Government after government, the perennial problem of high electricity rates remains a challenge. Still, with the new administration led by President-in-waiting Ferdinand Marcos, Jr. coming in, hopes are high that the lingering issue will be finally resolved.
For outgoing Energy Regulatory Commission (ERC) chairperson Agnes VST Devanadera, the time has come to slash the value-added tax (VAT) on generation and transmission charges to bring down power rates for consumers.
“The Philippines has one of the highest electricity rates in Southeast Asia. The cost billed to us is reflective of the real cost as there is no subsidy,” Devanadera said in a press conference Wednesday evening.
“Now, I see that there are double VAT impositions in our bills, especially on generation and transmission charges,” she told reporters.
She argued that her proposal will be a good start to identifying market power abuse or anti-competitive behavior. Devanadera pointed out that the VAT forces distribution utilities (DU) to pass on to consumers the additional taxes imposed on them.
7% bill reduction
Generation charge is the cost of power generated and sold to the distribution utilities by the National Power Corporation (NPC), as well as the independent power producers (IPP).
Meanwhile, transmission charge is the regulated cost or charges for the use of a transmission system, which may include availing of the Ancillary Service.
“There shouldn’t be double taxation. I’d like you to review your bill and you’d see that the VAT makes the amount higher than what it should be,” she said.
“For a P16,000 monthly bill, P1,700 represents the VAT imposition, but if we remove the VAT, our tax should only cost around P400 to P600,” she explained.
Devanadera said there’s no need to pass a law to remove double taxation on electricity rates because the Bureau of Internal Revenue (BIR), if it wants to, has the power to impose such a decision.
“It’s just a matter of interpretation of the agency that can do this, which is BIR, and that will give us a reduction of about 7 percent, that’s a lot. Now, you’d also notice that even the system loss is charged with VAT. That’s one and we don’t need a law for that. We only need an issuance by the executive,” she said.
Before she leaves her post as ERC chief, Devanadera said she will submit a final and comprehensive energy plan to Marcos Jr., which she said was the fruit of her years in heading the commission.
“I am telling you, ideas don’t retire. I will continue to submit to whoever is there and right now, I am happy that I will be submitting a final report to somebody I voted for — that’s it,” Devanadera said.
“Because of the experience I’ve had as part of the regulatory agency, we saw the direct connection between the policy and the rules that ERC should be implementing, policies are formulated by the Department of Energy and the policy and the rules should be in sync,” she added.
According to her, the next leaders of the power industry should aggressively implement short-term solutions to augment power capacity and lower the rates before they proceed to draft out long-term and permanent solutions.
“The very immediate solution is we can go into suspension of the excise tax on coal and petroleum fuel products and increase the taxes on the non-essentials like cars and gaming,” she said.
“When you free the taxes from the consumers, everybody benefits out of it. When you free them from taxes, purchasing power will increase,” she added.