Friday, July 25, 2008 Gov't open to removal of royalties from natural gas: Mikey
PAMPANGA Representative Juan Miguel "Mikey" Arroyo said the government is willing to forego the royalties on natural gas if this will help bring down power cost.
Arroyo, head of the House committee on energy, said they are now reviewing possible amendments to the Electric Power Industry Reform Act of 2001 (Epira) to look into other provisions among them the cut in royalties of the government on natural gas which is said to be at 60 percent as mandated by the law.
"We will look into the possible cut in royalties of the government. But we will also consider that the government will not be on the losing end when its royalties are cut. Also the government's pro-poor programs which are funded by the royalties should not be affected," he said.
Earlier, the Lopez Group, owner of the 1,000-megawatt (MW) Sta. Rita and the 500-MW San Lorenzo natural gas-fired power plants in Batangas Province, are pushing for the removal of the royalties from natural gas which would effectively lower down the power prices.
The two plants serve almost half the supply requirements of the Manila Electric Company (Meralco), the largest power distributor in the country.
The government collects 60 percent as royalties from the sale of Malampaya gas to the First Gas plants and to the 1,200-MW Korean-owned Kepco Ilijan facility, also in Batangas.
First Gas data indicated that the government collects a total of P21.76 billion in royalty tax from First Gas, and another P15.14 billion from Ilijan power plant for this year alone.
Leaders of the power industry said removing the royalties combined with removal of value-added tax (VAT) on electricity will result in reduction of P1.25-per kilowatt-hour in consumers' electricity bills.
Congress is also studying the provisions of system loss and generation charges in the Epira Law.
System loss charges, according to Arroyo, should be shouldered by the companies saying "investors should also lower their profits which is why they should minimize or scrap system loss."
Early this week, Energy Regulatory Commission (ERC) Chairperson Zenaida Ducut said they will review the possible lowering of the 9.5 percent system loss cap.
The recovery of system loss charge is provided for in Republic Act 7832, or the Anti-Pilferage Law, which allows distribution utilities and electric cooperatives to recover their costs for system losses, or electricity lost through technical loss or power theft.
The law also states that after four years, the private distribution utilities will have to file their respective applications to lower their system loss cap.
However no distribution utility has ever filed for the lowering of the cap since 2004. (MSN/Sunnex)
