IPPs prod use of Malampaya royalties

Manila Times.net

THE country’s independent power producers are renewing their call for government to subsidize electricity to spur investments.

Ernesto Pantangco, Philippine Independent Power Producers Association (PIPPA) president, said the government has to subsidize critical industries and the marginalized sector by using royalties from the Malampaya natural gas field and by removing the value-added tax (VAT) on power generation.

“These unnecessarily increases [the] cost of power,” he said.

PIPPA is calling on the government to use at least $300 million from the Malampaya to subsidize the power rates of the electronics industry and its allied sectors, which are among the country’s top dollar earners, as well as of marginalized sectors in the country.

The group is also seeking a zero-rated VAT for power generation.

Besides the levy imposed on power generation, the government also charges distribution utilities a 12 percent VAT, a 32 percent corporate income tax, and a local franchise tax on their gross receipts, which they simply pass on as additional charges to consumers.

PIPPA is composed of private power plant operators with a total generation capacity of 8,110 megawatts. The group has been lobbying for the use of the Malampaya royalties and the removal of VAT on power generation to lower electricity bills.

Based on the group’s studies, the power rates in the Philippines are among the highest in the region.

Residential rates in Metro Manila, for example, are the most expensive in Asia, topping even industrialized countries such as Japan and Singapore. The country’s industrial power rates are second only to Singapore in the region.

Pantangco said the country’s prohibitive power rates are a result of dependence on imported fuel, subsidies implemented by its neighbors, and indigenous natural gas indexed to import prices, a chunk of which is taken up by government royalties.

Government royalties from Malampaya correspond to less than P2 per kilowatt-hour in the power cost of Metro Manila’s electricity distributor, Manila Electric Co., whose average tariff in 2010 was P9 per kilowatt-hour.

Metro Manila and surrounding areas generate more than half of the country’s economic output.
Government generates roughly $500 million in royalties each year from the Malampaya, the country’s largest natural gas field to date.

Pantangco said that using government royalties from the Malamapaya would help improve investments, especially with industrial customers complaining that a quarter of their operating costs are eaten up by electricity.EUAN PAULO C. AÑONUEVO