FED UP with hefty bills, consumers yesterday called for an end to the monopoly of semi-state electricity company (EAC) as main opposition DISY said it would table a proposal reducing VAT on household bills to 8.0 per cent.
Opposition MPs said the lost revenue from lowering VAT to household consumers would cost the state around €20 million and not €60 million as government officials had said previously.
However, consumer groups, who have been receiving numerous complaints from people who cannot afford to pay their electricity bills, called for more drastic measures.
“We think the long-term solution to the problem would be breaking the EAC monopoly,” said Fryni Michael, head of the Cyprus Consumers Association. “Otherwise we would have to deal with continuous hikes, either in the price of fuel or the additional charges or VAT.”
Chairman of the Consumer Union Loukas Aristodimou said competition was needed in the energy sector.
“We need more options,” he told lawmakers of the House Commerce Committee.
Apart from hikes in the price of crude and diesel used by the EAC to power its generators, consumers also pay a 6.96 per cent surcharge to assist the company after its biggest power station was crippled in a munitions blast last year.
The last straw for consumers was the two percentage point increase on VAT to 17 per cent that came into effect this month.
In 2011 the state collected €127 million in the form of VAT imposed on electricity bills and around €27 million so far this year before the rise.
The EAC said €154 million in VAT will be paid to the state in the next 10 months.
Consumer representatives and MPs highlighted the despair felt by certain groups who are unable to pay their hefty bills.
“We are all in a state of emergency,” said DISY MP Andreas Michaelides, who added that in his home they have turned off some radiators and only use certain rooms.
Aristodimou said some people confine themselves to the kitchen because they cannot afford to heat the whole house.
“We want VAT (on household electricity bills) to be cut to 5.0 per cent not 8.0 per cent and not selectively,” he said.
The EU allows for a reduced rate to be applied – not lower than 5.0 per cent – as a measure to protect vulnerable customers.
The government opposes cutting VAT on power bills, arguing that the loss of revenue is too big.
Certain vulnerable groups already pay lower tariffs.
The additional cost for the EAC is covered by the rest of the consumers who are charged €0.00134 per kWh plus VAT, in the form of public benefit obligations or ‘???’ in Greek, as it appears on the bills.
Main opposition DISY yesterday said cutting VAT on household and agriculture consumers to 8.0 per cent, would only cost the state some €24 million.
The party said it plans to submit a law proposal to reduce VAT tomorrow and expressed hope that other parties would view this positively so that it is approved as soon as possible.
DISY also pledged that if the proposal is passed, to discuss alternative ways with the government to recover the amount.
Last week, the government submitted a bill to raise the tax on rolling tobacco with a view to collect between €18 and €20 million that would have been used “to subsidise electricity bills for vulnerable groups,” according to Finance Minister Kikis Kazamias.
The bill was rejected by the majority of parties, including DISY. Ruling AKEL chose to abstain.
Meanwhile, the European Party (EVROKO) suggested that it was illegal for the government to impose VAT on the 6.96 per cent surcharge.
Party official Stavros Violaris said the emergency charge was not a commodity nor a service neither did it have an added value.
Violaris said consumers ended up paying 8.14 per cent after VAT.
The same argument was used by Aristodimou, who also demanded more transparency on bills.
Aristodimou said when consumers call the EAC for an explanation regarding the hikes in most cases staff at the semi-state company cannot help them because they do not know the answer.
The EAC said domestic consumers can join an installment scheme – under certain conditions – which evens out seasonal fluctuations.
Details of the scheme have been sent along with bills and can also be found on the EAC website: www.eac.com.cy/EN/Pages/Home.aspx
