Electronics firms hope for reduced power rates by early 2005
Business World, Dec. 310, 2004
Power distributor Manila Electric Company (Meralco) said that if the firms want to cut on power cost immediately, the "block" power scheme is more feasible than the "transitory open access" scheme that is being proposed by its industry group.
Semiconductor and electronics firms, as large power consumers, have been asking for reductions in electricity rates given that the industry they represent is the country's top export winner. Last year, the industry contributed 68% to the country's annual exports. The industry claims that electricity rates in the Philippines is one of the highest in the region.
The Semiconductor and Electronics Industries in the Philippines, Inc. (SEIPI), which represents the 800-strong semiconductor and electronics players in the country, wants the immediate roll-out of the industry-specific power-saving "transitory open access" scheme, expecting to have it implemented as early as January or February next year.
But Meralco vice-president and head for utility economics Ivanna G. dela Peña told BusinessWorld Online in an interview that the "block" power scheme is in accord with the EPIRA law or the Electric Power Industry Restructuring Act. No. 9136. This is because the law also specifies that the mass implementation of the "open access" scheme should start only in July 2006.
While the "open access" scheme allows large power consumers to choose from a number of independent power producers (IPPs) for direct connection,without passing through the lines of power distributors, the "block" power scheme assigns only one IPP to cover a certain area through a discounted arrangement with a distributor such as Meralco.
Ms. dela Peña added that once implemented early next year, the "block" power scheme will be the second phase of the government's efforts to provide reduced power prices for industry locators inside the economic zones of the Philippine Economic Zone Authority (PEZA).
Released in May, a memorandum circular signed by PEZA, Energy Regulatory Commission (ERC), and the Department of Trade and Industry (DTI) has exempted ecozone firms from paying the two percent distribution franchise tax by requiring power distributors supplying electricity to special economic zones led by Meralco to register with PEZA.
Power distributors who registered are now counted as PEZA locators which can avail of the special 5% tax on gross income incentive.
In a separate interview, SEIPI vice-president Arthur R. Tan, who chairs the group's energy initiative committee, told BusinessWorld Online that the roll-out of the open access is heavily dependent on the response of Meralco.
Mr. Tan said the Department of Energy (DoE) has already considered their proposal to get the "transitory open electricity access" early next year, way ahead of the 2006 mass implementation.
Semiconductor and electronics players in the country are as the biggest consumers of electricity in the manufacturing sector. SEIPI estimates that the "open access" scheme will lower the cost of electricity by at least one peso per kilowatt-hour.
"Everybody is agreeing, the issue is in the implementation. How Meralco is going to do it because they are the distribution, we got all the generators all lined up. Truly it is Meralco that is holding that up. They are trying to figure out how they are able to implement this without having discriminatory effects with other users. I think that is more the problem," said Mr. Tan.
According to a SEIPI study, electric power costs here make up as high as 41% of the total operating costs of some firms. For other companies, power cost is seen to eat 20% to 30% of their total operating cost. In other countries electric power cost normally makes up for only about 10% of the total operating budget.
The study showed that the cost of electricity per kilowatt-hour is about $.09 in the Philippines, the highest in the five countries composed of Philippines, Thailand, Malaysia, China and Indonesia. In Indonesia, the cost is only $.03 per kilowatt-hour. Electric costs in Thailand, Malaysia and China are $ .06, $.05 and $.03 respectively.
Power distributor Manila Electric Company (Meralco) said that if the firms want to cut on power cost immediately, the "block" power scheme is more feasible than the "transitory open access" scheme that is being proposed by its industry group.
Semiconductor and electronics firms, as large power consumers, have been asking for reductions in electricity rates given that the industry they represent is the country's top export winner. Last year, the industry contributed 68% to the country's annual exports. The industry claims that electricity rates in the Philippines is one of the highest in the region.
The Semiconductor and Electronics Industries in the Philippines, Inc. (SEIPI), which represents the 800-strong semiconductor and electronics players in the country, wants the immediate roll-out of the industry-specific power-saving "transitory open access" scheme, expecting to have it implemented as early as January or February next year.
But Meralco vice-president and head for utility economics Ivanna G. dela Peña told BusinessWorld Online in an interview that the "block" power scheme is in accord with the EPIRA law or the Electric Power Industry Restructuring Act. No. 9136. This is because the law also specifies that the mass implementation of the "open access" scheme should start only in July 2006.
While the "open access" scheme allows large power consumers to choose from a number of independent power producers (IPPs) for direct connection,without passing through the lines of power distributors, the "block" power scheme assigns only one IPP to cover a certain area through a discounted arrangement with a distributor such as Meralco.
Ms. dela Peña added that once implemented early next year, the "block" power scheme will be the second phase of the government's efforts to provide reduced power prices for industry locators inside the economic zones of the Philippine Economic Zone Authority (PEZA).
Released in May, a memorandum circular signed by PEZA, Energy Regulatory Commission (ERC), and the Department of Trade and Industry (DTI) has exempted ecozone firms from paying the two percent distribution franchise tax by requiring power distributors supplying electricity to special economic zones led by Meralco to register with PEZA.
Power distributors who registered are now counted as PEZA locators which can avail of the special 5% tax on gross income incentive.
In a separate interview, SEIPI vice-president Arthur R. Tan, who chairs the group's energy initiative committee, told BusinessWorld Online that the roll-out of the open access is heavily dependent on the response of Meralco.
Mr. Tan said the Department of Energy (DoE) has already considered their proposal to get the "transitory open electricity access" early next year, way ahead of the 2006 mass implementation.
Semiconductor and electronics players in the country are as the biggest consumers of electricity in the manufacturing sector. SEIPI estimates that the "open access" scheme will lower the cost of electricity by at least one peso per kilowatt-hour.
"Everybody is agreeing, the issue is in the implementation. How Meralco is going to do it because they are the distribution, we got all the generators all lined up. Truly it is Meralco that is holding that up. They are trying to figure out how they are able to implement this without having discriminatory effects with other users. I think that is more the problem," said Mr. Tan.
According to a SEIPI study, electric power costs here make up as high as 41% of the total operating costs of some firms. For other companies, power cost is seen to eat 20% to 30% of their total operating cost. In other countries electric power cost normally makes up for only about 10% of the total operating budget.
The study showed that the cost of electricity per kilowatt-hour is about $.09 in the Philippines, the highest in the five countries composed of Philippines, Thailand, Malaysia, China and Indonesia. In Indonesia, the cost is only $.03 per kilowatt-hour. Electric costs in Thailand, Malaysia and China are $ .06, $.05 and $.03 respectively.
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