Big taxes blamed for high power rates in PH

by Alena Mae S. Flores – January 17, 2016 at 11:20 pm

from Manila Standard

Power rates in the Philippines have remain high compared with those of other countries due to “lack of government subsidy and a fully priced and heavily taxed power supply chain,” a senior official of Manila Electric Co. said.

Meralco senior vice president Lawrence Fernandez cited a previous report of the company’s consultant, who noted that the Philippines was dependent on the price of imported fuel.

He said approximately 80 percent of generation in Luzon was fueled with imported coal and oil at full international market prices and domestic gas pegged to world prices.

Fernandez said other countries provided fuel to their utilities at below market prices.

“Their government-owned power generation, transmission, and/or distribution companies are subsidized, absorb costs, and/or incur losses,” he said.

Fernandez said inadequate and unreliable capacity against demand had forced the use of expensive oil-fired power plants and created price spikes.

“Thus, new cost-competitive capacity, such as high efficiency coal-fired power plants must be built quickly,” he said.

Fernandez said the power sector was also heavily taxed across the entire chain.

He said the generation sector was imposed a VAT, royalty tax on indigenous fuels or duty tacked on imported fuels, real property tax and other taxes and fees.

The transmission sector is slapped with a three percent franchise tax in lieu of all other taxes, while the distribution sector is imposed a VAT, local franchise tax, real property tax, energy tax on residential, universal charge including feed-in tariff and other taxes and fees.

The official said VAT in the first half of 2015 accounted for P0.67 per kWh in the average customer bill of Meralco, the country’s biggest distributor with over five million customers in its franchise area.

Fernandez said universal charges such as environment charge, missionary electrification, stranded contract costs, among others, had been increasing.

He said Meralco had been empowering customers by actively promoting energy efficiency, net metering and retail competition and open access, which allows them to choose their own suppliers.

Fernandez said Meralco was also investing in new technologies such as smart meters, electric vehicles, system controls center and prepaid electricity.