JV No. and Date Official Receipt Payment No. (PhP) 11-02-093-02/28/12 9083400, 9083392 1,650.00 and 9001102 12-01-056-01/18/12 775.00 014789,0148811 01/27/12 and others 6,345.00 0489065 12852-06/28/12 0174736 6,345.00 129094-10/09/12 0411554 6,345.00 Unpaid-4th Quarter, 12 - 6,345.00 Total 27,805.00 9. It proposes to recover the business tax paid in six (6) months recovery period using a projected kWh sales of 2,490,462 kWhr, to wit: ERC CASE NO. 2013-002 CF DECISION/April 28, 2014 Page 5 of 18 Projected kWh Sales for Pangil, Municipality of Laguna Area Projected kWh Sales PanQil 4,980,924 Total Divide by 2 4,980,924 2 Six Months Projected kWh Sales 2,490,462 10. The proposed Tax Recovery Adjustment Charge (TRAC) is PhPO.0112/kWhr computed as follows: Total Paid/Unpaid Franchise Tax PhP27,805.00 Projected Semi-annual kWh Sales for Pangil Municipality of Laguna, within the franchise area of the 2,490,462 kWhr applicant TRAC PhPO.0112/kWhr 11. The Office of the Municipal Treasurer of Lumban, Laguna assessed it of arrears on its basic business tax liabilities for the following years: Taxable Particulars Business Tax Year Mayor's Permit and ReQulatory Charges 2012 2,600.00 Gross Sales Tax 2012 53,247.00 Total PhP55,847.00 12. It paid the basic business tax to the Municipality of Lumban, Laguna in the total amount of PhP55,847.00, as follows: ERC CASE NO. 2013-002 CF DECISION/April 28, 2014 Page 6 of 18 CV/JV No. and Date Official Receipt No. Payment and Date (PhP) 127826-02/27/12 0685469 4/16/12 2,600.00 12782-2/24/12 0685469 4/16/12 53,247.00 Total 55,847.00 13. It proposes to recover the business tax paid in six (6) months recovery period using a projected kWh sales of 4,911,292 kWhr, to wit: Projected kWh Sales for Lumban, Municipality of Laguna .Area Projected kWh Sales . Lumban 9,822,585 Total Divide by 2 9,822,585 2 Six Months Projected kWh 4,911,292 Sales 14. The proposed Tax Recovery Adjustment Charge (TRAC) is PhPO.0114/kWhr computed as follows: Total Paid/Unpaid Franchise Tax PhP55,847.00 Projected Semi-annual kWh Sales for Lumban Municipality of Laguna, within the franchise area of the applicant 4,911,292 kWhr TRAC PhPO.0114/kWhr ERC CASE NO. 2013-002 CF DECISION/April 28, 2014 Page 7 of 18 15. In 2006, the Municipality of Pagsanjan, Laguna implemented Tax Ordinance No. 01-2006, supplementing the Municipal Revenue Code of the Municipality of Pagsanjan, duly approved by the Sangguniang Sayan dated March 27, 2006; 16. On June 13, 2006, it sought the approval to recover from the consumers of Pagsanjan, Laguna the municipal taxes being imposed by the said municipality, through a letter addressed to the Chairman of the Commission; 17. When the Commission failed to reply to the said letter within reasonable period of time, it implemented the recovery thereof from the consumers of Pagsanjan, Laguna and accordingly remitted the same to the Municipality of Pagsanjan, Laguna; 18. It is requesting the Commission to confirm the aforesaid recovery and payment of the municipal business tax and to continue the same practice; 19. Likewise, the Municipality of Pakil, Laguna implemented Municipal Ordinance No. 05-S-2006, duly approved by the Sangguniang Sayan dated September, 2006; 20. On February 19, 2007, it sought the approval to recover from the consumers of Pakil, Laguna the municipal business tax being imposed by the said municipality, through a letter addressed to the Chairman of the Commission; 21. When the Commission failed to reply to the said letter within a reasonable period of time, it implemented the recovery thereof from the consumers of Pakil, Laguna and, accordingly, remitted the same to the Municipality of Pakil, Laguna; ,. ., ERC CASE NO. 2013-002 CF DECISION/April 28, 2014 Page 8 of 18 22. It is requesting the Commission to confirm the aforementioned payment of the Municipal business tax and to continue the same practice; 23. This application is being filed pursuant to Formula 5b, Section 6, Article 2 of the Commission's Resolution No. 16, Series of 2009; and 24. It prays that the Commission, after due notice and hearing, its application be approved and authorize it to: a) include in its bills to customers in the Province of Laguna a Tax Recovery Adjustment Clause (TRAC) of PhPO.071459/kWhr until such time that the franchise tax paid in the amount of PhP2,495,583.44 has been fully recovered; b) to include also in its bills to consumers in the Municipality of Lumban, Laguna a TRAC of PhPO.0114/kWhr until such time that the business tax paid in the amount of PhP55,847.00 has been fully recovered; c) to likewise include in its bills to consumers in the Municipality of Pangil, Laguna a TRAC of PhPO.0112/kWhr until such time that the business tax paid in the amount of PhP27,805.00 has been fully recovered; d) to also pass on to its customers all current Franchise Taxes in the Province of Laguna and Business Taxes in the Municipalities of Pangil and Lumban, both in the Province of Laguna, based on the approved Tax Recovery Adjustment Clause (TRAC) formula; and e) confirming the recovery and payment of municipal taxes in the Municipalities of Pagsanjan and Pakil, both in the Province of Laguna, and to continue the said practice of recovery and payment.
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