Thursday, January 05, 2006

electric bills, EVAT, etc

hello all,

may you have wonderful first week of the year!

i want to share this info for the enlightenment of many of us regarding increased electricity rates especially those in metro manila and other meralco-"serviced" areas. for other areas, paki-check nyo na rin electric bills nyo for possible actions. isama nyo na rin water bills nyo. i heard that EVAT will be implemented(!!!) by february this year. sobra na to. riot na!


ps. the article below was written by a topnotch electrical engineer from UP who is based in metro manila working with Agham ( and other friendly NGOs and POs not only those within Metro Manila but including those as far (from metro manila) as Mindanao.

There are taxes in abundance in our new electric bill. Clearly itemized in the electric bill are the E-VAT on the generation, transmission, system loss and power act reduction charges, which ranges from 6.44% to 7.96%.

Hidden under the item “VAT for dist & subs” is the 10% E-VAT on the other charges -- distribution, supply, retail customer, metering system, lifeline rate subsidy, interclass subsidy, CERA, and local franchise tax. Mercifully, the government has not yet taxed the two remaining items, namely, our forced contributions to the missionary electricity and environmental funds, which are in reality taxes disguised as contributions.

The strange thing about the electric bill we received this January is that we are slapped a local franchise tax of 0.57% on all the charges, and it does not stop there: on that franchise tax, the government further collects an E-VAT! Meralco was awarded the franchise but it is us who pay the tax on its franchise, and the government taxes our payment for the franchise tax. We reluctantly pay our electric bill because we do not want to live in darkness, at least at this time.

The EVAT has increased our electric bill by about 9%.The E-VAT for customers in the 101-200 kwh categories is 66 centavos per kwh, which is another way of saying that to exercise our basic right to use electricity we pay the government 66 centavos per kwh. For customers in the 201-300 kwh category, it is 72 centavos. It is higher for those consuming more.

There are a few interesting items in the way the government, through the Energy Regulatory Commission (ERC), applied the EVAT on power.

For example, we pay a tax of 6.52% on the systems loss charge, an amount we pay for electricity lost by Meralco because of pilferage and technical/administrative inefficiences. Some people steal electricity, government allows Meralco to make the honest customers pay for the loss, and the government joins in by taxing the same honest customers have been charged by Meraco for the theft. Your faith in justice will certainly be tested to the limit whenever you realize what is going on here.

We also pay – or, more accurately, donate -- the 11.25 centavos per kwh lifeline rate subsidy to enable Meralco to give discounts ranging from 20% to 50% to customers poorer than we are without Meralco losing money yet looking good before them because it does not say it collects from us to give to the poor. The funny thing is that our forced generosity is taxed 10%. The government just cannot resist the temptation to collect more money from us, yet donations by wealthy people and rich corporations are tax deductible.

The government also collects a 10% tax from us on the Currency Exchange Rate Adjustment (CERA) which is another tax item that is difficult to understand. Electric utilities borrow money or buy spare parts and materials abroad, and the CERA is an automatic cost recovery formula that allows them to pass on to their customers the additional cost whenever the peso depreciates. Currently the CERA is 11.87% of the distribution charge. The government imposes the 10% EVAT on the CERA charge. Why should we pay 10% tax on the CERA when we are paying the cost of peso depreciation passed on to us by the utility company? We are already helping the company recover their losses from peso devaluation, yet we are taxed in the process.

But there are two bright spots in this EVAT thing. For example, we have a discount of 21.39 centavos per kwh called inter-class subsidy which Meralco promptly recovers from its commercial and industrial customers so that it does not lose money. We also have a power act reduction discount of 11.40 centavos per kwh at the expense of Napocor. The people at ERC automatically imposes a 10% tax on both items..

Fortunately for us customers, the laws of mathematics are strictly observed by the computers. Since both items are preceded by minus signs, the result of the 10% multiplication process on both items is also negative, and we pay a negative tax, which in the real world translates to an additional discount. Computer algorithm gives us customers a few joys in this new year. Did the ERC people miss this? Congress should enact more laws that confuse the ERC people and benefit the people.

How much will the government earn from the VAT? At an average of 70 centavos per kwh and a total sale of about 24 billion kwh, all of us in the Meralco franchise area will be contributing to the government a total of P17 billion in one year. The government collects additional billions from the more than 120 electric utilities and electric coops in the country. You can now understand why the GMA administration just have to impose the tax on power. In the meantime, some people hope that the money taken from our almost empty pockets are spent wisely by the government, a phenomenon we have not seen for a long, long time. But sometimes miracles reportedly happen once in a great while.


Recursive formula. For those who still remember their mathematics, the way the taxes are factored in the various electric bill charges offers some exercises in recursion. The manufacturers of basic commodities will input the additional cost of power in their products, with the final sales price being slapped an EVAT again when you buy them. So how many taxes are in that can of sardines that you buy?

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