Power rates are almost as important as food. While government is seeing oil and rice prices go wild, with oil beyond $120 per barrel and rice over $1,000 per metric tons - the government is moving against Manila Electric Co. (Meralco), the country's biggest power distributor and biggest of 140 distribution utilities in the country controls about 64% of the national market, owned by the Lopez family.

Malacanang is moving to scrutinize Meralco aiming to bring down the costs of electricity. The government was asking to stop Meralco from passing on to its customers the system losses generated from its operations.

Along this move, the Government Service Insurance System (GSIS), one of the major share-holders of Meralco has demanded that the company's book be opened and made public. Pretty good, the people really has to know and understand if they are charged properly in their electric bills and as long as the examination of the books is done during office hours.

Last month, Meralco's rates rose by P0.6717 per kilowatt hour which redounds to an 8.95% increase or an additional P149 for consumers using 200 kilowatts of electricity per month.

Meralco finds itself under fire from all sides with accusations being levied on everything from the alleged charging of consumers for 'ghost deliveries" of power bought from its affiliates.

However, the law-makers urged last week the Energy Regulatory Commission (ERC) to order Meralco to immediately refund to the customers the unathorized charge, referring to the 89-centavo per kilowatt hour charge  Meralco imposed on its 4.4 million customers last month.

Meralco also has a pending refund of P20 billion in meter deposits that was collected by the company over years and another P30 billion worth of income tax from 1994 to 2002, which the power firm included in its computation of power rates.

Now, let us go a little bit deeper concerned-issue in bringing down the costs of electricity. I believe this is not a Meralco or Malacanang that matters. This is all about our national economic development. our economy becomes locally and internationally competitive when power costs is low. Our factories become regionally competitive. It is not surprising that Philippines is the second country in Asia with the highest electricity rates. This might be the reason why the President Arroyo is calling for support of her advocacy for the lowering of electricity charges. Accordingly, she had instructed National Power Corporation (Napocor), a state-owned company and principal power-provider for Meralco, to charge Meralco only P4.11 per kilowatt hour, the same rate it charges Luzon Electric Cooperatives, instead of the 6 to 11 pesos at which Meralco has been buying from Napocor and from Wholesale Electricity Spot Market (WESM) at peak hours. This reduction may result in a 58-centavo per kilowatt hour reduction in Meralco's rate.

And under open access power supply scheme soon to be implemented, major consumers of electricity such as malls, industries and other business consuming 1 megawatts a month or more, can buy power from the generating plants they choose at the cheapest rates they can negotiate.

And in favor of Meralco, the House of Representative may take action to suspend the application of the 12% expanded value added tax on the electricity used by residential consumers whose consumption costs has been P5,000 or less a month.

This concerted effort is indeed vital in this time of national crisis. The high cost of food and fuel is already to much to bear for many of our countrymen. Lifting the E-VAT would be of great help to our over-all power consumption. Thus, Meralco itself would bring down the power rates incurred to consumers. This action may even help minimize green house emmision from power plants - good for the environment.

Take a look at this equation:

<u>The Meralco Electric Bill Equation</u>

(based on April 2008 bill)

Let :
G = Generation charge
Gtx = Tax on Generation charge
T = Transmission charge
Ttx = Tax on Transmission charge
SL = System loss
SLtx = Tax on System Loss
DMS = Distribution, Metering and Supply charges
LLS = Lifeline rate subsidies
DMSLLstx = Tax on distribution, metering and

supply charges and lifeline rate subsidies
LFtx = Local franchise tax
UC = Universal charges

Total Electric Bill = [G + T + SL + DMS + LLS] + UC + [ Gtx + Ttx + SLtx + DMSLLstx +LFtx]

Where:
Gtx = 0.1044G
Ttx = 0.1069T
SLtx = 0.1049SL
LFtx = 0.0057[[G + T + SL + DMS + LLS]
DMSLLstx = 0.12[DMS + LLS + LFtx]

The multiplying factors vary from month to month except the 12% of the Distribution charge tax

Final equation:

Total Bill = 1.1044G + 1.1069T + 1.1049SL + 1.12DMS + 1.12LLS + 1.12LFtx + UC

As you can see, it is really such a complicated formula. Variables, especially G, T and SL, is what makes life for the ordinary consumer complicated and which often leads to the problematic disconnection notice.

/// In this equation, the tax component is repeated 5x.

Meralco's call for the government to reduce taxes in the form of E-VAT, Franchise Tax, Energy Tax, etc is even right.

The government must understand that the author of this complicated equation and multiple tax imposed to Meralco that makes consumer suffer its consequence is the government itself.

If the government is really serious in bringing down the power cost, then Malacanang must do the first step.