The implementation of Tax Reform for Acceleration and Inclusion program will increase the power rates by P0.08 per kilowatt-hour in February.
Rates in January, however, are expected to go down because of lower demand amid cooler temperature in December, according to Manila Electric Co.
Meralco head of utility economics Lawrence Fernandez said the power retailer was waiting for the billing from National Grid Corp. of the Philippines, following the lifting of the value added tax exemption.
“For NGCP, the Train is in effect Jan. 1 so with their January bill to us, we expect them to apply the VAT on transmission wheeling charges. Before, there was no VAT. Under their franchise, they were exempted. With 12-percent VAT, the estimate is P0.07 per kWh,” Fernandez said. Another P0.01 per kWh was expected to be passed on to consumers, because of a higher excise tax on coal under Train.
He said the price impact of Train on electricity could be passed on to consumers in the February billing.
“If NGCP incorporates it in their January billing, we should expect by February that it will be effective,” Fernandez said.
Under Section 9 of Republic Act 9511, NGCP should pay only a franchise tax equivalent to 3 percent of all gross receipts from its operation.
The payment of the concession fees due to the Power Sector Assets and Liabilities Management Corp. “under the concession agreement shall not be subject to income tax and value added tax.”
The said tax exemption was repealed under Section 86 of RA 10963 or the Train law.
Meanwhile, Fernandez said the impact of higher excise tax on coal was estimated at P0.01 per kWh.
“For generators, it will depend on their stock of coal if they bought it new or in stock.Our expectations is they will stagger the implementation of the coal tax,” he said.
Fernandez said the company used in its simulations the November dispatch level of one-third coal utilization and minimal oil generation.
“At P50 per MT, excise tax of coal and oil, the effect is around P0.01. The VAT on transmission charge, that’s P0.07, total is P0.08 per kWh,” he said.
Meralco expects power rates to go down in January on lower demand amid cooler temperature and the reconciliation of the outage allowance of the generators.
“Hopefully there will be another reduction in January…If we will use historical records as basis, normally rates are lower in January,” Meralco spokesman Joe Zaldarriaga said earlier.
Zaldarriaga said less power outages also contributed to the lower rates felt by consumers in December at P0.3785 per kWh.
“The reason why power rates were lower in December was because there were less outages aside from the strengthening of the peso,” he said.
The annual reconciliation of outage allowances is done at the end of each year under the contracts approved by the Energy Regulatory Commission.
Meralco’s power rates declined in December on lower generation charges amid a stronger peso and lower prices at the spot market.
The overall rate of a typical Meralco household went down to P9.2487 per kWh in December from P9.6272 per kWh in November.
“The lower December rate is mainly due to a P0.3035 per kWh reduction in the generation charge,” Meralco said earlier.