Wednesday, November 29, 2006 Abolition of Malampaya gas royalties to lead to P1 power rate drop
FIRST Gen Corporation (FGC) said the deletion of royalties on the Malampaya natural gas project would reduce electricity costs by about P1 per kilowatt-hour (kwh).
"We are proposing that the (Malampaya) royalties be taken out. However, by doing such, it could make the government lose revenues but again they have a lot of revenues already from VAT (value-added tax)," Federico Lopez, First Gen president told the Foreign Correspondents Association of the Philippines (Focap).
Lopez said by deleting the royalties, it would help make the power industry more competitive. The Philippines currently has the highest power cost among Southeast Asian countries.
But he said the removal of the royalties would need an amendment of Presidential Decree (PD) 87, which promotes the discovery and production of indigenous petroleum.
Citing the Electric Power Industry Reform Act (Epira), Lopez said the government can push for equalization of taxes on indigenous sources of energy but the government is not pushing for it.
The government is expected to earn an estimated US$637 million in royalties on the Malampaya project. The consortium operating the Malampaya gas project supplies natural gas to the Sta. Rita and San Lorenzo power plants in Batangas, owned by First Gas Power Corporation. (MSN/Sunnex)
