Meralco to seek higher power rates to reflect EVAT

Power distributor Manila Electric Co. (Meralco) is expected to file its petition next week with the Energy Regulatory Commission (ERC) for new power rates to reflect the implementation of the expanded value-added tax (EVAT).

The petition should also address the appeal of the Department of Energy (DOE) for Meralco to expand the lifeline rate structure to include consumers with a monthly consumption of up to 200 kilowatthours (kwh) or double the current coverage of 100 kwh.

The DOE last week issued a circular urging distribution utilities to file petitions to allow them to recover their costs due to VAT. At the same time, the circular appealed to distributors to expand the coverage of the lifeline rate structure so that consumers with consumption levels of 200 kwh could also enjoy subsidies.

The DOE previously proposed exempting the lifeline consumers or those consumers using zero to 100 kwh per month from the VAT. This will be on top of the discounts of up to 50 percent that they are currently enjoying under the Electric Power Industry Reform Act of 2001.

However, Meralco officials said this proposal will still have to be discussed by management. Moreover, the power distributor hinted it would rather leave the decision of expanding the lifeline rate structure to the ERC.

Meralco task force chair on VAT implementation Anthony Rosete, in the meantime, clarified that the implementation of VAT starting July 1 will be reflected in customers’ August bills.

As this developed, the Supreme Court on Friday issued a temporary restraining order on the implementation of the expanded VAT, indefinitely setting back the government’s new tax measure.

"The law states that in the case of electricity, if a billing period covers power consumption for the period before and after July 1, 2005, the 10 percent VAT will be applied only to electricity consumption on or after July 1, 2005," he said.

Rosete explained that the consumption included in Meralco’s billing cycle varies depending on the customers’ meter reading schedule.

He explained that since the law specifically states that the take-off point is July, only consumption in July will be covered by EVAT.

"For example, for a billing period from June 10 to July 9, only consumptions for the period from July 1 to 9 will be subject to VAT. Some proportionate computations will have to be undertaken but this will not be reflected yet in the July 2005 bills," he said.

He also mentioned that the ERC has issued draft guidelines on the EVAT implementation and that a public consultation on the guidelines is scheduled for July 5.

"We have to wait for ERC’s final guidelines to be able to discuss the details on how the VAT implementation will be carried out. As soon as we receive the order from ERC, we will inform our customers accordingly," said Rosete.

Ivanna de la Pena, Meralco vice president and head of utility economics earlier said the impact of the VAT will only be at eight percent of the consumer’s total monthly bill as the two percent franchise tax will be scrapped.

"The full impact of the VAT will be felt by August as the distribution utilities have yet to file within the week their respective petitions with the ERC on the revised lifeline rate structure," said De la Pena.