Press Release
April 22, 2009

PIMENTEL BACKS PROPOSAL TO REDUCE TAX
ON INDIGENOUS ENERGY

Minority Leader Aquilino Q. Pimentel, Jr. (PDP-Laban) today backed a proposal in the Senate to reduce the government royalty and other taxes on indigenous, renewable sources of energy in order to relieve households and industries from excessive power cost.

"The utilization of indigenous energy sources in the country like natural gas and geothermal power, which are extensively being used to generate electricity, would be really meaningful to the Filipinos if this will translate into lower power cost" Pimentel said.

He said the significant reduction of power rates in the Philippines, acknowledged to be the second highest in East Asia after Japan, should be part of the administration's economic stimulus package to help the ordinary Filipinos tide over their present difficulties, as well as to rescue distressed industries and prevent job losses in the wake of the global financial crash.

The minority leader urged the Arroyo administration not to block the legislative moves to cut taxes on indigenous energy sources as he echoed the people's frustration over the steadily rising power rates contrary to the expectations that the enactment of the Electric Power Industry Reform Act of 200l will bring down electricity cost.

"The Epira was aimed at reducing power rates, but this has not happened. On the contrary, electricity cost keeps on rising, adding to the financial burden of poor families and making our domestic industries less and less competitive. It has also compelled foreign investors to bypass the Philippines as an investment destination," Pimentel said.

In compliance with Epira, the government has privatized the generating assets of the National Power Corporation, and sold the National Transmission Corp. to a newly-organized business consortium.

However, Pimentel said the government went overboard by selling the highly-profitable Transco to the National Grid of the Philippines, a joint venture between three Filipino firms and the State Grid of China, a publicly listed firm in Hong Kong.

"I think this is a subterfuge of the power distribution in the country. Why are we allowing a company fully owned by a foreign power to operate the country's power transmission lines? I think, there is something terribly wrong with the deal," he said.

The minority leader said he has the Senate committee on energy to review the privatization of Transco in the light of allegations that it was grossly disadvantageous to the government.

Now being tackled by the Senate committee on energy and the committee on ways and means is a bill authored by Senate President Juan Ponce Enrile to limit to three percent the tax on the gross revenues of companies engaged in the development and production of indigenous energy sources which are being used for generating power. The bill aims to exempt these companies from value added tax and income tax.

One of the purposes of the measure is to remedy a lopsided situation wherein the power generated from natural gas from the Malampaya wells off Palawan is levied a rate of royalty much higher (Pl.48 per kilowatt hour) than the rate imposed on other fuels

Pimentel said the unusually huge royalty for locally-produced natural gas also serves as a disincentive to companies that are being lured by the government to engage in the exploration and development of indigenous energy sources.

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