DOE to make energy sector more attractive to investors

MANILA, Philippines — The Department of Energy (DOE) is preparing to make the country’s power and energy environment more appealing and friendly to investors, in cooperation with its attached agencies and legislators.

Energy Secretary Raphael Lotilla said the agency is looking forward to healthy relationship between the rest of the energy agencies and the Energy Regulatory Commission (ERC).

“I welcome the appointment of the new Energy Regulatory Commission chair because this is a follow through of the President in his desire to see a level playing field in the energy sector so that more investors and more investments can come in,” he said.

Lotilla said the ERC plays a vital role in the regulation of the power markets and of power prices.

“The DOE lays down the policy. Under the EPIRA, the DOE possesses the power to issue rules and regulations to implement the Electric Power Industry Reform Act. On the other hand, the ERC is tasked among others with reinforcement of the provisions of the EPIRA,” he said.

“So there is a link between policy-making between the DOE and the functions of the ERC in relation to competition, to the setting of regulations for transmissions, for distribution utilities, and even for retail suppliers,” Lotilla said.

According to the energy chief, a healthy relationship between the DOE and ERC is important because there have been unfortunate times in the past when both agencies were at loggerheads. “This did not have positive results. Both have to cooperate,” he said.

Lotilla said the DOE, under his watch, would recognize the importance of not only respecting, but reinforcing the independence of the ERC when it comes to setting rates.

“In other words, when it comes to rate-setting, the independence of the regulator needs to be respected because that is what the market, that is what the investors are looking at. That the regulator has a full understanding of the factors that need to be taken into account in order to ensure that there will be a steady stream of investments,” Lotilla said.

“It’s not only the here and now, but also future investments have to come in. If rate-setting becomes arbitrary, then we are going to compromise the entry of new investments in the country. In other words, we are ruining our own future if we do so,” he said.

Lotilla said the DOE also seeks to ensure that the policy environment for investors in the upstream sector is going to be certain, stable, and absolutely clear.

“Upon instructions of the President, the legal cluster has met and we in the DOE have joined them. So yes, we are addressing that desire of the President to make sure that the investment climate and the legal environment for investments in the upstream becomes absolutely clear,” he said.

Lotilla, however, said that it is not only in the upstream sector wherein the policies and laws would have to be clarified.

“We want to have a stable regulatory framework for the downstream natural gas as well,” he said.

“You see right now, there is a department circular, but the department circular can change with the next administration as well. But we want to provide certainty to the investments because these are long term investments. They are not going to be there only for one administration, but for several administrations and therefore it is best to have a law in place,” he said.

Lotilla earlier said the uncertainty over the interpretation of Presidential Decree 87 allowing the service contractor’s corporate taxes to form part of the government’s 60 percent net share has hindered investments and roll out in the upstream sector.

PD 87, or the Oil Exploration and Development Act of 1972, is the law governing the discovery and development of indigenous petroleum in the country.

He said the DOE would be submitting a clear articulation of the policy and would also seek legislative articulation of it in order to insure a stable investments regime across different administrations.