Malampaya funds eyed to lower power rates

MANILA, Philippines—Energy Secretary Jose Rene D. Almendras said he was amenable to the proposal of the Philippine Independent Power Producers Association (Pippa) to tap $300 million (roughly P13.5 billion) of the royalties that the government earned from the Malampaya operations to help lower electricity prices in the country.

Almendras noted that the amount could help fund the Industry Competitiveness Fund (ICF), which he said was going to cost the government P42 billion.

The ICF referred to a subsidy scheme meant to support and rationalize the grant of special power rates to industrial entities. It was meant not only to keep the existing investments, but also to make the country more attractive to foreign investors and create job opportunities.

It was only in May 2009 that former President Arroyo signed Executive Order No. 796 establishing the ICF with an initial allocation then of P1.6 billion to cover discounts granted to various large industrial customers.

However, Almendras admitted that based on provisions of existing policies, the Malampaya royalties were not meant to be used for the purpose of lowering power rates since the funds were earmarked for “energy sources.”

For example, the national government recently tapped P8 billion from the Malampaya royalties and allocated the amount for the Armed Forces of the Philippines to boost security forces within prospective and existing petroleum exploration areas in the country.

But the energy chief said he would still look into the proposal and study how this mechanism could be implemented, to see whether it would merit a bigger push.

Pippa president Ernesto Pantangco earlier stressed the importance of the group’s proposal as the amount was needed to help lower rates to “critical” local industries as well as to marginalized consumers.

Pippa was also pushing for the removal of the value-added tax (VAT) on power generation, which Pantangco said would definitely make an impact since generation charges accounted for 60 percent of a consumer’s electricity bill.

Pantangco noted that the Electric Power Industry Reform Act had originally provisioned zero-rated VAT for all types of power generation, but that the Department of Finance later decided to slap the 12-percent VAT on non-renewable sources to help boost government coffers. However, that meant an additional cost to the consumer, he added.