Removing the value-added tax on system loss charges would save a typical Meralco household about ₱19.54 a month, a consumer coalition said Thursday as it called for deeper measures to bring down electricity costs.
The Power for People Coalition welcomed moves to remove the 12 percent VAT but said consumers would continue to shoulder the system loss charge itself.
For a Meralco household using 200 kilowatt-hours, the system loss charge in August amounted to ₱184.36, or 6.2 percent of a ₱2,956.65 electricity bill, according to P4P. The VAT on the charge was ₱19.54.
“Removing the VAT on system loss is a welcome relief, but consumers should not mistake it for a solution to the bigger problem. The system loss charge itself remains a burden that consumers are forced to pay,” said Gerry Arances, convenor of Power for People Coalition (P4P).
The Energy Regulatory Commission (ERC) has classified the system loss charge as a government-mandated pass-through cost that does not form part of the gross sales of generation companies, the National Grid Corp. of the Philippines, and distribution utilities for VAT purposes.
The Bureau of Internal Revenue (BIR) is preparing a revenue memorandum circular to implement the change. The BIR said the issuance would come after the required 15-day period following publication of the ERC resolution on Aug. 28, with a target release around mid-September.
The ERC, however, has said the change may not immediately appear on electricity bills.
ERC Commissioner Francis Saturnino Juan told lawmakers during a budget hearing that November was the earliest possible implementation, as distribution utilities would need to modify their billing formats and address other implementation issues.
Under the resolution, distribution utilities would have to separately reflect the system loss charge as a government-mandated line item not subject to VAT.
System loss refers to electricity that is generated and paid for but lost before it reaches consumers. Losses may result from technical factors in wires and transformers, as well as nontechnical causes such as electricity pilferage.
Only system losses within limits prescribed by the ERC may be recovered from consumers. Losses beyond those caps cannot be passed on and must be shouldered by distribution utilities.
P4P called on the ERC to strengthen accountability among distribution utilities and eliminate what the coalition described as unjustified pass-through charges.
“₱19.54 in savings is welcome, but Filipino consumers need relief that they can actually feel in their monthly bills. The government should not stop at removing the tax but instead should review why consumers are being made to shoulder the charge in the first place. Every peso matters to struggling Filipino households already having to deal with weeks of relentless monsoon rains and widespread flooding amid record rainfall,” Arances said.
President Ferdinand Marcos Jr. called for the removal of system loss charges and the accompanying tax during his State of the Nation Address in July as part of efforts to lower electricity costs.
The current regulatory action addresses the VAT imposed on allowable system loss rather than eliminating the system loss charge itself.
The Department of Finance has warned that scrapping the VAT on system loss charges could cost the government about ₱10 billion in revenues annually.
P4P said removing the tax should be followed by a broader review of electricity charges and policies that keep power costs high.
“If the Marcos administration is serious about bringing down electricity prices, it must look beyond the VAT and confront the charges and policies that keep power expensive. The real test is not whether the government can remove VAT from system loss, but whether it can bring down the cost of electricity itself,” Arances added.
