Removal of VAT on power mulled

MANILA, Philippines – Speaker Prospero Nograles has proposed the removal of the 12 percent value-added tax (VAT) from the electric bills of residential consumers that do not exceed P5,000 a month.

“The cost of food and fuel is already too much to bear for many of our countrymen,” he said. “I think there is now a need to consider lifting VAT on electricity for residential consumers who have an average electric bill of P5,000 and below.”

“The only way to provide them relief is to discover ways and means of reducing their economic burden in the face of the spiraling cost of food and fuel,” he added.

Nograles said removing VAT can be an incentive for consumers who limit their use of electricity and save energy in the process.

“It’s also good for the environment if we can greatly reduce our overall power consumption,” he said.

Nograles said other charges that power distributors pass on to customers should be reviewed.

“Systems losses charged to consumers, although practiced worldwide, should be revisited and amended to a most reasonable basis,” he said. “It must have a cap.”

During the hearing of the House energy committee last Tuesday on the high cost of electricity, officials of the Manila Electric Co. said consumers are billed about P1.3 billion a month or P15.6 billion a year in systems losses.

The government is collecting a 12 percent VAT on these charges, the officials added.

The Meralco officials said the Energy Regulatory Commission (ERC) approved the fees.

Manila Rep. Amado Bagatsing, a member of the energy committee, said they will summon ERC Chairman Rodolfo Albano Sr. to its second hearing this week to explain why systems loss fees are being charged to electricity users.

“We want him to explain why he and other regulators of power rates allowed unconscionable charges to be passed on to consumers,” he said.

Bagatsing said the Anti-Electricity Pilferage Law allows only the cost of pilfered electricity to be absorbed by customers.

“The bigger part of systems losses, about 80 percent, is electricity that escapes from the transmission system,” he said.

“There is nothing in the law that authorizes ERC to allow distributors to collect the cost of this electricity from consumers. The regulators have exceeded their authority. Their implementing rules and regulations should not have gone beyond the law,” he added.