Manila Bulletin
May 7, 2006
To avert any impending fare hike, the Department of Energy (DoE) is pushing that an Executive Order (EO) mandating reduction in import tariffs of crude and finished petroleum products to 1.0 percent from prevailing 3.0 percent be issued on or before May 15 this year.
Estimates have noted that this will ease impending price hikes by at least P0.50 per liter; thus, giving the government leverage to ask the transport sector’s consideration to defer any bid for a fare adjustment.
DoE director for oil industry management bureau Zenaida Y. Monsada noted that indications are positive for the EO’s issuance before the May 15 resumption of Congress’ session; as there were not much objections raised during a public hearing convened yesterday by the Tariff and Related Matters Committee on the proposed tariff cuts.
"They set May 5 as deadline for the submission of position papers…so, most likely EO will be issued before Congress session resumes," the energy official has stressed.
There are no mechanics and specific threshold levels set through for this policy proposal. The details are yet to be hammered out with the Departments of Finance, Energy and the National Economic and Development Authority.
"We just want to maximize benefits for public transport…but it should be implemented immediately so a fare hike can be avoided," Monsada added.
It would be noted that both during the reigns of former Energy Secretaries Mario V. Tiaoqui and Vincent S. Perez, the import duty reductions were also employed to cushion spikes of oil prices on the consumers.
The economic managers of the Arroyo administration have again seen this as a more viable option than the more sweeping propositions of other sectors to scrap the value added tax (VAT) charges on petroleum products; noting that such will reverse any modest economic gains already achieved by the country since the implementation of Expanded VAT Law last year.
And as the new string of price up-ticks are again disturbing government, consumers and the oil industry, activist groups are again turning to calls for the scrapping of the Oil Deregulation Law, the policy that mandated the inception of competitive forces in the oil market.
Energy secretary Raphael P.M. Lotilla, however, clarified that "the series of petroleum price increases in the domestic market is not caused by the implementation of the Oil Deregulation Law; but of distressing factors in the world market which is way beyond the control of the Philippines, an economy very much dependent on oil imports.
He added that local pump prices should have even been higher "if we are in a regulated environment under which the oil companies are assured of a return on their investments and a reasonable rate of return on rate base."
Based on DoE’s computations, it was indicated that with the prevailing prices at P34.24 per liter of diesel, prices would have been P40.91 per liter if the industry is still regulated; while gasoline prices would have been P45.05 per liter compared to only P38.24 per liter in the current deregulated set up.
"Going back to price regulation if only to halt the effect of the international prices in the domestic market would entail additional government resources and this is not fair because it will effectively displace national funds for other equally important projects," he cautioned.
The energy chief stressed that the Oil Price Stabilization Fund (OPSF) imposed during the regulated regime to absorb increases in world oil prices and to minimize frequent domestic price adjustments is no longer applicable and should not even be considered.(MMV)
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Manila Bulletin
May 6, 2006
CEBU CITY - Maximizing the use of the Leyte-Cebu Interconnection Uprating Project (LCIUP) has helped cushion the impact of oil price increases in the Visayas.
Dr. Alan Ortiz, chief executive officer of the project, said that the completion of the LCUIP in 2005 has saved the government some R500 million a month through the harnessing of full potential of the indigenous power in Leyte.
Eduardo Eroy, National Power Corp. (Napocor) vice president for the Visayas, said that the optimum use of the geothermal power in Leyte and Oriental Negros has earned for Napocor monthly savings of some R200 million.
The two officials said that with the full use of the Leyte-Cebu Interconnection, more expensive and oil-guzzling power plants in the Visayas were shutdown. In Cebu, for example, the land-based gas turbine plants 1 and 2 in Naga has been placed on economic shutdown since the commercial operation of the Leyte-Cebu Interconnection.
Another coal-fired power plants, the Cebu thermal power plant and some of the diesel units in Naga that were maintained and operated by Salcon Power Plant were also placed on economic shutdown and served only as back-up supply.
