PEZA allots P1.2 billion for ecozone power subsidies

MANILA, Philippines - Locators in the Philippine Economic Zone Authority (PEZA) will receive P1.2 billion per year in power subsidies as part of the government’s thrust to provide cheaper electricity rates to big investors.

Big locators enjoy preferential power rate under the Ecozone Rate Program (ERP).

Since the expiry and subsequent extension of the ERP, the government has been looking for alternative solutions. There are 279 manufacturing enterprises availing of the special ecozone rate. The 279 firms accounts for 43 percent of total Philippine manufacturing exports.

PEZA director General Lilia B. De Lima, in an interview, said the government has approved P1.2 billion on annual subsidies to allow the ecozone to continue giving preferential electricity rates to investors in PEZA zones.

De Lima said this would only be in place until the open access system is implemented. At present, practically all households and commercial establishments are not free to choose their electricity supplier.

There are several generating companies that can supply power, but consumers generally buy power only from their local distribution utility. By the same token, generators/suppliers cannot sell directly to households and commercial establishments. They can only sell to distribution utilities who re-sell the electricity to end-users.

The implementation of the retail open access would break open this supply chain. Retail open access is a condition wherein consumers- industries, commercial establishments and residential users, are free to choose their respective supplier of electricity whom they deem offers the most reasonable cost and the most efficient service.

“With open access, we would be able to negotiate for an even cheaper power rate which would give the country more leverage in attracting investors,” De Lima said.

Currently, she said, PEZA locators enjoy a discount of P1 per kwh in electricity. With the new budget they would be able to use the same price.

De Lima said this has already been approved by the economic team, but the approval of President Aquino and the Energy Regulatory Commission is still required. Once approved, the money would be released in tranches.

Earlier, the Department of Trade and Industry announced that the government has allotted half a billion yearly for the industry competitiveness fund (ICF) to help big ticket investors operating in ecozones outside PEZA zones to cope with high electricity costs.

Trade and Industry Undersecretary Cristino L. Panlilio said they are allocating P500 million annually to help mega locators in the Subic, Baguio and Clark Ecozones. The commitment of the government is to help the big ticket locators for 10 years. Three years have already passed.

The fund was set up during the time of former President Arroyo. Panlilio said the initial ICF has already ran out.

The ICF expired March 31, 2011. “My recommendation is to make it retroactive,” he said.

Panlilio said he is uncertain how much the allocation was, but he said it was definitely smaller because the firms then had relatively lower demand.

The firms that would enjoy the benefits of lower electricity rate have investments of $500 million and above.

Panlilio said the exact discount is not yet ready.

The executive order for the ICF was signed in 2009.

The ICF under EO 796 was established because the government realized the need to help investors. The ICF was used to support and incentivize qualified power intensive industries which contribute significantly to the economy.

The ICF was used to recover any financial impact that PSALM/NPC, Transco and PEZA incur in the grant of special power rates to the ecozone locators.