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If the
Arroyo administration wants to end all suspicion that
the ongoing attacks against the Manila Electric Co. (Meralco)
is just a retaliatory attack against the latter’s sister
company ABS-CBN for its full coverage on the NBN-ZTE
scandal, it should heed the growing clamor of the public
and the business sector to scrap the value-added tax
(VAT) on power and system loss and royalties on natural
gas.
No less
than Speaker Prospero Nograles is proposing the removal
of the 12-percent VAT from the electric bills of
residential consumers who do not exceed consumption of
P5,000 a month.
Nograles
said, “The cost of food and fuel is already too much to
bear for many of our countrymen. 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.”
He adds
that other charges that power distributors pass on to
customers should be reviewed.
“System
losses charged to consumers, although practiced
worldwide, should be revisited and amended to a most
reasonable basis,” he notes. “It must have a cap.”
If there
is one good thing this whole Meralco-takeover issue has
brought us, it is the understanding of why the power
rates are high in this country as compared to our Asian
neighbors. This controversy has become an eye-opener
that government planners are turning a blind eye on what
really ails the power industry. From having one of the
lowest power rates in the world in the late ’60s, today
the country finds itself struggling with one of the
highest power rates in the region.
Imagine,
during the 1960s, the average cost of imported fuel oil
was P1.68/barrel, translated to an average cost for all
Meralco customers at 5.8 centavos per kilowatt-hour
(kWh)—very cheap power, indeed, for Meralco customers.
In fact, by the late ’60s, Meralco had the lowest power
rates in Asia, and Meralco rates were even lower than
those in 43 of the 50 states in the US.
During
the martial-law period, while there were efforts to
develop indigenous energy sources such as geothermal,
hydroelectric and natural gas, they failed in comparison
to those achieved by our Asian neighbors as the
Philippines is still predominantly dependent on
coal-fired power plants.
Fuel
cost makes up for a large part of the power-generation
cost as it accounts for anywhere from a low of 5 percent
to as much as 40 percent of the ultimate cost of
electricity to the consumer. This has the biggest impact
on end-consumer prices because fuel prices often
fluctuate in the world market.
Even
today, though our indigenous fuels in the mix seem to
have improved to almost 70 percent, we still haven’t
narrowed the gap in our electricity prices vis-à-vis our
neighbors; and our indigenous fuels, in fact, appear
costly. Why? Despite the press releases encouraging the
use of indigenous fuels in the country, the country
continues to impose heavy taxes and royalties on
indigenous fuels, like natural gas and geothermal steam,
which together produce more than 47 royalties of our
electricity needs. Indigenous fuels are made
artificially more expensive than the imported ones
because of this tax- and-royalty burden.
It has
been disclosed that our country has prospectively 10
more Camago-Malampayas and another 10,000 megawatts of
geothermal potential out there, and there is no need to
subsidize these cheaper and yet reliable potential
energy sources, nor impose heavy taxes. What we need is
to develop them. But if the government policies on
taxing indigenous fuels continue, our power industry
will be encouraged to build more power plants that burn
imported coal, which contributes to air pollution and
global warming, and it will be less likely that untapped
reserves of indigenous clean fuels like natural gas and
geothermal steam will be brought to market much sooner.
The
current tax-and-royalties structure was distorted in
favor of imported fuels and discriminated against
indigenous fuels like natural gas. Indigenous fuels are
made artificially more expensive than imported ones
because of this tax-and-royalty burden compared with our
Asean neighbors, which subsidize royalty fees on
indigenous fuels such as natural gas and coal.
Business
groups are also one in seeking the lifting of VAT on
system losses. Jesus Arranza, president of the
Federation of Philippine Industries, an umbrella
organization for 101 industry groups and individual
companies, in a letter to Finance Secretary Margarito
Teves said it was absurd to levy taxes on losses.
System
loss, or technically, electrical-system loss, is a
measure of a utility’s efficiency. It is the difference
between the electricity purchased by such firms from
power suppliers and the electrical energy they supplied.
But what
is more disheartening is the fact that the government
still imposes VAT on this system loss, which is also
being shouldered by consumers.
Based on
government data, royalty fees on indigenous natural gas
amount to P1.79 per kWh, compared with that imposed on
indigenous coal, which only comes up to 41 centavos per
kWh. The imposition of royalty fees on natural gas is on
top of the 12-percent VAT of 56 centavos. This means
that if royalties and VAT are removed from natural gas,
electricity rates will go down by at least P2 per kWh!
Certainly, with such a revelation, who could blame the
public for suspecting that all this supposed talks about
lowering power rates is only to take Meralco away from
the Lopezes?
E-mail: raulbvalino@yahoo.com.ph |
