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Highlights Of The 99th LEDAC Meeting Energy Savings and Independence Secretary Vincent Perez of the Department of Energy made a presentation with the following outline:
Power Sector Reforms Sec. Perez explained that power sector reforms were mandated by the Electric Power Industry Reform Act (EPIRA) or Republic Act (RA) 9136. RA 9136 provides for the privatization of the National Power Corporation (NPC), among others. Power sector reforms enumerated included sale of NPC generation assets, unbundling of electricity tariffs for transparency, and opening up of high voltage transmission lines for easy access of distributors and large consumers. Sec. Perez presented five EPIRA conditions required for open access and retail competition, namely:
He also cited other power sector reforms including the strengthening of electric cooperatives and the renegotiation of IPP contracts. Power Supply-Demand Profile (National, Luzon, Visayas, Mindanao) Sec, Perez informed the Council that by the period 2008-2014, the Philippines will require a total of 5,200 MW of which Luzon will need 3,600 MW from 2010 to 2014, Visayas will need 900 MW from 2008 to 2014, and Mindanao will need 700 MW from 2009 to 2014. NPC Financial Status Sec. Perez informed the Council that the consolidated NPC deficit last year was PhP 66.6B, and is estimated to reach PhP100B this year as NPC has been in deficit since 1998. This is due to the approved selling rates of NPC PhP/kWh price which is lower than the actual cost. In view of NPC losses and the significant increase in coal and oil prices in the last five (5) years, an action plan to address NPC’s financial situation was presented. The plan involves, among others, increasing power tariffs, NPC debt absorption by the national government (NG) and ensuring the successful privatization of the transmission company (TransCo) and generating company (Genco) assets. A timetable of future key milestones was also presented. Update on the Oil Industry Sec. Perez noted that international oil prices are at an all-time high due to concerns about the security of international oil supply. However, Sec. Perez explained that local pump prices as of August 20, 2004 (unleaded gasoline and diesel) are lower compared to those of other oil-importing nations and our ASEAN neighbors. Sec. Perez presented the revenue projections from a proposed tax measure (across-the-board increase of P2/liter). Revenue from the tax is expected to reach PhP34B for 2004 alone. Sec. Perez noted that oil as a percentage of both the power and energy mix was declining, reflecting government efforts to reduce dependence on oil. The transport sector accounted for the highest percentage share in oil consumption at 68%. Energy Agenda IndependenceSec. Perez presented the following five (5) Point Energy Independence Agenda as follows:
Legislative Agenda Sec. Perez identified the following legislative measures as critical to the country’s thrust of energy independence:
Conclusions Secretary Perez concluded his presentation by reiterating the urgency of implementing the following reforms to sustain economic growth as follows Energy reforms to sustain economic growth
On Power
On Downstream Oil Sector
On Energy Independence Energy independence can only be achieved through predictable energy policy promoting level playing field
Implementation of critical and strategic energy infrastructure are key to energy independence (Natural Gas & Renewable Energy Bills) Discussions Impact of Oil Price Hikes Senator Miriam Defensor-Santiago queried Sec. Perez whether the proposed tax measures generated external costs and whether these proposals were imposed as user fees for a public good. Secretary Perez replied that imposing an excise tax at the point of sale on petroleum products would result in inflationary costs. Senator Santiago also asked whether the tax measures would impact heavily on people with lower incomes. Secretary Perez assured that any tax imposed would have the least impact on socially sensitive products such as LPG and diesel. Senator Santiago queried whether the oil price crisis coupled with the new tax measures would result in a slowdown in the country’s economic growth. Sec. Perez replied that the DOE proposal is for the excise tax to be triggered only when oil prices start declining, and that this would be an opportunity for the country to focus on alternate forms of energy. Senator Santiago then asked whether the DOE could prevent private power distributors from taking advantage of NPC’s application for an increase in power rates. She noted that NPC has applied for an increase in rates (P1.85/ kWh) nationwide. Secretary Perez replied that he doubted whether the ERC would agree to the full amount being requested but admitted that he had no idea of what rate ERC would allow. Senator Santiago also asked what could be done to stop power distributors from passing on the increases to the consumers. The Energy Secretary’s answer was that the government cannot stop the power retailers from passing on these costs but instead should focus on reducing systems losses. Energy Conservation Schemes and Alternative Strategies Senator Santiago queried Sec. Perez about energy conservation schemes in other countries that may be applied in the Philippines. Senator Santiago