2018 December LKI - Year Ender Report

2018-12-28 17:56:35

LKI OPPOSED FUEL AND COAL EXCISE TAXES, FEED IN TARIFF ALLOWANCE, WATER RATES AND CRITICIZED LACK OF PRICES ROLLBACKS AND MINIMAL REDUCTIONS


Laban Konsyumer Inc. and its President Atty. Victorio Mario A. Dimagiba recently expressed concern that rollbacks of SRPs and prices in the Basic Necessities and Prime Commodities (BNPC) plus transport are hardly happening, and warned of its negative effects on consumers. 


LKI stated that “we wish to tell the public and the government the negative impact of excise taxes, especially on fuel and the inefficient supply chain that we have in our country, from the data that we have gathered and analyzed, there are only minimal reduction in prices versus SRP.” 


Dimagiba said that “these numbers should be an worrying story for consumers and also for traders and economic teams. Related to this, the Ease of Doing Business Act can achieve the same objectives of facilitating investments in the energy industry, cutting red tapes and promoting competition.” 


LKI continued declaring that “it remains doubtful that power rates will be reduced under the Energy Virtual One Stop Shop (EVOSS) due to taxes and the country’s dependence to imported fuels. We also have the Competition Act as a safeguard to promote competitive practices. The EVOSS duplicates the EODB and the Competition Law.” 

Dimagiba also attacked the withdrawal of the exemption of VAT in transmission charges and on coal, as a reason for higher prices of electricity, and proposed that “this VAT on transmission charges and on coal should be removed immediately to relieve customers of higher electricity costs.” 


LKI also highlighted other products, saying that “the prices of canned sardines increased from .75 to 1.30 pesos increased in December”. 


Dimagiba also proclaimed “the proposal to lower prices of basic necessities and prime commodities will not happen with the implementation of the second tranche in increases in fuel excise tax in January 2019 ” 


Regarding the current tax reform program, Dimagiba said “Laban Konsyumer will please to the new Chief Justice to decide soon that the tax reform program is anti-poor.” He also questioned the recent MWSS water rate hike asking “why did MWSS use the 5.7% inflation in July when the year to date is 5.2% , bereft of public consultation and hearing and inflation already factored in the recently approved rate rebasing for 2018-2022. This is an example of another anti-poor regulatory agency.” 


Recently, Laban Konsyumer Inc., thru Atty. Victorio Mario A. Dimagiba, filed a second pleading to the Supreme Court of the Republic of the Philippines opposing the Train Law. 


In the Petition, LKI stated that “the imposition and increase of excise taxes have real and imminent adverse effects to all consumers, more particularly to Filipinos from low-income and poor families, who have to pay the excise taxes as prescribed by the Train Law.” 


Dimagiba continued by saying that “the inevitable crippling burden to low-income and poor Filipino families to be caused by the contested provisions, and the implementation of second tranche in 2019 (the economic managers had recommended to the President to withdraw an earlier decision to suspend the excise taxes on fuel on January 2019 of the TRAIN Law) should enable this Honorable Court sufficient basis to act now; otherwise, the system of checks and balances, which is one of the founding principles of our system of government, will be put to naught in the guise of respecting “political” decisions and flip flopping by the economic managers, due to the flawed Train law.” 

LKI explained that “since the TRAIN Law has taken effect, all consumers have felt, and are continuously suffering, the adverse effects of its implementation in the form of increased prices in the basic commodities dependent upon coal, LPG, kerosene, and diesel, like food, transportation, electricity, and other goods and services needed for subsistence as these are imposed on top of the Value-Added Tax (VAT).” 

The petition went on to enumerate the relevant economic numbers: 



Phil Inflation 

NCR Inflation 

Dubai Crude ($/bbl.) 

