VAT on system loss should not be passed to consumers, Meralco admits
MANILA, Philippines - An official of the Lopez-owned Manila Electric Company (Meralco) on Tuesday conceded before congressmen that they should not pass to its four million customers the expanded value added tax in the losses the power firm had incurred.
“’Yun pong expanded value added tax na ipinapatong sa system loss dapat po hindi na nire-recover from customers (The expanded value added tax which we add to our system loss charge should not be recovered from our customers)," Meralco president Jesus Francisco told Camarines Sur Rep. Luis Villafuerte during the hearing of the House committee on energy.
This, despite a clarification from Villafuerte that the system loss Meralco has been collecting is “not-VAT-able."
“Meralco is not selling a loss, that’s why it is not VAT-able. That is a misleading assumption. That should be deducted from their earnings. That’s the way to recover," he said.
But according to the government, Meralco is not violating any law in passing system loss charges to its clients. Saturnino Juan of the Energy Regulatory Commission (ERC) said it is even provided in the implementing rules and regulations of Republic Act 7832, or the Epira Law.
In response, a visibly irate Manila Rep. Amado Bagatsing said Juan’s statement was a “misinterpretation."
“That (IRR) is a great departure from the real intent of the law! Since when did IRR become powerful than the law itself? That is your interpretation?" he asked Juan.
Also during the hearing, Camiguin Rep. Pedro Romualdo demanded an explanation from Meralco over reports that it is charging consumers even if it sourced the electricity it distributed from power plants using renewable energy.
Of the power being distributed by Meralco, an average 25 percent is being sourced from power plants using renewable energy, which is supposed to be VAT-free.
The chairman of the House committee on good government said the VAT could have bloated portion of the amount Meralco is charging its consumers by 23 to 39 percent “because it is collecting VAT on VAT-free sources."
“Meralco owes an explanation to us as consumers. They have to explain this questionable system at the height of high costs of basic commodities and petroleum products," Romualdo said.
Billing documents of Napocor to Meralco showed that from Feb. to July 2006, the time when Napocor started charging 12 percent VAT, it supplied 24 percent to 39 percent of the monthly 1,050 megawatt renewable energy to Meralco that is not covered by VAT.
Reports indicated that Napocor is only supplying 35.96 percent out of the total power requirement of Meralco, while 19.1 percent or roughly 2,154.8 megawatts is sourced from the Lopez-owned IPPs, including the First General Hydro, a VAT-free rated power plant.
“There is a deliberate game played by players, particularly Meralco, for all consumers to pay very high electric bills," Romualdo said, referring to Meralco’s admission its consumers are footing the bill for the company’s usage.
Reps. Elpidio Barzaga Jr of Cavite and Bienvenido Abante of Manila cited the uniform VAT charges of Meralco on its electric bill to consumers that could boost suspicion that another alleged overcharging is in the making.
“Meralco must indicate the renewable energy that is VAT free on consumer’s billing," Barzaga said.
For his part, Abante said the report “means Meralco has been short-changing its consumers."
“If this is confirmed, this is large-scale corruption. There should not be any let up in the investigation and appropriate charges must be filed," he added. - GMANews.TV
“’Yun pong expanded value added tax na ipinapatong sa system loss dapat po hindi na nire-recover from customers (The expanded value added tax which we add to our system loss charge should not be recovered from our customers)," Meralco president Jesus Francisco told Camarines Sur Rep. Luis Villafuerte during the hearing of the House committee on energy.
This, despite a clarification from Villafuerte that the system loss Meralco has been collecting is “not-VAT-able."
“Meralco is not selling a loss, that’s why it is not VAT-able. That is a misleading assumption. That should be deducted from their earnings. That’s the way to recover," he said.
But according to the government, Meralco is not violating any law in passing system loss charges to its clients. Saturnino Juan of the Energy Regulatory Commission (ERC) said it is even provided in the implementing rules and regulations of Republic Act 7832, or the Epira Law.
In response, a visibly irate Manila Rep. Amado Bagatsing said Juan’s statement was a “misinterpretation."
“That (IRR) is a great departure from the real intent of the law! Since when did IRR become powerful than the law itself? That is your interpretation?" he asked Juan.
Also during the hearing, Camiguin Rep. Pedro Romualdo demanded an explanation from Meralco over reports that it is charging consumers even if it sourced the electricity it distributed from power plants using renewable energy.
Of the power being distributed by Meralco, an average 25 percent is being sourced from power plants using renewable energy, which is supposed to be VAT-free.
The chairman of the House committee on good government said the VAT could have bloated portion of the amount Meralco is charging its consumers by 23 to 39 percent “because it is collecting VAT on VAT-free sources."
“Meralco owes an explanation to us as consumers. They have to explain this questionable system at the height of high costs of basic commodities and petroleum products," Romualdo said.
Billing documents of Napocor to Meralco showed that from Feb. to July 2006, the time when Napocor started charging 12 percent VAT, it supplied 24 percent to 39 percent of the monthly 1,050 megawatt renewable energy to Meralco that is not covered by VAT.
Reports indicated that Napocor is only supplying 35.96 percent out of the total power requirement of Meralco, while 19.1 percent or roughly 2,154.8 megawatts is sourced from the Lopez-owned IPPs, including the First General Hydro, a VAT-free rated power plant.
“There is a deliberate game played by players, particularly Meralco, for all consumers to pay very high electric bills," Romualdo said, referring to Meralco’s admission its consumers are footing the bill for the company’s usage.
Reps. Elpidio Barzaga Jr of Cavite and Bienvenido Abante of Manila cited the uniform VAT charges of Meralco on its electric bill to consumers that could boost suspicion that another alleged overcharging is in the making.
“Meralco must indicate the renewable energy that is VAT free on consumer’s billing," Barzaga said.
For his part, Abante said the report “means Meralco has been short-changing its consumers."
“If this is confirmed, this is large-scale corruption. There should not be any let up in the investigation and appropriate charges must be filed," he added. - GMANews.TV
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