DOE Wants Power Incentives Retained

Baseload Projects
March 27, 2012, 11:34pm


MANILA, Philippines — The Department of Energy (DOE)has urged the Board of Investments for the continued granting of tax incentives to baseload energy projects in light of the huge power supply gap that is being addressed via private sector investments.


The official position of the DOE was contained in its letter addressed to the BOI.


“The DOE has a letter asking the BoI to extend the incentives to power projects while there is still a lack of supply of baseload power,” the official said.


With the DOE position, “it leaves a window open a review of the BOI position.”


So far, the government is trying to build up its baseload power supply to 30,000 megawatts. The current baseload power is only between 17,000 to 18,000 MW.


The new capacities of baseload power plants in Subic Freeport are also facing environmental issues that might delay their commissioning.


The GN Power has also proposed to double its capacity.


It could be recalled that DTI Secretary Gregory L. Domingo, who also chairs the BOI, has strongly opposed the continued granting of income tax holidays to power projects. As a result, the power sector is no longer listed in the proposed 2012 Investment Priorities Plan (IPP), which lists the preferred economic activities that are eligible for government tax perks.


The BoI house, however, is divided as to the power incentives is concerned. Thus, it sought the position of the DoE to help them guide in coming up with the preferred list of economic activities for the 2012 IPP. The BOI is the lead government agency in the crafting of the 2012 IPP. Economic activities listed in the IPP are the ones that would be entitled to as much as six years in tax income holidays.


“Domingo has expressed his position and the others in the Board are just following on his cue, but he is not the only voice. There are others who are against the Secretary’s position, but chose to be quiet,” the official added.


Aside from other BOI officials who are against the removal of incentives to power projects, the private power sector and the Philippine Chamber of Commerce and Industry (PCCI) have also strongly opposed the plan to remove the incentives to power projects.


Already, a BOI official said they would have difficulty hitting its P400- billion investments target this year once the power sector will be stripped of incentives.


The traditional power sector is expected to contribute P100 billion in new investments for BOI or one-fourth of the agency’s full year target. The BOI was hoping to register the P40 billion 600 megawatt coal-fired project of AES this year.


In the first month this year, the BOI was able to register only P3 billion but this is already 10 percent higher than the P2.7 billion registered in January 2011. There have been mini-hydro power projects that are expected to register with the BOI but still it would be difficult to compensate for the loss of the huge baseload power projects.


“This makes the P400 billion investments target challenging,” an official noted.


Domingo, however, has stood pat on his decision to remove income tax holiday to traditional power projects to avoid “double dipping” of government incentives as these projects are already enjoying guaranteed rate of return.


“What we are against is double-dipping of incentives,” Domingo stressed. He said the guaranteed rate of return the energy projects get from the Energy Regulatory Commission is already a huge incentive to these companies. (BCM)