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Sunday, September 04, 2005
DOE taps ‘lifelines’ for power rate hike
By Liberty A. Pinili
Sun.Star Staff Reporter
While power rates are bound to increase because of the expanded value-added tax (E- Vat), electricity in the Visayas may be cheaper than in other areas in the country, an official of the Department of Energy said Friday.
Energy Undersecretary Melinda Ocampo said in an interview that power in the Visayas will cost less than in other areas, because the grid relies more on geothermal power, which is exempted from the E-Vat.
She said renewable sources like geothermal, hydropower, solar and wind are exempted from E-Vat.
The Visayas’ power supply mix is 85 percent geothermal, while the rest comes from coal and plants that use fuel oil.
Ocampo’s presentation on the VAT, during an energy forum at Midtown Hotel in Cebu City last Friday, also pointed out that there are proposed mitigating measures to ease the impact of the tax on power rates.
One of these may be implemented through the lifeline rate being used by distribution utilities, which provide subsidies for consumers who consume less than the minimum.
The Visayan Electric Co. (Veco), for instance, has set the lifeline rate at 55 kilowatt-hours (kwh) a month. Consumers that use less than 55 kwh a month enjoy cheaper electricity.
The DOE, in a circular, directs distribution utilities to immediately file with the Energy Regulatory Commission (ERC) a revised lifeline rate structure to — “when necessary” — modify the levels of consumption in the lifeline rate structure “to allow more end-users to qualify.”
Ocampo said mitigating measures are also in place for diesel and liquefied petroleum gas (LPG). Her presentation cited Executive Order 440, which reduces import duty on crude and petroleum products to three percent from five percent.
For LPG, the effect of the VAT is “significantly mitigated” by removing import duty and excise tax.
According to Ocampo’s presentation, in the power sector, the VAT will be imposed in two aspects of the generation level: 10 percent on input, which means the source of power supply (or raw material) and 10 percent on electricity generated.
But there is no VAT if the source of power is renewable.
Bill
At the transmission level (where electricity is transmitted from generation to distribution utilities or electric cooperatives), there is a 10 percent tax on input (goods and services) and another 10 percent for the transmission service.
At the distribution level (electric cooperatives and distribution utilities), there is a 10 percent tax on input (which means goods and services). For the output (distribution service), there will be an eight percent tax, not 10 percent, since the national franchise (two percent) tax has been abolished.
Ocampo presented a bill with a 210 kwh consumption, using power rates in Luzon.
Before VAT, the amount to be paid by the consumer is P1,549.99 at P7.3808 per kwh. With VAT, the bill is P1,704.15 at P8.1149 per kwh.
Ocampo said the E-VAT — or as she called it RVAT for reformed VAT — will regulate the use of petroleum and environmental protection, and help improve the health of the people as it will encourage use of renewable sources of energy.
The energy official urged the public to use oil prudently and responsibly.
(September 4, 2005 issue)
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