AMID brewing debate over high power rates, the militant Bagong Alyansang Makabayan (Bayan) urged a government audit of the Manila Electric Co. (Meralco) aside from a recommendation of removing the value-added tax (VAT) on power rates and the scrapping of the system-loss charge of distribution utilities if the government really wants public consumers to be unburdened from high power rates.

“From yesterday’s Joint Congressional Power Commission hearing, we could see that Meralco, Napocor [National Power Corp.] and the Energy Regulatory Commission [ERC] had their share of responsibilities on why power rates are high. At the end of the day, it is still government’s responsibility to protect consumers. This can only be done through government intervention in and regulation of the power sector,” said Bayan secretary-general Renato Reyes Jr.

“The problem with the power sector is not a simple one. The Arroyo government has dug consumers such a deep hole after the passage of the Electric Power Industry Reform Act [Epira]. There have been mutations. Deregulation, privatization, high taxes and inconsistent regulation in the power industry have all contributed to high power rates,” the Bayan leader added.

Reyes said subjecting Meralco to a Commission on Audit (COA) audit is based on a 2006 order issued by the Supreme Court (G.R. 166769, December 6, 2006) in relation to a case filed by Bayan against Meralco in the unbundling of rates.

While upholding the unbundling and rate adjustment of Meralco in 2003, the Supreme Court also ordered the ERC to seek the help of the COA in auditing Meralco to determine if its rates are reasonable. The ERC and the COA have yet to release the results of the audit, if there has been any conducted.

Bayan also proposed the rejection of the P14-billion Napocor-Meralco settlement that aims to pass on bad debts to consumers, of which  petition it said has been pending before the ERC for four years now;  rejection of the Napocor-Power Sector Assets and Liabilities Management Corp. petition to allow the recovery of P9 billion in generation charges that resulted from “market-power abuse” in the Wholesale Electricity Spot Market  from August to November 2006, which petition is currently pending before the ERC;

Stricter regulation and monitoring of Napocor fuel procurement to prevent overpriced emergency coal purchases which raise generation rates; possibility of long-term contracts should be considered to protect consumers from rising coal prices; review of all independent power producer contracts of Napocor and other distribution utilities and disallowing take-or-pay provisions that are usually disadvantageous to consumers; and scrapping of the Epira and an immediate stop to the deregulation and privatization of the power sector in favor of a more regulated environment where rates can be thoroughly scrutinized.

“The removal of the VAT on electricity and the system-loss charge will save consumers a combined P1.42/kWh  [kilowatt-hours]. Those consuming 200 kWh a month can easily save P284 a month. We would like to see government address these issues immediately,” Reyes said.

“The COA audit of Meralco, on the other hand, may help us better understand how companies with interlocking interests from generation and distribution really work. This can shed light on the corporate practices of Meralco and its affiliates that are now being questioned by lawmakers. Consumers are entitled to know more on how rates are fixed and what contributes to rising prices,” he added.

Meanwhile, consumer group POWER reiterated its call to scrap the VAT on power rates, saying the government charges are “patently unjust and outrageous.”

Power convenor engineer Ramon Ramirez said the VAT was being imposed even on such electricity-bill items like system losses, lifeline subsidies and even on the franchise tax.

“System losses are comprised of technical losses and losses incurred due to pilferage. There is really no sense as to why this item has to be subjected to the VAT. Why is the government taxing electricity pilferage and system inefficiency? It’s bad enough we are being charged for used electricity, now government wants to earn revenues from unused power,” Ramirez said.

As to the franchise tax, Ramirez said this item was included in the computation of the 12-percent VAT on distribution which Meralco also collects on behalf of the government. The tax on the franchise tax falls under “distribution revenues and subsidies” under the heading of “government taxes.”

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AMID brewing debate over high power rates, the militant Bagong Alyansang Makabayan (Bayan) urged a government audit of the Manila Electric Co. (Meralco) aside from a recommendation of removing the value-added tax (VAT) on power rates and the scrapping of the system-loss charge of distribution utilities if the government really wants public consumers to be unburdened from high power rates.

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