BoI weighs incentives on power sector

Friday, 23 March, 2012 Written by Julito G. Rada


Stakeholders in the energy industry are expected to make a last-ditch attempt to convince the government during a final public consultation Monday on the 2012 Investment Priorities Plan to keep the incentives in the sector.


Board of Investments executive director Efren Leaño told Manila Standard Friday the fate of the sector would be known after Monday’s hearings.


“The energy sector would be one of the issues to be tackled. After that, the board will deliberate on the inputs of the hearing. We don’t decide on the hearing itself,” Leaño said.


He said the Trade Department would submit the final draft of the 2012 IPP to Malacañang before the regular March 30 deadline.


Earlier, the BoI delisted new power projects from the 2012 IPP, saying they did not result in lower electricity despite generous incentives in the previous years.


The BoI also said expensive electricity was one of the major reasons why the country had been losing its competitiveness in the region.


Top executives of power-generating companies led by the independent power producers opposed the BoI move.


The BoI said the only projects in the power sector that would receive incentives are renewable energy, which is included in the mandatory list.


Earlier, the Philippine Chamber of Commerce and Industry, the largest business organization in the country, called on the BoI to retain the energy sector in the 2012 IPP.


The PCCI said the incentives provided to energy projects were helpful in attracting investors and reducing capital costs, which ultimately benefit consumers.


“Capital costs account for about 70 percent of the total fixed costs of a power plant. The continuation of incentives could address three things: (1) it will reduce the final power rate that will be charged to electricity end-users, (2) encourage the building of urgently needed new generation capacity; and, (3) facilitate the attraction to private investors, considering that importation of capital equipment is one of the major cost burdens during the start-up operations,” Miguel Varela, PCCI president, said in a statement.


The PCCI said power supply must keep up with demand as the economy is poised to grow 5 percent to 7 percent this year and the near term.


The group said the removal of BoI incentives for new fossil-fueled power plants would increase the generation rate and the cost to government of existing subsidies in missionary electrification areas.


The PCCI said removing BoI incentives could potentially slow tourism and labor-intensive, energy-dependent value industries.


(Published in the Manila Standard Today newspaper on /2012/March/24)