The Department of Energy (DOE) and players in the electric power industry are appealing for temporary exemption on the payment of value added taxes (VAT) as well as suspension of excise taxes for coal and oil as fuel for power generation, to spare Filipino consumers from drastic spikes in electricity rates especially during the summer months.

This has been among the solutions proposed by the Philippine Independent Power Producers Association Inc. (PIPPA) in a meeting convened by the DOE over the weekend amid the rising costs of oil and coal commodities in the world market.

For coal, which is the country’s dominant fuel for power generation, it was noted that cost spikes could drive up electricity rates by P9.00 per kilowatt hour (kWh) based on the prevailing coal trading price of $446 per ton.

Given surging coal prices in the international market, PIPPA likewise pleaded to the energy department for it to relax “the 30-day coal inventory requirement for generation companies,” so they will have leeway “to better manage coal delivery schedules.”

To aid the GenCos in their bid for tax suspensions, the DOE has requested PIPPA “to submit a formal paper on the price simulations, including their recommendations in addressing the anticipated electricity price increases.”

The DOE indicated it will initially evaluate the ‘tax suspension recommendation’; and will correspondingly raise that concern in this week’s meeting of the National Economic Development Authority-Economic Development Committee.

“We want to work with our electric power industry stakeholders in securing the sufficiency of our power supply, as well as in creating solutions to help arrest rising electricity costs,” Energy Secretary Alfonso G. Cusi stressed.

In the case of the gas-fired power plants of which fuel costs are oil-linked; as well as the oil plants that are depended upon by the power system for peaking needs, the astronomical rise of oil prices in the world market are similarly seen driving up electricity rates in the weeks and months ahead.

Apart from tax suspension, the power companies are also batting for an interim ditch of the secondary price cap in the Wholesale Electricity Spot Market (WESM). Nevertheless, that will entail that if there will be successive spikes in spot trading prices, it cannot be tamed anymore at P6.245 per kWh once the prescribed thresholds are breached.

The other solution recommended by PIPPA would be for the DOE to assist in seeking the imprimatur of the Energy Regulatory Commission (ERC) to allow “possible recovery of the impacts of fuel price increases – even on a staggered basis.”

Additionally, the power firms have sought for the allocation of subsidy to targeted end-users of electricity – and such must be sourced from the Malampaya fund.

Beyond addressing highly probable spikes in electricity tariffs, the energy department stated that it also sought the firm commitment of the generation companies “to ensure their full availability during the critical summer and election periods.”