DOF rejects bid to cut NG's share in energy projects

MANILA, Philippines - The Department of Finance (DOF) has thumbed down a proposal filed at the House of Representatives seeking to reduce to three percent the government’s share in the proceeds of contracts utilizing indigenous energy resources.

At present, the government’s share from service contracts involving various indigenous power sources range from two percent to 11.11 percent.

Two pending measures at the House of Representatives, however, are seeking a reduction of electricity rates through a reduction in the government’s share in the proceeds of indigenous power contracts.

The bills, filed by Rep. Salvacion Ponce Enrile (first district, Cagayan) and Jonathan Dela Cruz (Abakada-Guro Party List), seek to develop the competitiveness of indigenous sources of energy against imported fuels and to improve the country’s energy self-sufficiency.

The pending measures also seek to determine the true and lower cost of electricity generated from indigenous sources of energy.

However, the DOF’s National Tax Research Center (NTRC) said that the proposed reduction of the government’s share is “untimely considering that the government needs all the revenues it can collect in order to keep the economy afloat and to respond to the global financial crisis.”

The NTRC also said that the lowering of the share would mean that the government would have to look for other sources of revenues to compensate from the reduction.

While it stressed that its supports the proposal to lower electricity rates to Filipino consumers, the NTRC said that the government is earning a substantial amount from its share in indigenous power contracts.

The annual tax collections form the Malampaya Natural Gas Project from 2002 to 2005 amounted to P3.961 billion.

“In 2005 alone, the government share from the operation of the Malampaya project amounted to P2.393 billion,” the NTRC said.

The government’s share in the Malampaya contract is 11.11 percent.

The Malampaya consortium, which operates the 2,700 MW deep water-to-gas project, consists of Shell Philippines Exploration B.V. (Spex) and Chevron Texaco, each holding a 45 percent stake in the project.