News Release
March 29, 2012
The umbrella group Bagong Alyansang Makabayan (Bayan) today called on the Aquino government to remove the Value Added Tax on electricity, saying the move can provide immediate relief for power consumers reeling from escalating rates.
The VAT on power was introduced, along with the VAT on oil, during the regime of Gloria Macapagal Arroyo. It has been assailed for being oppressive since all items in the electric bill, including non-service related items such as systems losses and franchise taxes, are subjected to VAT.
Recently the Energy Regulatory Commission approved an increase in generation rates for Napocor which would impact the entire nation, in varying degrees and depending on the electricity distributor.
“Malacanang is not powerless to bring down power rates. It can push for the removal, suspension or reduction of the VAT on power rates which will greatly benefit consumers. It should be considered especially for Mindanao consumers whose only option now is to source power from more expensive barges,” said Bayan secretary general Renato M. Reyes, Jr.
According to Bayan, Meralco consumers who use 100-300 kWh a month will stand to benefit anywhere from P70 to P290 monthly reduction in power rates.
“There are many compelling arguments to remove the VAT on power. It is a tax that is being imposed on items in our electric bill which are not even related to the actual electricity we use. For example, even systems losses, or electricity that we did not use, is being subjected to VAT. That is patently unfair for consumers. The bigger the systems loss, the more VAT we pay,” Reyes said.
“Taxes such as the local franchise tax are also being subjected to VAT. That is a tax on a tax,” he added.
EPIRA is main culprit in rising power rates
While the removal of the VAT is only a short term measure, Bayan sees the EPIRA as the long-term problem that has resulted in high electricity rates.
Based on available data, Bayan said that the average power rates of Meralco customers more than doubled during the period EPIRA was implemented. In 2000, the average rate was only P4.87/kWh but it 2010, the average reached P10.35/kWh or more than double the pre-EPIRA rates.
The same trend was also apparent for Napocor’s generation rates for the Luzon grid, which Bayan said almost doubled during the 10 years of EPIRA. The average rates in 2000 was P2.39/kWh while the average rate for 2010 stood at 4.67/kWh.
“EPIRA legitimized the ‘Purchased Power Adjustment’ or the PPA that consumers protested in 2001. This cost represented electricity that was not used or delivered but had to be paid for by the consumers because of contracts with independent power producers. This item was embedded in the new charges that resulted from the unbundling of rates,” Reyes said. ###
