THE Energy Regulatory Commission (ERC) has proposed scrapping the value-added tax (VAT) on system loss charges as a means of lowering power costs for consumers nationwide.
Under a draft resolution, system loss charges will be declared as a government-mandated pass-through cost that should not form part of the gross receipts of generation companies, National Grid Corp. of the Philippines (NGCP), and distribution utilities for VAT purposes.
“System loss is electricity that consumers pay for but never receive,” ERC Chairman Francis Saturnino Juan said.
“Imposing VAT on top of a charge for electricity that was never delivered to consumers is fundamentally at odds with the nature of VAT as a tax on the value of goods and services actually rendered,” he added.
“This proposed resolution addresses that and gives consumers the relief they rightly deserve.”
Juan told reporters that the ERC had discussed the matter with the Bureau of Internal Revenue (BIR).
“During that meeting, we discussed this solution, or this route to a possible removal of the 12-percent tax from the systems loss charge and the BIR commissioner is already made aware of this,” he said.
“Eventually, we will coordinate with them if there are remaining issues on their side,” Juan added.
Public consultations regarding the proposed resolution will be held on Aug. 2.
“Stakeholders, including generation companies, distribution utilities, NGCP, consumer groups, and the general public, are encouraged to attend and actively participate in the consultations,” the ERC said.
Written comments can also be submitted to the commission on or before Aug. 18.
President Ferdinand Marcos Jr. last month called for the removal of system loss charges and the corresponding VAT to ease the burden on consumers who have been complaining of surging power costs.
Industry reception has been lukewarm, however, with companies such as Manila Electric Co. saying the proposal should be carefully studied as systems losses are a normal part of operations.
Systems loss refers to electricity that is not delivered during transmission due to technical issues or nontechnical factors such as theft. Local laws allow power firms to recover some of the loss from consumers via a charge included in monthly power bills.
ED PAOLO SALTING
