Meralco customers to feel EVAT by August

Manila Electric Co. (Meralco) customers will not immediately feel the impact of the expanded value-added tax (EVAT) which takes effect starting July 1 as the Energy Regulatory Commission (ERC) and the Bureau of Internal Revenue (BIR) have not yet finalized the implementing rules and regulations on the new tax law.

Meralco president Jesus Francisco said the company will not be charging the VAT on the June consumption as Meralco’s billing cycle varies depending on the consumer.

"We cannot charge VAT on June consumption. We’re still waiting for the guidelines. We are seeking clearance from the BIR," Francisco said, adding that it may only be in the August billings of its customers that the VAT will be reflected.

Ivanna de la Pena, Meralco vice president and head of utility economics, said the impact of the VAT will be eight percent of the consumer’s total monthly bill as the two percent franchise tax will be scrapped.

"There is a possibility that the full impact of the VAT will be felt by August as the distribution utilities have yet to file within the week their respective petitions with the ERC on the revised lifeline rate structure," said de la Pena.

While the ERC has committed to fasttrack the approval of the petitions, Meralco officials believe it will some take time before the regulator can approve them.

Under the circular issued by the Department of Energy (DOE) last Friday, the agency directed the distribution utilities to file petitions with the ERC "that the current lifeline end-users continue enjoying the subsidies" and that the lifeline rate structure be expanded to include consumers with consumption of up to 200 per kilowatthour (kwh), or double the current coverage of 100 kwh.

The DOE previously proposed exempting the lifeline consumers or those consumers using zero to 100 kwh per month from the VAT. This will be on top of the discounts of up to 50 percent that they are currently enjoying under the Electric Power Industry Reform Act of 2001.

"There’s a feasibility that we implement it by August but then the VAT that will be applicable in July will be done through back billing but that is still one option," de la Pena said.

Daniel Tagaza, Meralco chief finance officer, added the impact of the VAT will also depend on those who will be subsizing the smaller users, namely the large residential, commercial and industrial users.

"If the scheme is implemented which requires first the utilities to file and the ERC to approve, those sectors that will be subsidizing the lifeline, there will be another add on on top of the VAT," said Tagaza.