“The LEDAC remains committed to the enactment of Senate Bills 3147 and 3148 into law before the year ends,” said Enrile in a statement. Representative Exequiel B. Javier, Chair of the House Committee on Ways and Means, shares the Senate President’s advocacy and has, in fact, set into motion the House version of Enrile’s proposed bills. House Speaker Prospero C. Nograles also confirmed this by saying that he will “work for the bills’ passage” noting that these are already in the pipeline.

The Senate Leader also clarified that discussions on the possible deferment of his Senate bills were not broached by President Gloria Arroyo, as earlier reported, but only by Finance Secretary Margarito Teves and Energy Secretary Angelo Reyes. Enrile clarified, however, that all the concerns raised by Secretaries Teves and Reyes during the LEDAC have long been addressed in the deliberations before the Senate Committee on Energy. “The Senate Committee on Energy has established that the Department of Energy’s claim that the impact of the power reform bills will not significantly impact on the industrial sector is inaccurate and based on erroneous data. The Department of Finance, on the other hand, will oppose any legislative measures that will in anyway reduce existing government revenue sources.”

Enrile stressed that the power reform bills will directly result in significant power cost reduction which will range from P1.34-P2.00 per kWh for business or industrial users, and at least P1.00 per kWh for residential consumers.

Enrile’s power reform bills have earned multi-sectoral support. The removal of excessive taxes on electricity consumption has been consistently advocated by the Gabriela Women’s Party and the National Association of Electricity Consumers for Reform or Nasecore.

Other business groups have been pushing for immediate government action on Enrile’s power reform bills. Philippine Chamber of Commerce and Industry (PCCI) President Edgardo Lacson has expressed particular support for Senate Bill 3148 which he said will enhance the competitiveness of business enterprises. Lacson expressed optimism that the proposed bills will be passed, saying that “we will make a last appeal to the President [Arroyo]”. The PCCI, together with the joint Foreign Chambers, the Philippine Exporters Confederation and the Employers’ Confederation of the Philippines have previously presented to the LEDAC a list of policy recommendations for immediate adoption that included Senate Bill Nos. 3147 and 3148.

In a separate statement, the Semiconductors and Electronics Industry of the Philippines, Inc. (SEIPI) urged President Arroyo to certify the power reform bills as priority bills to ensure immediate passage. “We hope that Malacañang and Congress will certify these proposed measures as priority bills for power rates in the country to be lowered and to result in making our industries more competitive against neighboring Asian countries,” SEIPI President Ernie Santiago stated.

The global financial crisis is already on a downturn, but not after leaving the local economy weak, with the country’s gross domestic product or GDP registering almost nil year-on-year growth at 0.4 percent, while per capita GDP declined by 1.5 percent.

A frail and volatile economy coupled with the high prices of goods and services remain as major threats to economic recovery, with exorbitant electricity prices in the country – one of the highest in Asia, being cited as one of the major roadblocks.

Addressing the heightened clamor for lower electricity rates, legislators have recently been proactively crafting measures to ease the burden of high power costs in the country.

Of all the proposed measures, Senate Bills 3147 and 3148 of Senate President Juan Ponce Enrile are the most prominent. Supporters of the twin power measures are urging Malacañang to certify these as priority bills to ensure speedy deliberation, passage and enactment into law.

Enrile’s bills and its counterparts in the Lower House, House Bills 6208 and 6207, bravely ask for a change in government’s treatment of public service, including services provided by public utilities, as major source of revenue. In the case of the power sector, the bills seek to reduce the layers of taxes imposed on this industry to lower electricity prices.
Once passed, the twin bills stand to grant the much-sought economic relief of electricity consumers, especially the power intensive industries. According to Enrile, businesses and industries will have their power costs reduced from a low of P1.34 to a high of P2, while electric bills of residential consumers will go down by P1 at the very least.

Business groups openly support SB 3148, in particular, which aims to reduce the royalties collected by government from indigenous energy sources from 60% to 3% of net proceeds from the sale of such energy sources to lower electricity rates.
In a statement, Philippine Chamber of Commerce and Industry (PCCI) President Edgardo G. Lacson said that they support the redirection of government share of royalty for the reduction in electricity rates to end-users as stipulated in SB 3148. If passed, PCCI also hopes to see an adequate percentage of the fund from the royalties supporting energy efficiency initiatives to enhance the competitiveness of business enterprises.

Accounting for about two-thirds of total Philippine exports, the Semiconductors and Electronics Industry in the Philippines (SEIPI) has also been asking government to reduce the royalties in indigenous energy sources, like the natural gas of Malampaya, so that foreign investors will not transfer to other ASEAN countries which have more competitive power rates.

SEIPI President Ernie Santiago urged Malacanang to certify Enrile’s twin power bills as priority bills to ensure immediate passage.

“We hope that Malacanang and Congress will certify these proposed measures as priority bills so that the power rates in the country will be lowered, thus making our industries more competitive against neighboring Asian countries,” Santiago said.

