High power rates in Philippines force investors out: industry officials
Thursday, November 30, 2006
Nov 29, 2006MANILA
— The high cost of electricity is driving away hundreds of foreign investors from the Philippines, leading to huge job losses and anemic economic growth, top private utility officials said Monday.
Industry leader Oscar Lopez urged the government to slash taxes and royalties, and to plan well ahead for the needs of the next generation despite overcapacity that he said has plagued the sector since 1999.
Despite surplus generating capacity, the average industrial tariff here is 11 cents per kilowatt-hour, about double that of neighbors and foreign direct investment (FDI) rivals Malaysia, Indonesia, Thailand and Vietnam, he said.
Lopez, chief executive and chairman of Benpres Holdings Corp. said an outmoded royalties and tax regime kept power rates high and drives the industry toward imported energy supplies such as coal and oil. “It’s a major obstacle that holds us back from competing effectively with neighboring Asian countries for manufacturing jobs,” he told the Foreign Correspondents Association here.
Benpres is the Lopez family’s holding firm for generating and other assets that include top power distributor Manila Electric Co. (Meralco) and power plants, broadcasting, toll roads, construction, property and electronics.
Federico Lopez, president of unit First Gen Corp., said Meralco has lost betwen 400 and 500 industrial subscribers over the past year, which suggests manufacturers may be moving elsewhere “due to high power rates”. Oscar Lopez, his father, said the Philippines had one of the world’s lowest electricity rates in the late 1960s but this regime was gone forever due to peso depreciation, inflation and rising oil prices.
Despite the deregulation of the power sector in 2001 and increased use of locally available power generation to about 70 percent of total demand, “we still haven’t narrowed the gap in our electricity prices vis-a-vis our neighbors,” he said. Lopez-owned power plants use natural gas from the offshore Malampaya field but its gas purchase agreement was indexed to crude oil prices, which have more than quadrupled compared to 1998.
Oscar Lopez criticized the government for its natural impulse to “suppress and subsidize power prices” instead of addressing the root cause of high costs. Meralco is still repaying customers about 30 billion pesos (604 million dollars) in charges that the Supreme Court ruled illegal three years ago. — AFP
posted by philpower @ 7:32 AM,
