Press Release
April 17, 2010

Use royalties on indigenous energy sources to cushion impact
of power rate hikes--Enrile

Senate President Juan Ponce Enrile today urged the national government to make use of the royalties from indigenous energy sources such as the Malampaya natural gas deposits to cushion the impact of the increase in the electricity rates to benefit the Filipino consumer.

Enrile acknowledged that while the increase in power rates from the power distributors such as Meralco are inevitable given the current situation when the cost of electricity from individual generators as well as the energy spot market are skyrocketing, still the blow on the end-user can be softened if the government reduced the tax/royalty treatment of indigenous resources.

He explained that because of the current El Nino phenomenon, hydro-electric generation is virtually at a standstill. Moreover, the rising cost in fossil fuels and charcoal used to power generators and turbines have skyrocketed lately.

He said that as of May 2007, government royalties on indigenous natural gas was around P1.46 per kilowatt hour, which was 5 to 8 times more than the taxes imposed on imported fuels such as coal (P0.17/kwh); oil (P0.20/kwh) and liquefied natural gas P0.29/kwh). If taxes and royalties were to be removed from both indigenous and imported fuels, the rates of electricity generated using indigenous energy resources would be substantially lower.

Enrile had filed during the 14th Congress Senate Bill 3148 (the Electricity Rate Reduction Act of 2009), which the Senate immediately passed on third reading. The Lower House, however, did not act on its counterpart measure, despite Enrile's repeated follow-ups with the House leadership. In fact, the Department of Finance had vigorously opposed the measure.

In one of meetings of the Legislative-Executive Development Advisory Council (LEDAC), Enrile said he urged Malacanang to certify the measure. "However, then Finance Secretary Gary Teves recommended to the President not to push for my bill, which he referred to as a 'revenue-eroding measure.' I disagreed with him because these royalties are not part of the revenue base of the government and these do not go to the general fund."

The DoF instead offered some form of subsidy which Enrile opposed because any form of subsidy, particularly if not mandated by law, is temporary in nature and can always be removed anytime. He reasoned that the use of royalties on indigenous sources of energy, such as the Malampaya natural gas deposits, to help reduce power costs for consumers is a more effective approach that will directly benefit marginalized and lifeline consumers as well as qualified industries with 70%-load capacity.

"In fact, when I was defending this bill, I envisioned it to be crucial in ensuring that even qualified industries will benefit from this, and that factories or industries will be prevented from closing down, specially at a time when even big companies are affected by the global economic crisis. Ultimately, I had hoped that this bill, while easing the burden on our people, will also help stimulate our economy and prevent job losses."

Enrile, who is seeking reelection under the Pwersa ng Masang Pilipino, lamented that the current situation of power rates going through the roof could have been avoided--or at least mitigated--"if the Executive had only listened to me and if my counterparts in the House even considered the merits of this very important measure."

"Unfortunately," he said, "they did not, so we now find ourselves in this bind. Our industries and, ultimately, our consumers continue to suffer from the increasing cost of electricity even when the government could have done something about the situation."

He said it is about time the Filipino people should fully benefit from its energy resources by removing the disparities in the tax/royalty treatment of indigenous resources specifically natural gas, coal and crude oil which are not covered by the Renewable Energy Act of 2008.

"These indigenous sources of energy are actually owned by the people. If these will be used for the benefit of the people, I do not see why these sources should be imposed a much higher tax than fossil fuel which is even harmful to the environment!"

"Lowering the royalties will directly result in reducing the commodity prices of these energy resources as they are utilized for electricity generation, which reduction will translate into lower electricity rates for the benefit of the Filipino consumers," he said.

Enrile observed that in the Meralco franchise area alone, a reduction of government royalties will translate to a reduction of an average of P1.50/kwh in electricity rates.

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