DOE eyes more measures to cut power rates

The Department of Energy (DOE) will explore more measures to help reduce the country’s power rates.

Energy Secretary Angelo T. Reyes said they have started accepting proposals that would help lower electricity rates such as the reduction or removal of the royalties imposed on natural gas projects.

“We’re looking at all options to lower electricity rates. These are being discussed at the Cabinet already,” he said.

But Reyes said all talks on royalty-related matters are still being subjected to thorough study as these may impact on the revenues of the National Government.

“The bottom line is, we want to lower electricity costs but I don’t want to preempt the Cabinet,” he said.

According to Reyes, the DOE is now discussing with the Department of Finance (DOF) the possible impact of the proposed reduction of royalties from the Malampaya project to government’s coffers.

“We need to study this very carefully. We have to balance the interest of the private investors and the government. On the one hand, we want to reduce power rates but we need the revenues from it.”

First Gen Corp. president Federico Lopez earlier said that if the government removes the P1.46 per kilowatthour (kwh) royalties from the Malampaya project, it will immediately reduce electricity rates.

Lopez said power costs continue to be very high in the Philippines partly because indigenous fuels like natural gas are “the most heavily taxed.”

Government generates revenues of around $600 million annually from the Malampaya royalties.

“Power cost from our own natural gas is rendered artificially expensive due to the high royalties to government. Generation charge to the Manila Electric Co. could be reduced considerably if natural gas royalties are removed,” Lopez said.

Lopez said the P1.46 per kwh royalties, if removed, would result in a 38 percent reduction in the electricity bill of industries.

The impact of the royalty removal to residential consumers, specifically customers of Meralco will be a rate reduction of 50 centavos per kwh. First Gas supplies power to Meralco through its 1,000 megawatt Sta. Rita and 500-mw San Lorenzo power facilities in Batangas.

“If you can give the P1.46 per kwh to them (industries), the impact will really be tremendous. It means about $600 million worth of government revenues, but if you plow it back to industries your job creation potential is tremendous. The government will also collect more in terms of VAT (value added tax),” Lopez said.

He explained that government is asking for lower price of power but on the other hand, it is charging royalties for natural gas.

“Tax and royalty burden is ironically heavier on clean, indigenous fuels like natural gas and geothermal as opposed to that on imported oil, coal and liquefied natural gas,” Lopez said.

He admitted that the royalties on natural gas is anchored on Presidential Decree 87 the “Oil Exploration and Development Act of 1972. “There’s nothing to stop government from removing the royalties. PD 87 can be corrected via a new legislation or amendment,” Lopez said.