Cyril del Callar, Napocor president, said that the increasing cost of fuel has prompted the power firm to maximize the use of oil-based power plants that accounted only 14 percent of the total generation in 2005.
Meanwhile, Ortiz reported that Transco has now shifted its focus on projects that would use geothermal energy, especially on Panay Island where demand for power is high.
He bared that only recently, Transco completed the Panay-Boracay Interconnection project that is expected to boost the power supply of the top tourist destination of the country (Boracay).
Energy Secretary Raphael Lotilla said recently that oil prices are expected to increase in June and July as crude prices in the world market continue to soar.
He said, however, that the government is doing its best to cushion the impact by promoting alternative sources of energy and implementing austerity measures in government offices.
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By Donnabelle L. Gatdula
The Philippine Star 05/06/2006
First Gas Power Corp. (FGPC), a subsidiary of the Lopez-owned First Generation Holdings Corp., announced Thursday another positive development in its arbitration proceedings with Siemens due to contract differences.
In a disclosure to the Philippine Stock Exchange, First Gen said the Arbitral Tribunal issued its third interim ruling and awarded FGPC $11.2 million (including the $5-million balance of liquidated damages payable pursuant to the second interim award), and Siemens $8.5 million, respectively.
"We are delighted that FGPC has received positive awards from the Arbitral Tribunal, which have affirmed that FGPC was not responsible for the delays which occurred during the construction of the Santa Rita power plant in 1999 and 2000," First Gen vice chairman Peter Garrucho Jr. said.
Garrucho said the arbitration has taken up a considerable amount of management time thus "we now look forward to putting this matter behind us, and to intensify our focus on the development of new projects and hope that, as a company, we can renew our ties with Siemens."
FGPC in November 2005 received a positive development in arbitration proceedings originated by Siemens concerning the allocation of responsibility, and payment of damages, arising from the delay in the completion of the Santa Rita plant.
The Arbitral Tribunal published its second interim award and ruled that FGPC was entitled to the full amount of liquidated damages due to delays in the aggregate amount of $99.3 million – of which sum FGPC had already withheld $94.3 million from interim payments that would otherwise have been due to Siemens.
The awards given by the tribunal are exclusive of interest and yet to be calculated. These will be dealt with in a future award if not previously agreed upon.
After adjustments are made to the amounts awarded to each party to account for interest, FGPC anticipates that a net cash balance will still be payable by Siemens to FGPC; and FGPC will remain entitled to retain all of the $94.3 million previously withheld from Siemens. The amounts involved will likely result in prepayment of loans as required under FGPC’s financing documents.
The tribunal will determine the remaining issues (principally relating to the costs of the proceedings, and any unresolved issues concerning interest) in a final award which is expected to be published later in 2006.
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By Donnabelle L. Gatdula
The Philippine Star 05/06/2006
The independent Philippine Petroleum Companies Association (IPPCA) is in favor of the proposed tariff reduction on imported petroleum products but is strongly opposed to the imposition of the tariff differential between crude and finished petroleum products.
"The Supreme Court has already ruled on the unconstitutionality of the tariff differential. It will result to eventually placing the consumers on a disadvantage. This will go against the interest of the public," said IPPCA president Glenn Yu.
Yu said the tariff differential will favor certain sectors of the industry. "This will create an unequal playing field. We should remember that 14 percent of the industry is being supplied by independent players."
On the tariff reduction on imported fuel products, Yu said "provided this will be applied on all fuel products and will be revenue neutral for the oil firms, it is a good proposal."
The government has floated the idea of imposing a tariff differential between crude and finished petroleum products in a bid to lure oil companies into investing in refineries in the Philippines.
Energy Secretary Raphael P.M. Lotilla earlier said the differential would spur interest among oil companies like Pilipinas Shell Petroleum Corp. and Petron Corp. to revitalize their refinery operations in the country.
He said oil refiners are enjoying the fruits of having stayed in the Philippines because refineries are earning better than oil importers amid the regime of high oil prices.
