Electronics sector renews call for lower power rates

The electronics industry has again called on the government to bring down electricity rates to make the country’s exporters more competitive amid an expected recovery of global demand.

Ernie Santiago, president of the Semiconductors and Electronics Industries in the Philippines, Inc., said all economic indicators pointed to a better market starting in the second quarter after the industry hit bottom in the first quarter and demand started to pick up beginning March.

“We are posting month-on-month improvement in export performance. We have seen the bottom of the ocean, so to speak, and there’s no way but up,” said Santiago.

He said electronics and semiconductor companies were directly competing with neighboring countries.

“We have to be cost competitive so that we can keep multinational companies here, as well as in the radar of foreign investors. How can we be competitive if we have very high power costs?” asked Santiago.

Power comprise 25 to 30 percent of industries’ cost of doing business.

“The Philippines has the highest power cost in the country, next to Japan, owing to layers of government charges that are then passed on to electricity consumers,” said Santiago.

The group vowed to support any government initiative to bring down electricity rates.

It said it was supporting the passage of the bill that proposes tax cuts in indigenous energy sources like Malampaya’s natural gas.

Senate Bill 3148, or the Electricity Rate Reduction Act, authored by Senate President Juan Ponce Enrile, seeks to remove the disparities in the treatment of royalties of indigenous energy sources not covered by the Renewable Energy Act of 2008, namely natural gas, oil and coal.

The bill proposes to reduce the government share or royalties collected in the exploration, development and production of indigenous energy sources to 3 percent of net proceeds of generation companies. The tax savings will, in turn, be redirected to lower electricity rates to Filipino consumers.

The proposed legislation is strongly supported by the business community including Seipi, which joined the bill’s technical working group.

Seipi said government royalties imposed on power companies tapping into the country’s indigenous sources of energy were “sky-high” if not totally prohibitive. It said the high royalties negated the intent of power companies to harness indigenous energy sources in their bid to reduce the country’s dependence on imported fuel.

SB 3148’s twin bill, SB 3147, completes the package of legislative measures which will reduce electricity rates in the country.

SB 3147, or the Uniform Francise Tax Measure, proposes a franchise tax regime where electric utilities are levied 3 percent tax on their gross distribution income in lieu of all national and local taxes.

The government is currently charging power utility companies with a 12-percent value added tax on top of corporate income tax, and a local franchise tax imposed on their gross receipts, which they simply pass on as additional charges to consumers. –Elaine Ramos Alanguilan, Manila Standard Today