‘No foregone revenues if coal tariffs permanently removed’

INDEPENDENT power producers (IPPs) believe there is more to lose if tariffs on all types of coal would remain while a permanent removal of these would see more gains to the country and not impact revenues.

“Tariff removal would diversify the country’s import sources ensuring energy security and there is no foregone revenue as we traditionally import from Afta [Asian Free Trade Area] countries,” said Anne Estorco-Montelibano, president of the Philippine Independent Power Producers Association Inc. (PIPPA).

Montelibano spoke during a Tariff Commission hearing last Wednesday when she also said the group supports the petition by the Foundation for Economic Freedom. The nongovernment group FEF seeks to extend lower tariff rates on coal products under the tariff heading 2701.11.00, 2701.12.10, 2701.12.90 and 2701.19.00.

Members of the PIPPA are: SMC Global Power Holdings Corp.; Aboitiz Power Corp.; Semirara Mining and Power Corp.; First Gen Corp.; Quezon Power Philippines Ltd. Co.; AC Energy Corp.; TeaM Energy Corp.; Filinvest Development Corp.; and, Meralco PowerGen Corp.

The FEF, on the other hand, is managed by Trustees led by former Finance Secretary Roberto De Ocampo and Bangko Sentral ng Pilipinas Governor Felipe M. Medalla.

The FEF petitioned the extension of Executive Order (EO) 171 that lowered tariff rates on various imported commodities, which include coal products.

Export ban

MONTELIBANO said that aside from supporting the position of the FEF, the Pippa is also proposing “for the consideration of the body—the commission in modification—that we need to remove the tariff on coal.”

“Our rationale for this is we need to diversify imported coal sources.”

Montelibano, also a lawyer, explained that it has become imperative for the Philippines to diversify its coal sources amid geopolitical uncertainty surrounding Indonesia, which accounts for 99 percent of the Philippines coal imports.

She said that 99 percent of the country’s coal imports for power are sourced from Indonesia. She emphasized that “the January event, the coal export ban, exposed significant risks due to our dependence on Indonesian coal.”

Coal-fired power plants account for almost 60 percent of the country’s total power supply mix.

According to Montelibano, the political and regulatory uncertainty in Indonesia “poses an ongoing risk for the export ban recurring.” Hence, she urges that the Philippines should explore other sources of coal amid increasing worldwide coal prices.

“There is a need to ensure [the country’s] energy security,” she said. “This is the most important as we are recovering from a post-pandemic world and we are trying to achieve our goals to fully develop our country, we need a stable, reliable and sufficient energy supply.”

Stability, predictability

BASED on the Pippa’s estimates, the economy loses about P556 million for the loss of 500 megawatts in five hours.

Aboitiz Power Corp. Assistant Vice President for Fuel Management Team Mark John C. Lim said the permanent tariff removal will be “most ideal for us because that will enable us to contract longer term and provide more stability and predictability in terms of pricing.”

“This year, it has been helpful that tariffs were lifted temporarily but that also only enabled us to purchase on spot basis, meaning within the year,” Lim said. “But it has not able to give us enough stability to buy longer term because of the unpredictability of tariffs.”

The group estimated that an increase by $100 per metric ton of coal in the world market translates to an additional P1.7 per kilowatt-hour in terms of fuel cost.

Montelibano said that the Philippines loses P556 million in just five hours “if we don’t have stable electricity.

“Every time we experience a blackout or brownout, it greatly impacts our economy to the point that we lose that much,” she emphasized.


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