"Of all the oil companies in the Philippines, the refineries right now that are in a better financial position because of the (price) differentials between crude and refined products. And that’s a phenomenon all over the world," Lotilla said.
The energy chief noted that the price difference between crude and refined products based on Mean of Platts Singapore (MOPS) had widened. Refiners, which use crude as a primary blend, are not as heavily hit by high oil prices unlike petroleum importers.
"Even without tariff differential right now, there is an incentive finally after so many years of being not as competitive as direct importers," Lotilla said.
Consumer and Oil Price Watch (COPW) chairman Raul T. Concepcion echoed Yu’s position, saying that the proposed tariff differential, which if approved will encourage oil refiners to continue investing in the country, still needs careful study by the government.
Based on the original Oil Deregulation Law or Republic Act 8180 signed in 1996, there was a four-percent tariff differential between imported and refined products but this was nullified by a Supreme Court ruling.
The tariff differential was cited as among the provisions that rendered the said law unconstitutional.
As a result, the remedial legislation under RA 8479 or the Oil Deregulation of Law of 1998 took out the said policy.
At present, both crude and finished products share a uniform five-percent tariff.
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Manila Bulletin, May 5, 2006
State-owned National Power Corporation (NPC) reported that it saved as much as P14.022 billion last year; primarily due to the economic load dispatch of its power plants.
The company noted that P9.884 billion was trimmed down from its operating costs due to economic load dispatching; and while the other bulk of savings amounting to P3.834 billion came from deferment of capital expenditures.
"NPC saves an estimated P14 billion in 2005 following the continued implementation of stringent cost-cutting measures, including economic load dispatching and the prioritization of capital expenditures," the company has noted.
With the optimized use of local coal thru blending with imported supply, this likewise resulted in P44.286 million cut in the power firm’s costs.
Savings have further been achieved from the adoption of electronic bidding for supply and equipment, to the tune of P60.995 million; while cost-cutting in operating expenses logged P199.223 million in additional savings.
The power firm last year was reported to have wiped out its previously registered huge losses; and managed to put in modest pre-audited income of P16 million.
Given, however, that it still needs to settle some enormous indebtedness; including bullet repayments amounting to 0 million, power firm officials stressed that they cannot totally set themselves free yet from acquiring new set of loans.
Its successor-company, the Power Sector Assets and Liabilities Management Corporation (PSALM) sounded off that it would still need to secure new loans for NPC this year; but the level of borrowings is expected to soften.
NPC president Cyril C. del Callar noted that the diversification strategy in the country’s power mix worked well in their bid to significantly bring down operating costs - especially in reducing oil consumption to run generation plants.
"The new generation mix also made available financial resources that we will be able to use to implement projects," he said.
At the same time, he noted that the power firm’s move to utilize more renewable power sources, as well as indigenous fuel sources, "has lessened our dependence on imported fuel oil and at the same time, help assure the country of its security of supply."
He added that "having a stable power supply in the long-term results to sustained economic growth. This also increases our country’s competitive advantage in the international market, giving us a solid foundation to pursue our own national development goals." (MMV)
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By Donnabelle L. Gatdula
The Philippine Star 05/05/2006
The National Power Corp. (Napocor) realized savings of about P14 billion in 2005 with its continued implementation of stringent cost-cutting measures, including economic load dispatching and the prioritization of capital expenditures.
Based on the power firm’s data, the biggest chunk of the savings — amounting to P9.88 billion — resulted from the economic load dispatching of its power plants.
Under the company’s cost-cutting measure, plants that are more efficient and have lower fuel costs are dispatched first in order to minimize the use of the more expensive plants.
The 2005 savings from economic load dispatching were almost three-fold or 190 percent higher than the year-ago figure of P3.4 billion.
Napocor also saved another P3.83 billion through the prioritization of capital expenditures.
The company has been focusing on key capex requirements that have been certified urgent and were considered crucial in ensuring the operational capability and efficiency of Napocor plants.
