Meralco to start phase IV-A of refund process next month

The Manila Electric Co. (Meralco) expects to start next month phase IV-A of the refund process, a ranking company official said.

"We are now processing the first batch of applications for post-dated checks. We expect that this will be reflected in the January billing period of these customers," Meralco senior assistant vice president and refund management task force head Leonardo Mabale said.

Mabale said they completed last month the delivery of letters of notice to phase IV-A customers.

Phase IV-A is the first part of the last phase in the refund process for Meralco’s big commercial and industrial customers. This last phase is expected to amount to P18 billion.

The Meralco official said they have also started the delivery of notices to phase IV-B customers.

Mabale said there is a noted drop in the turnout of Phase IV-B applications. We have received less than 100 applications from these customers," he said.

But Mabale assured that if ever there would be a delay in the process of the last phase of the refund, "the payments would be retroactive.

"Our customers need not really worry since the delay which is beyond our control is mitigated by the application of the refund retroactive to July 2005 for phase IV-A and to October 2005 for phase IV-B," he said.

According to Mabale, it was the intention of the Energy Regulatory Commission (ERC) for Meralco to start issuing refunds to residential customers before refunding to the commercial and industrial customers.

He said as much as the Supreme Court’s decision on the refund had a substantial financial impact on Meralco, the company exerted all efforts to implement the refund of about P30 billion as ordered by the Supreme Court and the ERC.

"We need not emphasize although it is of public knowledge that the refund effectively wiped out our profits from 1994 to 2002. This despite the fact that we invested around P60 billion in the same period to fund our capital expenditures program which is necessary to improve and upgrade our system and service to a level expected by our customers," Mabale said.

He said for the record, phase IV of the refund, which covers commercial and industrial customers, could have started earlier.

"However, BIR wrote us in January 2005 stating its intention to tax the phase IV refund. We then manifested this development to the ERC which then ordered us to implement phase IV-A beginning July 2005 and phase IV-B in October 2005," he said.

Meralco received BIR Revenue Regulation 8-2005 on May 10, 2005 ordering Meralco to act as withholding agent for phase IV refund customers and imposing a 25-percent tax on active customers and 32 percent on terminated customers.

The 25 percent was an offshoot of Meralco’s appeal to BIR to reconsider the 32-percent tax it initially intended to impose even on active customers.

The corresponding Revenue Memorandum Order (RMO) 22-2005 was issued only in September 2005 providing the specific provisions in implementing RR 8-2005.

"Understandably, it took BIR some time to come out with its guidelines in order to address all the possible legal implications of the order. We respect the BIR’s position that the refund is taxable on the ground that commercial and industrial taxpayers have already expensed their electricity costs in paying their income taxes and therefore should be taxed on the windfall amounts received as refund," he said.

As per the ERC order for phase IV-A (small commercial and industrial), the refund mode is through postdated checks (PDCs), credit-to-future bill or cash depending on the option taken by the customer.

If the gross refund amount is P5,000 or less the refund shall be made in full at the start of the refund period.

For phase IV-B (large commercial and industrial), the refund mode shall be 21 PDCs corresponding to the quarterly refundable amount.

The PDCs shall have sequential quarterly maturity dates beginning on the first month of the calendar quarter (21 quarters), maturing at the end of every quarter.