More than the expanded value tax (E-VAT), the scrapping of the "royalty taxes" imposed on fuel will have a bigger impact on reducing power rates. This was the suggestion of First Gas Power Corp. chief operating officer Richard Tantoco to congressmen in today’s House energy committee hearing.

The government takes up to P2 for every kilowatt hour of energy, Tantoco explained. At today’s rates, First Gas has been paying P0.21 per kilowatt hours for E-VAT. But the bigger share, P1.70 to P1.80 per kilowatt hour, is attributable to the royalty taxes. "The capacity fees collected by First Gas have remained flat except for very small annual CPI adjustments for operations and maintenance," he explained.

At today's rates, Meralco charges consumers P4.30 per kilowatt hour. Deducting the royalty tax alone will reduce the rates to P2.50 per kilowatt hour.

The same call had been made by Oscar Lopez, chair of First Philippine Holdings, which is the parent company of Manila Electric Company (Meralco). First Gas produces power for Meralco.

Tantoco also lamented the big discrepancy on royalty taxes imposed on natural gas compared to other forms of fuel. It is at least P1.48 higher than what the government imposes on imported coal (P0.17), imported diesel (P0.32), and geothermal (P0.30).

"The Filipino government, in effect, thru our distorted tax policies, is encouraging the use of foreign fuels—thereby creating jobs in foreign countries—rather than helping in developing our domestic sources of fuel," Tantoco said.

In comparison, Indonesia , Malaysia , Thailand "have hardly any royalty tax on domestic sources of fuel sold in their countries. Some even subsidize consumption of local fuels," he said.

"The Filipino consumer has always been told that the price of electricity here is one of the highest in Asia . What they have not been told is that the taxes on their fuel is also the highest in Asia . The ball is in the government’s court," he said. --Carmela Fonbuena, abs-cbnNEWS.com/Newsbreak