Lower RP power rates to be competitive with ASEAN countries – SEIPI, FCCP
Currently recuperating from the effects of the recent onslaught of the global financial crisis, the country’s electronics and semiconductors industry is now preparing for an upturn.
Semiconductors and electronics Industries in the Philippines, Incorporated (SEIPI) has held that all economic indicators point to a better market starting in the second quarter, as the industry had already hit bottom during the first quarter, and demand has started to pick up since March of this year.
According to SEIPI President Ernie Santiago, “We are posting month-on-month improvement in export performance. We have seen the bottom of the ocean, so to speak, and there’s no way but up.”
To ensure the climb uphill continues, one of the first items in SEIPI’s agenda is to call for government’s immediate implementation of measures to bring down electricity rates in the country.
“Most of our electronics and semiconductors companies are directly competing with our neighboring countries in terms of cost. We have to be cost competitive so that we can keep multinational companies here, as well as be in the radar of foreign investors. How can we be competitive if we have very high power costs?” Santiago stresses.
Power costs comprise 25 to 30 percent of industries’ total costs of doing business.
“The Philippines has the highest power cost in the country, next to Japan, owing to layers of government charges that become passed-on costs to electricity consumers,” says Santiago.
“Thus, we are renewing our call for government to initiate measures to bring down power rates in the country at the soonest possible time. We support all measures that will bring down power rates in the country, ” says Santiago.
In particular, the proposed cut in government royalties from indigenous energy sources like Malampaya’s natural gas has been long advocated by the business community, particularly by SEIPI which even joined Senate Bill (SB) 3148’s technical working group.
SB 3148 or the Electricity Rate Reduction Act, authored by Senate President Juan Ponce Enrile, seeks to remove the disparities in treatment of royalties of indigenous energy sources not covered by the Renewable Energy Act of 2008, namely, natural gas, oil and coal.
The bill proposes that government share or royalties collected in the exploration, development and production of indigenous energy sources shall be reduced to three percent (3%) of net proceeds levied on generation companies. The tax savings will in turn be redirected to lower electricity rates to Filipino consumers in a significant and sustainable manner.
SEIPI holds that government royalties imposed on power firms tapping or wishing to tap into the country’s indigenous sources of energy are sky-high, if not totally prohibitive. Thereby negating the intent of these power firms to harness indigenous energy sources on top of imported sources, to lower our dependence on imported fuel.
SB 3148’s twin bill, SB 3147, completes the package of legislative measures which will reduce electricity rates in the country.
SB 3147 or the Uniform Franchise Tax Measure proposes that government adopts a franchise tax regime where electric utilities are levied three percent (3%) tax on their gross distribution income in lieu of all national and local taxes.
Currently, government is charging power utility firms with a 12% value added tax (VAT) on top of corporate income tax, and a local franchise tax imposed on their gross receipts which they simply pass on as additional charges to consumers.
Petteri Makitalo, Filipino-Finnish businessman and Chairman of the Foreign Chambers Council of the Philippines (FCCP) says, “Electricity cost in the country is outrageously prohibitive. It should be a basic service and, as such, government should ensure that Filipinos get these at an affordable cost.”
FCCP is an association of seven countries doing business in the Philippines, namely, France, Spain, Finland, Singapore, Taiwan, India and Israel.
“Our electricity rates are far higher than our ASEAN neighbors. A friend in Malaysia whose household uses airconditioning at the same number of hours as my household here in the Philippines pays only one-third of what I pay. And the disparity comes from what government charges to distribution utilities and generation companies.”
Makitalo further remarked, “Aside from bringing down taxes which only get passed on to consumers, government should also remove barriers to entry for those who wish to harness alternative sources of energy. Why should there be barriers to making clean energy?”
Makitalo’s firm, Veredium Energy Ventures, Inc., is contemplating on partnering with a Finland company for an investment in the alternative fuel sector in the country.
May 25, 2009 at 6:08 PM
With the economic crisis, the government should ease the suffering of our local exports sector by providing non-cash benefits at the very least. A significantly lower power rates would do electronics firms a lot of good. They may be able to operate on lower expenses and bigger profit margins