BOI undecided on inclusion of power in IPP

MANILA, Philippines -  New power projects in the country may still be covered by the 2012 Investment Priority Program (IPP) if they can lower power costs, Trade Undersecretary Cristino Panlilio said yesterday.

The development of new power projects was removed from the draft list of investment projects that will be entitled to income tax holidays as identified by the Board of Investments (BOI).

In removing new power generation projects from the list, the BOI argued that despite having received more than two-thirds of incentives for the past two years, the sector still charges high power rates.

Panlilio said, however, new power projects that tap renewable energy may be covered under the IPP, but those that tap traditional power sources like oil and coal have been proven to be reaping profits and are, therefore, not entitled anymore to incentives.

“If they can reduce the cost of power,” Panlilio said, “or if they are able to go more into hydro or geothermal power plants, I think they can be entertained. But certatinly coal-fired and oil-based can stand on their own.”

Renewable energy is one of the sectors designated for mandatory inclusion under the 2012 IPP as mandated under the Renewable Energy Act of 2008. It covers the development of renewable energy facilities, including hybrid systems as well as the manufacture of renewable energy equipment and components.

Panlilio said power projects that are to be built off the grid may be exempted from the delisting.

Power generators were given until this week to submit their positon paper for reconsideration.

The Philippine Chamber of Commerce and Industry (PCCI), however, argue that incentives for projects under the IPP help attract investors by reducing their capital costs.

According to PCC president Miguel Varela, for investors in power generation, their capital costs account for about 70 percent of the total fixed costs of a power plant.

Varela said that the continued grant of incentives could address three things:

• It would reduce the final power rate that would be charged to electricity end-users;

• It would encourage the building of urgently needed new generation capacity; and

• It would facilitate the attraction of private investors, considering that the importation of capital equipment is one of the major cost burdens during start-up operations.

PCCI vice president for energy Jose Alejandro, likewise, said that “bringing in new baseload capacity would not only address the country’s precarious power supply situation due to the strong growth in electricity demand and the absence of new power plants, but would also help contain further increases in generation costs.”