November 26, 2022

INDEPENDENT POWER PRODUCERS (IPPs) believe there is more to lose if tariffs on all types of coal stayed in place, while removing these tariffs permanently would bring more benefits to the country and not hurt revenues.

“Eliminating the tariffs would diversify the country’s import sources and ensure energy security, and there is no lost 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 was speaking during a Customs Commission hearing last Wednesday, when she also said the group supported the Economic Freedom Foundation’s petition. The non-governmental organization FEF aims to extend lower tariff rates to coal products under tariff numbers 2701.11.00, 2701.12.10, 2701.12.90 and 2701.19.00.

PIPPA members 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 administered by trustees headed by former Finance Minister Roberto De Ocampo and Bangkok Sentral ng Pilipinas Governor Felipe M. Medalla.

The FEF requested the extension of Executive Order (EO) 171, which reduced tariffs on various imported goods, including coal products.

export ban

MONTELIBANO said that the Pippa not only supports the FEF’s position but also “proposes for consideration by the body – the Amendment Commission – that we need to abolish the coal tariff”.

“Our reason for doing this is that 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 around Indonesia, which accounts for 99 percent of Philippine coal imports.

She said that 99 percent of the country’s coal imports for electricity come from Indonesia. She stressed that “the January event, the coal export ban, presented significant risks due to our dependence on Indonesian coal”.

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

According to Montelibano, political and regulatory uncertainty in Indonesia “poses an ongoing risk of the export ban being repeated”. Therefore, she urges the Philippines to explore other sources of coal in light of rising global coal prices.

“It has to be secured [the country’s] Energy security,” she said. “This is the most important thing as we recover from a post-pandemic world and try to achieve our goals to fully develop our country. We need a stable, reliable and sufficient energy supply.”

stability, predictability

Based on Pippa’s estimates, the economy loses about 556 million pesetas for losing 500 megawatts in five hours.

Mark John C. Lim, associate vice president for Aboitiz Power Corp.’s fuel management team, said the permanent elimination of tariffs is “most ideal for us because it allows us to enter into longer-term contracts and have more stability and predictability in terms of.” to offer the pricing”.

“This year, it helped that tariffs were temporarily lifted, but it also allowed us to only buy locally, so within the year,” Lim said. “But it didn’t give us enough stability because of the unpredictability of tariffs.” to buy longer-term.”

The group estimated that a $100 per tonne increase in coal in the world market translates into an additional 1.7p per kilowatt hour in fuel costs.

Montelibano said the Philippines will lose 556 million pesos in just five hours “if we don’t have a stable power supply.

“Every time we experience a blackout or brownout, it impacts our economy so badly that we lose so much,” she said.