Meralco rates up 54¢ per kilowatt-hour

MANILA, Philippines – Customers of Manila Electric Co. (Meralco) will pay an additional 54.55 centavos per kilowatt-hour (kWh) of electricity this month (April) due to higher generation charge brought about by the summer heat.

Meralco external communications manager Joe Zaldarriaga said the rising temperatures in the past weeks also increased electric consumption of customers.

But Zaldarriaga was quick to point out that the increase in rate will not go to Meralco since this is just a pass-through cost that will end up with the generation companies.

“We would like to emphasize that Meralco does not earn a single centavo from any adjustment in the cost of power supplied by the power producers. The generation charge is a pass-through charge which Meralco does not earn from,” he said.

Based on the computed increase, Meralco customers consuming 200 kWh will have to pay P109 more.

“There was marked increase in consumption during the peak hours of 9 a.m. to 9 p.m. in March as consumers coped with the summer heat through more intensive use of air-conditioning and other cooling appliances,” the Meralco official said.

Zaldarriaga said the higher consumption resulted in higher purchases from the National Power Corp. (Napocor) and the wholesale electricity spot market (WESM).

“As a result, purchases from Napocor and the WESM, which reflect pricing according to the different periods of the day, registered marked increases of 57 centavos and 84 centavos per kWh, respectively.”

These sources (Napocor and WESM) supplied 47 percent of Meralco’s power requirements in March and were responsible for the 54.55 centavos per kWh increase in the generation charge from P4.4750 per kWh in March to April’s P5.0205 per kWh.

Zaldarriaga noted that the increase in power rate is seasonal.

A 52 centavos per kWh increase in the generation charge was recorded in April last year, with the generation charge moving up from P4.39 per kWh in March 2008 to P4.91 per kWh in April 2008.

The 47 centavos per kWh basic charge increase for Luzon provisionally approved by Energy Regulatory Commission (ERC), the power sector watchdog, is already reflected in Napocor’s pricing this April.

The official explained that while Napocor supplied only 32.5 percent of Meralco’s power requirements in March, the share of purchases during peak for customers not billed under any of the Customer Choice Programs significantly increased.

Meanwhile, Zaldarriaga said the average rate of the Independent Power Producers (IPPs) of Meralco such as Sta. Rita and San Lorenzo gas-fired power plants hardly moved during the two-month period.

The Meralco official warned the public that higher cost of generation during summer is to be expected as the more expensive plants are run to meet the surge in demand during peak hours.

He noted that peak demand increased by almost 200 megawatts (MW) during the period.

Meralco urged customers to use electricity wisely since consumption levels have obviously risen during this period.

“It is also evident that the hot summer months also raised the consumption levels of our customers,” Zaldarriaga said.

Very simple tips such as using compact fluorescent lights instead of incandescent bulbs, doing your ironing at one time and opening refrigerators only when needed will, in one way or another, help a household save electricity. Consumers actually have the power to control their usage, he said.

Meralco also said that appliances would operate more efficiently and use less energy when they are in good working condition.

Senate bill seeks VAT exemption

Senate President Juan Ponce Enrile filed yesterday a bill seeking to lower the cost of electricity by exempting power distribution firms from the 12 percent value added tax and income tax.

Enrile has filed Senate Bill 3147 asking Congress to impose just a franchise tax of three percent on gross distribution income of the power utility firms in lieu of all other taxes, duties and fees.

“Under the present system where the power industry players are required to pay ordinary income tax as well as the 12 percent VAT, consumers are placed at a disadvantage since the energy companies simply pass on the cost of paying these taxes to end-users,” said Enrile in his explanatory note to the bill.

“This bill therefore seeks to revert to the previous system where franchise tax is being required of distribution utilities not only to allow the industry players to enjoy a more equitable tax regime. More importantly, the imposition of a franchise tax, which is directly absorbed by the franchisee, will free consumers from shouldering additional pass-on charges,” Enrile said.

“Congress enacted the Electric Power Industry Reform Act (EPIRA) in 2001 with the end goal of establishing a more competitive and responsible electricity industry, which shall hopefully, in turn, provide better services to the public at affordable and competitive prices. To achieve this goal, the law provided for the restructuring and deregulation of the power industry,” Enrile explained.

“However, five years after the passage of EPIRA, it became evident that some provisions of the law could not be properly enforced which, contrary to the objectives of the law, led to a constant rise in the cost of electricity that is more burdensome on the part of consumers,” he added.

Enrile said taxes paid by industry players in the power sector became unreasonable and encouraged an unabated transfer of the burden of what are properly costs of doing business to the consumers.

“Prior to the enactment of Republic Act 9337, which further amended the National Internal Revenue Code (NIRC), electric, gas and water utilities were subject to a franchise tax at the rate of two percent (2 percent) on gross receipts under Section 119 of the NIRC, as amended.

“The amendments embodied in RA 9337 removed electric utilities from the franchise tax regime and subjected the same to the 12 percent value added tax,” the Senate president noted.

Under Section 2 of the bill, “distribution utilities shall pay a franchise tax equivalent to three percent of a distribution utility’s gross distribution income derived from the distribution business granted under the distribution utility’s legislative franchise.” –-Donnabelle Gatdula with Christina Mendez, Philippine Star