In 2004, Napocor was able to realize savings of P3.79 billion from the focused-capex scheme.
According to Napocor, the 2005 savings from implementing these measures did not reflect yet its reduced contractual obligations to some of its independent power producers, and from the increased operational efficiency of its power plants.
These two measures yielded savings of P8.06 billion and P583 million, respectively, in 2004.
Napocor said it also recorded savings of P199.22 million from the reduction of operating expenses, including strict limitations on foreign travels and training, and other controllable expenditures.
About P61 million savings were also realized from the adoption of the electronic bidding system, which enabled the power generation company to secure competitive tenders for its fuel and materials/supplies requirements.
Some P44.29 million worth of savings were also generated from the optimum use of local coal through blending with imported coal.
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By Donnabelle L. Gatdula
The Philippine Star 05/05/2006
The government is mulling the possibility of giving another P1 per liter discount to public utility vehicles (PUVs), using the proceeds from the reduction of the tariff duties on imported petroleum products from three percent to zero, a top energy official said.
Energy Secretary Raphael P.M. Lotilla said that every one-percent reduction in tariff duties would result in foregone revenues of P2.5 billion for the government.
The government, however, would be wiling to allot these revenues through a so-called focused two-tiered pricing system that would benefit legitimate public utility vehicles (PUVs).
"Pursuant to President Arroyo’s instructions, we are looking for alternative ways of giving focus on providing discounts to public utility vehicles – we need to explore other alternatives. Currently, the discounts are being given and charged to the oil companies themselves and they do this through their jeepney lanes," he said.
Under the proposed scheme, instead of the government collecting the tariff from the oil firms, it would ask them to reflect the savings realized from the tariff cut in their pump prices.
The Department of Energy is further proposing that the savings generated by the oil firms from the tariff reduction be reflected only as discounts for PUVs instead of spreading the savings to all their pump products.
If the tariff reduction proceeds would be spread out to all petroleum products, it would only result to a drop in prices of between 30 to 35 centavos per liter. But if applied to PUVs, the reduction could reach P1 per liter.
"We’re trying to explore a two-tiered pricing system for PUVs. We said we want that to benefit as many PUVs as possible, especially now that fuel prices have been increasing. For instance, at P2.5 billion, for every percent reduction in tariff duties you’re going to spread across all fuel products in two that would amount to a reduction of around 30 to 35 centavos per liter. From that everybody would benefit including the gas-guzzlers, the richer classes to consume even more fuel than any other classes, so this would be some sort of a reverse subsidy and we don’t want that to happen,"he said.
The energy chief admitted, though, that they have yet to firm up the mechanism for the proposed "well-targeted discount scheme."
"What we’re trying to explore is how we can channel, for example, the P2.5 billion from the one-percent reduction from tariff duties to a discount system focusing only on PUVs because we want to help the mass transport system, drivers and we want to make sure that the public at large using the PUVs would also benefit. It would be an additional discount on top of the existing one-peso discount provided by oil companies," he said.
He said they would be able to determine the bonafide beneficiaries of such discount through the aid of information technology or an ID system. According to Lotilla, they would be using an "in-house technology" to develop this system.
So far, public transport groups have been enjoying a P1 per liter discount in the so-called jeepney lanes designed by the local oil companies. This time, another P1 per liter discount will come from the government’s pocket.
A total of 525 gasoline stations nationwide are now offering P1 discount on diesel to public transport vehicles.
"We are very pleased to note that the oil companies have heeded the government’s call to assist the public transport groups in light of rising fuel prices. From only about 366 two weeks ago, we have now 525 service stations giving P1 per liter discount on diesel. And the number is growing as oil companies are concerned about losing their market due to intense competition," Lotilla said.
The 525 gasoline stations are strategically located along the major routes of public transport to ensure that they are being served. In fact, 252 stations are in Metro Manila, 118 in South Luzon, 80 in North Luzon, 32 in the Visayas and 43 stations in Mindanao.
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