Average Forex 

2017 

Jan 

2.5 

2.5 

53.71 

49.7363 

2017 

Feb 

3.1 

3.4 

54.41 

49.9614 

2017 

Mar 

3.1 

3.9 

51.21 

50.2752 

2017 

Apr 

3.2 

4.0 

52.31 

49.8626 

2017 

May 

2.9 

3.8 

50.47 

49.8603 

2017 

Jun 

2.5 

3.1 

46.38 

49.8501 

2017 

Jul 

2.4 

2.9 

47.59 

50.6382 

2017 

Aug 

2.6 

3.3 

50.24 

50.8747 

2017 

Sep 

3.0 

4.4 

53.51 

51.0094 

2017 

Oct 

3.1 

4.3 

55.63 

51.3433 

2017 

Nov 

3.0 

4.5 

60.81 

51.0384 

2017 

Dec 

2.9 

4.2 

61.61 

50.3947 

2018 

Jan 

3.4 

4.7 

66.15 

50.5087 

2018 

Feb 

3.8 

4.7 

62.69 

51.7856 

2018 

Mar 

4.3 

5.2 

62.76 

52.0676 

2018 

Apr 

4.5 

5.2 

68.29 

52.0986 

2018 

May 

4.6 

4.9 

74.20 

52.1948 

2018 

Jun 

5.2 

5.8 

73.61 

53.0476 

2018 

Jul 

5.7 

6.5 

73.09 

53.4329 

2018 

Aug 

6.4 

7.0 

72.47 

53.2735 

2018 

Sep 

6.7 

6.3 

77.22 

53.9419 

2018 

Oct 

6.7 

6.1 

79.40 

54.0086 


Dimagiba explained that “to make matters worse, the consumers continue to pay high prices of basic necessities and prime commodities (bread and canned sardines implemented and announced price increases in October and December, 2018) despite the rollback of prices of fuel products for the past two months beginning October 4, 2018 up to the filing of the instant pleading, due to the continuing implementation of the TRAIN Law.” 


LKI also cited fuel prices, pointing out that the total fuel price rollbacks from October 13 to December 18, 2018 using DOE monitored data from its website are as follows: 


Gasoline – Php 9.62 to 10.77 

Diesel - Php 10.20 to Php 10.35 

Kerosene-Php 7.39 


The group said “these rollback on fuel prices are lower by an average of 25% from the October 4, 2018 Department of Energy monitored prices of gasoline, diesel and kerosene”. 


He continued by stating “the sad reality is that the TRAIN Law burdens the poorest 17.2 million or three out of four (76%) of Filipino families with oil and other consumption taxes without giving them compensatory personal income tax cuts. Rising fuel prices drive up the prices of food, transport and electricity. The cash transfers for the poorest 10 million and Pantawid Pasada fuel vouchers are not just merely temporary but, after more than 12 months of TRAIN, even very delayed for the overwhelming majority of their supposed beneficiaries.” 


The petition pointed out that as it is evident, the TRAIN Law is now harshly affecting the 22.7 Million Filipino families who do not pay income taxes because they belong to the informal sector composed of minimum wage earners with low and erratic incomes, who do not stand to benefit from the lower income taxes but stand to suffer because of the price increase brought about by the confiscatory and arbitrary excise taxes. In fact, excise taxes are expected to jump to Php 310.208 Billion from 2017’s target of Php 185.029 Billion.1 This is plain insensitivity to the plight of the low-income and poor Filipino families who are forced to make ends meet in order to fulfill the minimum requirements of living. 


Furthermore, the petition wrote that inflation has already eaten up thousands of pesos in the purchasing power of the incomes of the poorest households who are already under-consuming and have low standards of living as it is. In fact, independent think-tank IBON Foundation estimated that each of the country’s poorest 30% of households have lost at least Php1,800 to Php2,916 already from the start of the year until September due to inflation. These are households assumed to be earning some Php12, 835 or less monthly. Similarly, less poor and middle income households have also seen their purchasing power eroded. The next 30% of households have lost Php3, 418 to Php4, 725 since the start of the year. These are the households earning up to around Php21, 119 monthly. IBON Foundation estimates the erosion of purchasing power by deflating household incomes with reported monthly inflation rates. The impact on the poorest households is also underestimated by the unavailability of inflation rates for low income groups.2 


Dimagiba stated “at this point, only this Honorable Court can prevent the Respondents from the continuation of implementation of these unwarranted impositions which patently violate Petitioners’ and every Filipino consumers’ rights. What is currently happening is contrary to what the Duterte administration promised to the Filipino people. The common Filipino now suffers, and will further suffer, under the weight of the new and proposed TRAIN Law in as much as its obvious results are totally inimical to its objectives.” 


In conclusion, Dimagiba said “consumers, particularly low-income and poor families, stand to suffer grave and irreparable injury, hence, the immediate need for the injunctive relief to be issued.” 