The Foreign Chambers of Commerce through its chairman, Petteri Makitalo, likewise supports measures that will bring down electricity rates in the country. Makitalo says, “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.”

At the consumer front, groups such as National Association of Electricity Consumers for Reform (Nasecore) and Gabriela Women’s Party have been calling for the removal of the excessive taxes on electricity to ease the burden of residential consumers.

About half of Filipino families have reduced electric consumption in the face of double-digit inflation rates for basic necessities, according to Pulse Asia July 2008 Nationwide Survey on Coping with Double-Digit Inflation Rates.

“Malacañang can very well reduce our electric bills significantly and give much needed respite by removing taxes imposed on the power industry. Removing the VAT on electricity is by itself a form of direct subsidy to consumers,” said Gabriela Representative Liza Maza in a prior statement.

For his part, Nasecore President Pete Ilagan said, “Electricity costs would be lower if Enrile’s power reform bills are passed. The lower costs will be reflected in our monthly bills.”

Currently, government is charging power utility firms with a 12% value added tax (VAT) on top of a 32% corporate income tax, and a local franchise tax imposed on their gross receipts which they simply pass on as additional charges to consumers.

Under SB 3147, government will instead charge a uniform 3% franchise tax on the distribution income of distribution utilities in lieu of all national and local taxes.

Enrile said that both power reform bills will serve as an economic stimulus which will not only make industries more competitive, but will also contribute to more purchasing power to the consuming public.

The call for lower electricity cost has even spread into cyberspace. In a comment in the blogsite, www.murangkuryenteparasapilipino.wordpress.com, poster Jimmy Peña said, “Good news ito sa lahat ng mga Pilipino dahil malaking tulong ‘to lalo na sa ordinayong tao! Pag naisabatas ito, siguradong giginhawa tayong lahat. (This is good news to all Filipinos because it will be a big help especially to ordinary citizens. If the bills will have been passed, everybody will surely benefit from it.)

It also found its way into social networking sites such as Facebook where consumers have created a Murang kuryente para sa Pilipino page, where about 500 users have signed up as members.

The Philippine government earns billions and billions of pesos from taxing power utility firms as well as power generation companies when this should not be the case.

According to Senate President Juan Ponce Enrile, “All over the world, public utilities are never sources of revenues for government coffers. In the Philippines, however, the government imposes taxes on public utility firms which are so burdensome that utility firms have no choice but to pass these on to consumers.”

The senator stressed that given the hard times and the decreasing competitiveness of Philippine industries, it is high time that the Philippines emulate other more progressive countries in their treatment of basic needs such as electricity as a public service – not as a major source of revenues.

This, Enrile said, is what his proposed measures currently undergoing Committee deliberation at the Senate aim to achieve – “a paradigm shift that will see Filipinos enjoying electricity more as a public service, not as a public burden.”

Senate bills 3147 or the Uniform Franchise Tax Act and 3148 or the Electricity Rate Reduction Act share the same goal of bringing down costs of electricity in the country.

“Providing cheap electricity to Filipino consumers is a public service – serbisyo publiko, that is why government collects taxes so that they can perform that public service to the people,” said Enrile.

Under SB 3147, Enrile proposes that, in lieu of all taxes, government should instead charge a uniform 3% franchise tax on the distribution income of electric utilities.

Currently, government is charging power utility firms a 12% value added tax (VAT) on top of a 32% corporate income tax, and a local franchise tax imposed on their gross receipts.

Enrile clarified that, contrary to what others believe, this proposed measure will not benefit Meralco or other DUs as most of the taxes are passed-through expenses, with consumers shouldering the additional burden.

On the other hand, SB 3148 aims to bring down government royalties from indigenous energy sources from 60% to 3% of net proceeds of generation companies (Gencos).

The intent of tapping into our very own, natural, or the so-called indigenous energy sources is to have an alternative source to imported fuel. But, as it is, the senator says, indigenous energy resources end up more expensive than imported fuel.

Enrile also pointed out that the 60-40% arrangement between the government and power generation companies enacted by virtue of a presidential decree issued during the Marcos regime was based on a premise that energy coming from the country’s very own natural or indigenous sources will be exported to other countries – not for domestic consumption.

The senator said that, since these indigenous energy resources are, in actuality, being consumed domestically and are not being exported, there is no point in collecting this kind of onerous government royalties under what the senator calls “an anomalous taxation scheme”. In so doing, the senator said, the government is only punishing the Filipino consumers.

Lowering to 3% the 60% government share in Malampaya’s natural gas, for example, will result to lower priced natural gas for power generation companies. What will be saved by these gencos will, for one, be used by the government to remove and assume the cross-subsidy being shouldered by higher income bracket families, or those consuming above 100 kwh electricty per month. This is on top of utilizing these tax savings for the direct benefit of electricity consumers through reductions in the electricity bills they have to pay.

