Sans incentives, power costs seen to go up

MANILA, Philippines - The generation cost of electricity will increase by at least 27 centavos per kilowatt-hour if fiscal incentives in the power sector will be removed, a group of power producers said.

In a letter to Senator Juan Edgardo Sonny Angara, Chairman of Ways and Means Committee,  the Philippine Independent Power Producers Association called for the retention of fiscal incentives in the power sector.

 “Power plants are capital intensive to build, maintain and operate. Yet, return on investments is uncertain unless the full capacity of the plant is contracted for a fixed period of time. As such, to attract necessary investments into the sector, government assistance, through grant of incentives, is indispensable. Without fiscal incentives, the generation cost of electricity will increase by at least P0.27 centavos per kilowatt-hour. This will directly impact residential consumers and also increase costs and dampen competitiveness of industries, such as manufacturing and information technology,” PIPPA said in its letter to Angara who is seeking comments on pending bills that aim to rationalize fiscal incentives.

In the letter, PIPPA president Luis Miguel Aboitiz said strategic projects should be qualified for incentives “based on its capacity to significantly contribute to economic development in terms of amount of capital investment, use of high level of technology and creation of value added.”

The group noted that its members capture about 82.8 percent or 13,549.40 megawatts of grid installed capacity with consumers scattered all over Luzon, Visayas and Mindanao.

The pending measures seeking to rationalize fiscal incentives include Senate Bills are SBN 35 or The Investment and Incentives Code of the Philippines, authored by Sen. Cynthia Villar and SBN 987 or An Act Harmonizing the Grant and Administration of Fiscal and Non-Fiscal Incentives and For Other Purposes, authored by by Sen. Ralph Recto.

The group said a new incentives law might only add to the problem of low foreign direct investments and slow growth in the power generation and infrastructure sectors.

“We recommend that in rationalizing fiscal incentives, focus must be on streamlining documentary requirements and approval procedures for registration and in availing of fiscal and non-fiscal incentives,” PIPPA said.