PE2 seeks "TRAIN-proof" incentives in EE&C bill

  • House Committee on Ways and Means deliberation on TRAIN-2 on 31 July 2018, with (rightwards, starting with third from right) committee chairman Dakila Carlo Cua, Speaker and committee member Gloria Macapagal-Arroyo and committee director Mauricio Pulhin. (PE2 photo by Luigi Eusebio)
    House Committee on Ways and Means deliberation on TRAIN-2 on 31 July 2018, with (rightwards, starting with third from right) committee chairman Dakila Carlo Cua, Speaker and committee member Gloria Macapagal-Arroyo and committee director Mauricio Pulhin. (PE2 photo by Luigi Eusebio)

HOUSE OF REPRESENTATIVES, QUEZON CITY, 31 July 2018 – The Philippine Energy Efficiency Alliance (PE2) filed with the House Committee on Ways & Means (CWM) earlier today a new position that proposes new language on fiscal incentives in the pending Energy Efficiency and Conservation (EE&C) Bill, which anticipates the outcome of the parallel legislative process for the TRAIN-2 Bill.

PE2 foresees that the current language on fiscal incentives remains weakly anchored on Executive Order No. 226 or the Omnibus Investment Code of 1987. PE2 president Alexander Ablaza explained in the letter that the TRAIN-2 Bill is considering to repeal fiscal incentive provisions of Executive Order No. 226. For this reason, the Alliance officially asks CWM to modify Section 20 on Fiscal Incentives of the EE&C Bill with new language that will be able to:

  • Specify the recommended incentives for Energy Efficiency Projects that will be needed to ensure the financial viability of Energy Efficiency investments;
  • Remove its express reference to Executive Order No. 226;
  • Identify the Board of Investments (BOI) as the lead investment promotion agency to administer the fiscal incentives for Energy Efficiency Projects;
  • Remove restrictions on ownership by nationality; and,
  • Define a minimum 15-year availment of the recommended fiscal incentives.

PE2 has repeatedly emphasized in previous manifestations that the economy will need to incentivize local and foreign capital flows toward Energy Efficiency Projects with an appropriate package of tax-based fiscal incentives that would make third-party investments commercially viable. The Alliance now asks lawmakers for the Board of Investments (BOI) to administer fiscal incentives, which shall specifically include a 6-year income tax holiday, zero-rated value added tax and duty-free importation of capital equipment, for Energy Efficiency Projects to be endorsed by the Department of Energy (DOE). 

PE2’s proposed incentives provision includes language which ensures the automatic inclusion of Energy Efficiency Projects in the Strategic Investments Priorities Plan ("SIPP") during the first 15 years from the passage of the EE&C Act. Such language expressly indicates the legislative intent to ensure the availability of incentives for Energy Efficiency Projects over the next 15 years. Under this provision, after the lapse of 15 years, Energy Efficiency Projects may still be eligible for inclusion in the SIPP however, such inclusion will no longer be automatic. The Alliance made it clear, however, that the "Strategic Investments Priorities Plan" does not currently exist under the Philippine legal framework for investments and will be introduced only upon the passage of the proposed TRAIN-2 Bill. A similar situation exists for the "Financial Incentives Review Board," which remains contingent on the earlier passage of the TRAIN-2 Bill. 

PE2 clarified that the proposed incentives provision does not make any express reference to Executive Order No. 226. The provision provides for a specific set of incentives applicable only to Energy Efficiency Projects which are not tied to and are distinct from the BOI incentives provided in the Omnibus Investments Code. However, reference to the BOI is retained as the appropriate Investment Promotion Agency ("IPA") which shall be tasked with administering the tax incentives. 

Notably, despite reference to the BOI as an IPA, the proposed provision is crafted in such a way that the application by proponents for registration of Energy Efficiency Projects, whether Filipino or up to 100% foreign-owned, shall be duly acted upon by the BOI on the basis of the endorsement issued by the DOE.

For further avoidance of doubt, PE2 recommends that the House Bill adopt a repealing clause akin to Section 37 of its counterpart, Senate Bill No. 1531, which repeals or modified all policy issuances inconsistent with the EE&C Act. 

Relatedly, PE2 also proposed to add another section or amend an appropriate section of the EE&C Bill to ensure that Energy Efficiency Projects will not be considered as a public utility operation.

As a supporting annex to the latest position paper, PE2 attached its 9 May 2018 letter to the TRAIN-2 Bill authors and the Department of Finance (DOF), which raises the urgency and logical arguments behind excluding Energy Efficiency Projects from the rationalization objective and scope of TRAIN-2.

Copied with the PE2 position letter were the House Committee on Rules, House Committee on Energy, Senate Committee on Energy, and senior officials of the DOF, DOE and BOI.

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The Philippine Energy Efficiency Alliance, Inc. (PE2) is a non-stock, non-profit organization of energy efficiency market stakeholders.

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    Philippines 1200
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