Utility firm passes on E-VAT to consumers
Maricel V. Cruz
Manila Times
Electricity consumers in the franchise area of the Manila Electric Co. (Meralco) are paying for value-added tax, which the utility firm is exempt from paying.
The Lopez-controlled Meralco apparently has not been declaring that a large portion of the power supply that it buys from the state-run National Power Corp. (Napocor) and independent power producers, or IPPs, is spared from VAT.
The 14-page Napocor’s “Power Bill” for Meralco, a copy of which was obtained by The Manila Times, showed that the VAT being passed on to consumers by Meralco is bloated, from 23 percent up to 39 percent that represents billions of pesos collected from consumers every month to cover its supposed VAT charges.
The document showed that an average of 24 percent to 39 percent of the electricity supplied by Napocor to Meralco is sourced from zero-VAT power plants that utilize renewable energy sources.
The country’s biggest power distributor, Meralco charges 12 percent across-the-board VAT without making any distinction between a VAT-free and VAT-chargeable power supply in the electric bills of its consumers, despite the cut in VAT payments for its power supply from Napocor.
The 25-percent, zero-VAT rate representing the total volume of electricity supplied by Napocor to Meralco is outside of the other VAT-free electricity supplied by other independent power producers to Meralco.
Napocor supplies 35.96 percent out of the total amount of power requirement of Meralco, while 19.1 percent or roughly 2,154.8 megawatts are sourced from Lopez-owned power plants, including the First General Hydro, a VAT-free rated power plant.
Napocor billings to Meralco showed that since December 2005, the government-owned power corporation has started collecting 10-percent VAT from the utility company. This charge became the basis of the VAT charges passed on by the power distribution firm to its customers.
At the same time, however, the 10-percent VAT being charged by Napocor to Meralco does not cover “FBHC, GRAM, ICERA and renewable energy portion of all other charges.” Napocor’s December 6, 2005 “power bill” to Meralco showed that of the total of 1,000 megawatts supplied by Napocor, 26 percent were “renewable” and, therefore, was free of VAT charges.
On January 3, 2006, out of the total of 1,050 megawatts also supplied by Napocor to Meralco, 26.69 percent were again renewable and VAT-free.
The document also showed that from February 1, 2006 to July 10, 2006, during which Napocor started charging 12-percent VAT, 24.03 percent up to as high as 39.09 percent of the monthly total of 1,050 megawatts supplied by Napocor to Meralco came from renewable energy sources and were also not covered by VAT.
The monthly inclusion of “renewable” energy in the total volume of electricity supplied by Napocor, however, did not have any impact on lowering the cost of electricity that the utility company had been charging its customers.
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