If passed, the proposed twin measures could lower electricity rate by at least P1 for residential users, and between P1.32 to P2 for industrial users.

For a household consuming monthly electricity of a minimum of 100 kilowatt-hours, savings would amount to at least P100. For lifeline users, most especially, this could make a lot of difference as this could be a one-week allowance for one of the children or a one-week supply of rice; for industries consuming thousands of kilowatt-hours of electricity, this could be the salary of one, two, or more workers, said the senator.

“The benefits from the proposed bills far outweigh the revenues that government will lose if the bills are passed,” said Enrile.

“Aside from making industries more competitive, if not making them stand a better chance at surviving the current economic challenges, lowering electricity rates will release substantial amounts of consumer purchasing power. This will translate to jobs preserved or created, continued government revenues from taxes from saved industries, as well as a more robust consumer-driven economy,” the senator said.

Senate Bills 3147 and 3148, authored by Senator Juan Ponce Enrile, aim to reduce electricity costs in the country by lowering the taxes levied to electric utilities and reducing the royalties collected by government from the development, exploration, and utilization of indigenous energy sources, respectively.

Experts say that electricity cost in the Philippines is one of the highest in Asia, second only to Japan.

“We support the twin bills’ passage. Mababawasan na ang binabayaran natin sa kuryente kapag naipasa ang panukalang ito (Electricity costs would be lower if these bills are passed),” said National Association of Electricity Consumers for Reform (Nasecore) President Pete Ilagan.

“The lower costs will be reflected in our monthly bills,” he added. According to Enrile, SB 3147 proposes a 3% franchise tax on distribution utilities’ gross distribution income in lieu of all national and local taxes. Consumers will no longer shoulder the burden of paying for additional pass on charges as a result of the imposition of value-added tax, corporate income tax and local franchise tax in the current system.

SB 3148, meanwhile, would reduce government royalties to lower electricity rates. With the passage of the two bills, consumers would be able to save “at least one peso per kilowatt-hour across the board, nationwide,” according to Enrile.

“Say, if a family consumes 200 kwh per month, that would translate to a savings of P200.00. It could mean at least 5 more kilos of rice, or at least 16 cans of sardines,” Enrile added.

“Sa ibang bansa, serbisyo publiko ang kuryente. Sa atin, hindi. Kaya pro-consumer itong mga bills na ito, (In other countries, electricity is a public service. This is not the case in the Philippines. So these bills are pro-consumer)” Ilagan added.

Enrile echoed Ilagan’s statements. According to the senator, “Allover the world, public utilities are never sources of revenue of government. Public service yon, serbisyo publiko, kaya kumokolekta siya ng buwis sa taong-bayan para you can perform that public service to the people. “

“The government now is treating distribution utilities as sellers of goods and piling up taxes on them. But they are not. The distribution utility should not be a major source of revenue for the government. The distribution of power is a public service because it is really the function of government to provide for this facility.”

Senator Enrile also welcomed the consumer group’s show of support, saying, “The show of support is a big boost for the passage of both bills. This shows that consumers are united in clamoring for lower electricity costs in the country.”

“I hope that these bills would be passed without any problems and before Congress goes into recess,” Enrile added.

# # #

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.

Power reform bills pending in the Senate stand to grant the much-sought economic relief  of electricity consumers.

This is what Senate President Juan Ponce Enrile, principal author of Senate bills (SB) 3147 and 3148, has been reiterating in an effort to drum up support for the power reform bills currently pending at the committee level. These twin bills intend to lower power costs in the country, one of the highest in Asia, by reducing government taxes and royalties on distribution utilities and power generation companies, respectively.

According to Enrile, “Industrial and marginalized residential electricity consumers shall benefit from the implementation of the proposed twin measures seeking to lower electricity rates in the country.”

Enrile likened the measures to a “stimulus package” during a time of economic crisis.

“Taxes lost to implement SBs 3147 and 3148 should be seen as part of a much needed ‘stimulus’ package that will redound to more benefits to the economy. Instead of the more arduous cycle of charging power and utility firms with high taxes or royalties to distribute these tax earnings later on in random to people, why not lower these taxes to lower electricity rates which shall directly benefit all electricity consumers,” says Enrile.

The senator explained, “Reduced electricity cost leaves consumers with more money to spend. On the other hand, as power comprises a significant cost of doing business, lowering power rates will benefit our industries by making their products and services more competitive, especially in international markets. This will, in turn, avert lay-offs and or shutdowns of factories and keep investments here. This shall ensure more jobs for Filipinos.”

Lowering power costs has long been Enrile’s advocacy even before the senatorial campaign in 2004. The passage of the twin bills will in effect be a fulfillment of the senator’s campaign promise of reducing power costs to provide consumers more purchasing power, and increase the chances for businesses to survive the global economic slump.

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.

On the other hand, SB 3148 or the Electricity Rate Reduction Act 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.