Govt’s Right to Tax Power Comes with Obligation to Protect Electric Consumers From Exploitation

David Celestra Tan, MSK
17 December 2017

The new government tax on coal and diesel will be painful additions to the monthly electric bills of the already overcharged and overburdened Filipino electric consumers. It will add P0.12 per kwh to our power cost. But that’s alright.We the consumers will brave through it as part of our duty in nation building, just as we braved the 12% VAT imposed on power in 2004 even if the EPIRA law of 2001 exempted it. That one added a whopping 0.90 per kwh.

We respect the governments right to tax and we consumers are happy to contribute to TRAIN. (We hope though it leads to somewhere beneficial to all)

We wish however that the government will step up to its equal obligation to protect its taxpayers as electric consumers. The government apathy and nonchalance on CSP and PBR has been costing the captive consumers as much as p2.50 per kwh in the areas served by Meralco and other privately owned utilities covering 75% of the national electricity consumption.

If only the government will act on opening the generation sector to true competition (and we don’t mean RCOA) we can reduce our power cost by p1.00 per kwh. They started a CSP policy but were not really committed to it.

The government agency that has specific mandate to protect us the consumers is the Energy Regulatory Commission. On the PBR rate making methodology alone we estimate an overcharge of P0.75 per kwh. On systems loss charges 0.15 to 0.30 per kwh.

Meralco as a public service utility is making 25% profit on equity AFTER tax, way over the 12% the Supreme Court ruled in 2012 as the rightful maximum tax. When your organization MSK asked during the last public hearing on PBR why that is allowed, the ERC commissioners present went to great lengths to justify by saying the “economic conditions” is different!!! This means to them the “economic conditions” now are much riskier and unfavorable that Meralco is entitled to making 25% instead of 12% per year.

Out of curiosity we compared the economic indicators when the Supreme Court made the ruling in 2012 and now and NOW is much better with less risks. GDP is higher, interest rate is lower, Meralco’s collection rate is higher, its sales is growing 6 to 10% and there is no insurgency. Fuel costs and forex changes are passed on. Meralco is having it so good!

Coal is Meralcos favorite fuel currently and would be the fuel of all the 4,015mw of new power projects it negotiated with its sister company MeralcoPowergen to come on line by 2022 with contracts to 2050. With the sweetheart prices and contract terms they negotiated among themselves on the generation side, those sweetheart profits will be in addition to the 25% they make on the distribution side.

The government through the ERC must reform the PBR to preempt the profiteering opportunities down to the legal 12% not 25% per year.  It must enforce honestly the CSP policy and truly open the bulk power generation sector to more deserving investors. They must look into and guard against cartelization. The ERC owes it to our people.

Reducing power costs will make our business sector competitive and encourage more production and employment. Those lead to sustainably higher tax revenues.

We are okey paying those Coal and VAT taxes. But please don’t leave us out to dry for profiteers to feast on. Government through the ERC has this equal obligation. 

The private sector capitalists cannot be expected to restrain themselves and not overcharge. Maximizing profits is in their DNA. It is up to the government to draw the line and make and enforce the rules to protect the consumers.

Sadly, even when the government is trying to do something good, the electric consumers get hit hard. The DOE and ERC doled out super generous FIT rates of 9.69 and 8.68 to solar. Those means the consumers are paying subsidies of p4.69 per solar kwh for the next 20 years. Why punish us? And consumers still have to be charged for the ancillary services to support those solar plants.

All these do not even include the vicious cycle of overcharges and refunds in billions and billions that are in the ERC system.

The government has the right to impose taxes even on power for the country’s fiscal support. However government should not renege on their obligation to protect the consumers. That is taxation without protection.

MatuwidnaSingilsaKuryente Consumer Alliance Inc.

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