ERC Resolution No. 09, Series of 2026 – Revised Rules on Pass-Through Tax Recovery for DUs
ERC issued revised rules on the recovery of pass-through real property, local franchise, and business taxes by distribution utilities, clarifying cost recovery procedures and ensuring transparency in consumer billing.
4/2/20263 min read
SUMMARY
WHAT IT IS
This Resolution approves and adopts revised rules for how Distribution Utilities (DUs) recover real property, local franchise, and business taxes as pass-through charges to consumers, ensuring transparency, viability, and regulatory oversight.
Distribution Utilities
Electric Cooperatives
Electricity consumers
WHO IS AFFECTED
KEY DEADLINES
Takes effect 15 days after publication in the Official Gazette or a newspaper of general circulation.
Initial compliance filings: Luzon DUs by March 31, 2023 (covering 2021–2022), Visayas by March 31, 2024 (2021–2023), Mindanao by March 31, 2025 (2021–2024); subsequent filings every three years.
TAKEAWAY
DUs should prepare to recover eligible taxes as pass-through charges, ensure compliance with documentation/reporting, and file within prescribed periods to avoid waiving recovery rights.
KEY POINTS
Scope: Applies to all Distribution Utilities (DUs) where Real Property Tax (RPT), Local Franchise Tax (LFT), and Business Tax (BT) are levied by Local Government Units (LGUs), covering both privately-owned DUs (PDUs) and Electric Cooperatives (ECs).
Covered Entities: All DUs, including PDUs and ECs (on-grid and off-grid), with specific provisions for each type.
Requirements: DUs must submit certified true copies of tax ordinances, tax declarations, tax assessments, statements of account, official receipts, and other documents as required by the Commission to recover pass-through taxes.
Thresholds: Only taxes assessed and paid for the current year are recoverable as pass-through charges; tax arrearages prior to effectivity (excluding penalties and interest) may be recovered if filed within 60 days (PDUs) or after member-consumer consent (ECs).
Deadlines:
Initial consolidated compliance filings: Luzon DUs by 31 March 2023 (covering Jan 2021–Dec 2022), Visayas DUs by 31 March 2024 (Jan 2021–Dec 2023), Mindanao DUs by 31 March 2025 (Jan 2021–Dec 2024).
Subsequent filings every three years thereafter.
Monthly reporting to ERC required by the 30th day of each month during recovery.
Compliance Obligations:
DUs must reflect RPT, LFT, and BT as separate line items (“RPT Charge”, “LFT Charge”, “BT Charge”) in customer bills.
DUs must submit monthly reports and include collections in Uniform Reportorial Requirements (URR).
DUs must retain relevant documents for at least 10 years from franchise expiration.
Mechanisms Introduced/Amended:
Establishes post-validation and confirmation by ERC for all pass-through tax recoveries.
Introduces a true-up mechanism for over/under recovery every three years, coinciding with compliance filings.
Specifies formulas for calculating pass-through charges and over/under recoveries for RPT, LFT, and BT.
Prohibits recovery of tax arrearages paid after the effectivity year unless LGU allows installment payments.
Repeals previous rules inconsistent with these provisions; applications under prior rules before effectivity are processed under old rules.
Penalties: Violations subject to fines and penalties per EPIRA and ERC guidelines.
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ERC Resolution No. 09, Series of 2026
Detailed policy analysis
Operational and compliance implications
Stakeholder impact assessment
Risk flags and ambiguities
Suggested next actions
PREMIUM REGULATORY ANALYSIS
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Tags: Pass-Through Charges, Tax Recovery, Distribution Utilities, RPT/LFT/BT Charges, Compliance Filings, True-Up Mechanism