PCCI seeks to retain power sector perks

THE Philippine Chamber of Commerce and Industry ( PCCI) wants to retain power supply projects in missionary areas in the list of 2012 Investment Priority Plan (IPP).

In a statement, Miguel Varela, PCCI president said that the incentives provided to projects listed in the IPP are helpful in attracting investors and in reducing capital costs, which ultimately redound to the benefit of consumers.

“Capital costs account for about 70 percent of the total fixed costs of a power plant. The continuation of incentives could address three things: first, reduce the final power rate that will be charged to electricity end-users, second, encourage the building of urgently needed new generation capacity; and, third, facilitate the attraction to private investors, considering that importation of capital equipment is one of the major cost burdens during the start-up operations,” Varela said.

Varela said that it would be in the national interest to continue encouraging new investments in the cheapest available and most stable sources of energy found in baseload power plants which include coal, geothermal, natural gas, as well as hydroelectric, biomass and fuel oil. “Bringing in new baseload capacity will not only address the country’s precarious power supply situation due to the strong growth in electricity demand and the absence of new power plants, but would also help contain further increases in generation costs,” Jose Alejandro, vice president for Energy of PCCI said.

In the case of missionary areas operated by the National Power Corporation’s (Napocor) Small Power Utilities Group ( SPUG), PCCI said the retention incentives for fossil fuel-based power plants will facilitate privatization plans aimed at addressing unstable power supply. Last year, missionary areas had to endure rotating brownouts because lack of fuel brought about by NAPOCOR’S inability to pay its suppliers.

PCCI noted that for missionary areas, fossil fuel-based power plants provide the short-term option for rapid deployment and commissioning of supplemental power to meet the urgent, rapidly growing demand for electricity. It added that the removal of BOI incentives for new fossil-fuelled power plants will increase the true cost generation rate (TCGR) and concurrently increase the cost to government of existing subsidies in missionary electrification areas.

Conversely, if subsidies are reduced or removed in missionary electrification areas, elimination of BOI incentives will increase the true cost generation rate (TCGR) and further increase the cost of electricity at the consumer level.

PCCI said that removing BOI incentives now could potentially arrest tourism and labor-intensive, energy