cited the example of Thailand where fuel service stations are shut down by midnight and malls close earlier. Sec. Perez discussed the Department’s energy conservation proposals that include shutting down idling cars, placing stickers on cars to identify fuel efficiency rating, turning off lights in government offices during lunch, and closing air conditioning systems by 4 p.m. Senator Santiago inquired whether the higher oil prices would result in a reduction in the country’s GDP by 6% a year. Socioeconomic Planning Secretary Romulo Neri replied this is why government is promoting the use of indigenous energy resources to help reduce our dependence on foreign energy sources like encouraging production of geothermal energy. Likewise, he discussed the use of Malampaya liquefied natural gas (LNG) by motor vehicles. Congressman Butz Aquino made the following proposals in relation to rising fuel costs and the need to save government resources:
Senate Minority Floor Leader Pimentel suggested that the government study the claims of a Filipino inventor who had allegedly found a way to harness the waves of the sea to produce energy. Secretary Perez replied that DOE is awaiting a prototype of this invention that shall be tested in coordination with the Department of Science and Technology (DOST). Senate President Drilon proposed the conduct of three (3) studies, namely: creating fast lanes along EDSA; shutting down malls at a certain time to save power; and practicing daylight saving time as done in the United States. Franchise For Transco Concessionaire The Council discussed the need for a new franchise for Transco. Senator Enrile opined that there was no need for a new franchise citing Section 8 of the EPIRA law which stated that within six (6) months from the Act, transmission and sub-transmission facilities of NPC, including franchise for operation, shall be transferred to Transco. Moreover, he emphasized that this was not a matter of creating a new franchise but merely extending the term of the franchise. Congressman Miguel Zubiri raised his concern that failure to create a new franchise would only result in questions being asked later as in the case of MWSS. Meanwhile, Senate President Franklin Drilon proposed that the Department of Justice (DOJ) be consulted. Senator Enrile did not oppose this suggestion but he cited Section 21 (Privatization of TRANSCO) of the EPIRA for the consideration of the Council. PhP2 Across-the-board Levy on Fuel Products Senator Enrile asked Secretary Perez when he planned to impose the additional PhP 2 tax on fuel products as a revenue-raising measure. Secretary Perez said there was a trigger mechanism when fuel prices would go down. Secretary Enrile then replied how this could be justified to the people if government was to raise prices of fuel products through the tax the moment fuel prices go down. He then asked for a benchmark as to how much of a decrease in prices would warrant the imposition of the tax. Sharing the Debt Burden of NPC Senator Mar Roxas said government has to make it clear to legislators and to our people how much revenues it needs to raise and exactly for what purposes these revenues will go to. Moreover, he said that it is necessary for the fund flows to be set forth, and everything is made clear on how much of the burden is taken on by the National Government and the consumers. Senator Enrile pointed out that the NPC debts should not be passed on to the consumers. Sen Enrile stated that it is government that acquired those debts. Senator Roxas replied that all these figures have to be contextualized in the NPC debt problem and how it is to be resolved. Rep. Salceda proposed sharing of the burden between the NG, taxpayers and the consumers. Other Matters The Council agreed to postpone the ARMM elections together with the barangay elections. Speaker de Venecia’s Proposal for a Debt Relief Program The House Speaker requested Secretary Neri to work towards the crafting of a debt relief program, as one-third of the budget goes to debt service. He called for a renewed strategy that involves asking the help of the United Nations on the matter of debt relief. The Speaker mentioned this may require a new generation of Brady bonds with long term maturities. Secretary Neri noted the need to improve the country’s credit rating, as an improvement of one (one) percentage point would save the country PhP20B. Speaker de Venecia also suggested that the President speak about debt relief in the upcoming Political Parties Conference in Asia. The Speaker said this would be consistent with the Millennium Development Goals of the United Nations. An Agreement For a Meeting in September The Council agreed to have a meeting before Congress recesses on September 25, 2004 to discuss revenue measures as these all have to be explained and discussed further with the legislators. Likewise, it was suggested that the follow up LEDAC meeting discuss short term and long term measures to address the energy crisis. Rep. Salceda also suggested that the LEDAC Task Force (TF) on Tax Measures be convened prior to the LEDAC meeting to review and prioritize revenue measures. The TF outputs shall then be elevated to the Council for its approval. Download The Full Version Of This Document In Microsoft Word Format |
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