Another highlight of the year was when LABAN Konsyumer Inc. also visited ERC Chair Agnes Devanadera to push swift action on FIT-All charge and its heavy burden on consumers. Laban Konsyumer Inc. President Atty. Victorio Mario A. Dimagiba, met with Energy Regulatory Commission (ERC) Chair Agnes Devanadera on Monday, October 22, to push once again for immediate action to be taken against the Feed-In-Tariff Allowance being charged to consumers’ electric bills and thus burdening consumers with high prices. 


The group explained the urgency of the issue, saying “FIT-All is collected from electric consumers nationwide and is used to subsidize payments to select RE developers. But what is alarming though is that FIT-All has increased more than six fold from 4-c/kWh in 2015 to 25-c/kWh starting June 2018. There are even pending petitions to further increase this to as much as 29-c/kWh. We met with ERC to put a stop to this unjust and overpriced component of consumers’ electricity bills.” 


Dimagiba reiterated to Chair Devanadera his recent concerns regarding Fit-All in the past months, pointing out that “the FIT-All Rate Petitions are the only cases where the Commission grants a rate that is higher than what was asked by the Petitioners. In fact, the FIT rates granted to developers have been shown to be far too expensive. For example, the solar rates signed by electric distributors with developers, as submitted to the ERC for approval, are cheaper than the FIT rates that consumers nationwide will subsidize for 20 years.” 


In their discussion with Chair Devanadera, LKI also touched on overpayment to Fit-eligible renewable energy plants. Dimagiba said “during the hearings for the 2018 FIT-All Rate, LKI observed that Transco presented inconsistent capacities for some RE plants. LKI also pointed out that these higher capacities may have been used by Transco as the basis for payments to these RE Plants. This means Transco may have OVERPAID these FIT-Eligible RE Plants and that the computed FIT-All is higher than necessary. This observation was confirmed when the ERC issued an Order on June 11, 2018, where the ERC determined that Transco OVERPAID certain FIT-eligible generators by P36.5 million. It would be unfair and unjust to pass on this overpayment to consumers and their electricity bills.” 


Dimagiba added "Considering that the estimates and assumptions used for the present 2019 FIT-All application used the latest approved 2017 FIT-All rate of 25.63-c/kWh and that the present 2019 FIT-All application even asked for a lower rate of 26.55-c/kWh, then the 2018 FIT-All application of Transco should be considered moot or deemed abandoned with Transco’s filing of the present 2019 FIT-All application. Otherwise, a comical situation arises where the ERC issues a Provisional Authority or Decision on the present 2019 FIT-All application for a lower rate 26.55- c/kWh and then subsequently releases a Decision on the 2018 FIT-All application for a higher rate of 29.32-c/kWh. Considering the substantially higher rate of 2018 FIT-All, the end-users should be protected and the 2018 FIT-All application should be deemed moot and abandoned." 


Dimagiba concluded that “Fit-All is also an inflation issue, and thus a consumer welfare issue. Meralco has been reporting that 2018 power prices have been lower than they were in 2012, with only the Universal Charge and Fit-All showing increases. This is where the Chair can help government temper inflation. By considering Fit-All as a burden to consumers, the Chair can finally rectify and undo mistakes of the government in the past.” 


Laban Konsyumer Inc. actively participated in deliberations of proposed bills in the Senate and the House on consumer welfare and served as Co-Chair of Technical Working Groups in the House in the creation of a Drug Price Regulatory Board and the amendment to the Retail Trade Liberalization Law. 


Laban Konsyumer Inc. (LKI) is a nonprofit and non-stock registered entity with the Securities and Exchange Commission. LKI is a consumer advocacy group in the Philippines that promotes consumer education and protection against deceptive, unfair and unconscionable business practices. The LKI focuses on education, prices and supply of basic and prime commodities, standards and qualities among other areas of consumer protection. 


LKI became a new full member of Consumers International in February 2018, a membership organization for consumer groups around the world. Consumer International is composed of over 200 member organizations in more than 100 countries to empower and champion the rights of consumers everywhere. Dimagiba also acts as Chairman of the International Organization for Standardization (ISO) Consumer Policy Committee (COPOLCO) of the Philippines. 


For any inquiries or concerns, you may reach LKI President Vic Dimagiba at 0917-812- 5546. Visit our updated website at www.labankonsyumer.com 

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