By Ted Cordero, GMA News Online
Note: This article was originally published last October 14, 2017 in GMA News Online.
Senator Joel Villanueva is set to file a resolution to look into the Energy Regulatory Commission's (ERC) policy in ensuring that banks, developers, and distribution utilities investing in coal-fired projects are not passing on stranded assets to consumers.
“We want to scrutinize if these banks and financiers have looked at the likelihood of stranded assets when they provided support to these power plants in correspondence to the proper implementation of environmental regulation, including a coal tax and a more effective energy competition policy,” Villanueva said in a statement.
The senator described the stranded coal plant assets that are not delivering an economic return in line with the expectations from the project as "a growing material and inevitable risk in the Philippines," citing a report by the Institute for Energy Economics and Financial Analysis (IEEFA) and Institute for Climate and Sustainable Cities (ICSC).
Citing the IEEFA and ICSC report's data, Villanueva said that stranded coal asset cost is already being realized in Mindanao due to an oversupply of approximately 700 megawatts (MW) of coal and hydro in an island grid lacking national connectivity.
From 2014 to 2016, stranded costs were conservatively equivalent to P3 billion or $60 million.
The country has 10,423 MW or $20.8 billion of largely imported coal expansion in its current pipeline. This runs on top of a total of 7,419 MW of existing coal-fired capacity.
With this, Villanueva said the issue “raises serious concerns on the country’s energy policy.”
“We have to make sure that consumers and taxpayers are not bearing the brunt of the disproportionate amount of risk brought by these stranded assets as compared to financers, developers, and distribution utilities,” he said.
The report further explained that the surplus of coal-fired power plants has led to a downtrend in utilization rates as compared to original expectations.
Villanueva is also seeking to assess the policy of ERC on energy mix and use of renewable energy, and the level of consideration of the said agency and major distribution utilities like Meralco on the competitiveness of liquefied natural gas and renewable energy in addressing a significantly rising share of demand growth.
Aside from the possibility of stranded coal assets in leading to higher electricity rates shouldered by consumers, it also runs the risk of acquiring losses for investors.
Villanueva also highlighted the situation of coal plants which are running at risk of a coal tax.
The Department of Finance is pushing to increase the 20-year old coal tax of P10 per metric ton to P20 per metric ton.
During the Senate deliberations on Tax Reform for Acceleration and Inclusion (TRAIN), Villanueva reiterated the objective of his filed measure, Senate Bill 1223, which amends PD 972 or the Coal Mining Development Act of 1976 wherein the senator intends to repeal the excise tax exemption enjoyed by coal mining industry for more than 40 years.
“We would like to note that, under the current rate of P10/metric ton, the government had foregone up to P120 million in excise taxes on locally produced coal in 2016, given our local production of 12 million metric ton of coal in the same year,” Villanueva stressed.
“Aside from the millions of foregone excise taxes on locally produced coal, government regulations have long neglected the environmental and health impacts caused by coal-fired plants being borne by consumers. Thereby, we deem it necessary to put a marginal increase in coal excise tax in exchange to coal’s adverse health and pollution costs,” the senator said.