The government is considering the use of a portion of the P228-billion Malampaya fund to reduce power costs in the Philippines, an energy official said over the weekend.
“The DoE was informed that about P228 billion was deposited to the special account of the fund three months ago. This can be verified with the Department of Budget and Management, which is the steward of the account,” Energy Undersecretary Felix William Fuentebella said.
Fuentebella said previous disbursements from the proceeds of the Malampaya gas production field were made through Presidential Decree 910 that authorized the President to do so, but this was invalidated by the Supreme Court in 2013.
He said the use the Malampaya Fund was one of the government’s options to reduce power rates.
“Use the Malampaya to subsidize universal charges. There are bills filed in Congress to effect such subsidy,” Fuentebella said.
Another option was removal of the value added tax on power systems loss.
“The DoE already wrote to the DOF/BIR (Finance and Internal Revenue Bureau) on this and there are several bills in Congress that aims to remove tax on systems loss,” he said.
He said the department was also speeding up the permitting process and classifying energy projects and assets with national significance.
Fuentebella said the department was addressing price volatility in the market by implementing mitigating measures.
Other plans include the pursuit of segregation of losses, both technical and non-technical, with the end of lowering the cap.
“Pending bills for such segregation are filed in Congress,” he said.
Fuentebella said the implementation of competitive selection process in power supply contracts would help decrease power costs.
He said the department, in addition, would revisit the pricing methodology.
“The distribution and transmission costs approved by ERC is being re-examined,” he said, adding an improvement in the operations of electric cooperatives would help.
“Lower costs can be achieved in the long term with improved operations and robust distribution facilities of ECs,” he said.
Meanwhile, Shell Philippines Exploration B.V.’s arbitration case against the government on the Malampaya gas project’s corporate income tax issue has started to move forward.
Spex, operator of the Malampaya gas project in northwest Palawan filed the arbitration case with the International Center for Settlement of Investment Disputes or ICSID on June 27, 2016.
“It is pending before the International Centre for the Settlement on Investment Disputes. Parties to the case recently went to a process of selecting arbitrators,” Fuentebella said.