DOE adopts PE2’s first fuel position for pioneer status of EE&C projects
TAGUIG CITY, 24 August 2020 – The Department of Energy (DOE) confirmed earlier today that it adopts the recommendation of the Philippine Energy Efficiency Alliance (PE2) which classifies energy efficiency and conservation (EE&C) as a first fuel of the economy, thereby enabling the Board of Investments (BOI) to legally support EE&C projects with the granting of pioneer status under Executive Order No. 226, or the Omnibus Investment Code of 1987.
The DOE confirmation was made by Director Patrick T. Aquino of the Energy Utilization Management Bureau during the first virtual public consultation (PubCon) on the draft Department Circular containing the proposed guidelines for the DOE endorsement of EE&C projects to the BOI for the availment of tax-based fiscal incentives under Republic Act No. 11285, more popularly known as the EE&C Act.
In a 17 August 2020 letter inked by PE2 president and PE2 Policy Committee chair Alexander Ablaza, PE2 highlighted the urgent need for the granting of Pioneer Status across all EE&C projects availing of fiscal incentives. The Alliance needs DOE to defend this provision before BOI, with the argument that EE, which the global energy market has started to treat as a first fuel and therefore an indigenous, non-conventional energy resource that needs to be tapped, qualifies for Pioneer Status, as provided for under Article 17 of EO 226. Third-party investments of energy service companies (ESCOs) and other investors in EE equipment assets to be installed in non-owned and non-leased premises will need at least 6 years of income tax holiday for them to approach commercial viability as far as after-tax equity returns are concerned.
During the PubCon, Ablaza said, “We hail the DOE push for EE&C as first fuel. PE2 also seeks the harvesting of wasted energy as an indigenous, non-conventional energy resource across all designated establishments and not limited to IPP [Investment Priority Plan] sectors only.”
Ablaza and PE2 VP for External Affairs Theresa Acedillo-Lapuz sought clarification on possible typographical errors during Dir. Aquino’s presentation relating to the minimum energy savings threshold to earn income tax holiday (ITH) perks. PE2 noted that the DOE’s website release of the draft Department Circular indicated 25% as the minimum energy savings threshold of the highest bracket to benefit from the 100% ITH incentives. Ablaza said that PE2 was worried that any attempt to raise this to a higher threshold, such as 50%, will limit eligible EE&C measures to only a few opportunities such as LED retrofits, even if measured within the project boundary.
PE2 treasurer Raymond A. Marquez raised points during the open forum that sought clarification of eligibility of ESCO-implemented EE&C projects with contract terms longer than 5 years. Relatedly, DOE also informed the participants that it would look into PE2’s query on which entity should shoulder the cost of independent verification, if applicable.
DOE was also firm in its stance that only EE&C projects represented by registered or certified energy service companies (ESCOs) would be endorsed to BOI for fiscal incentives.
PE2 member firms which attended the PubCon earlier today included Climargy, EconoServ Solutions International, Engie Services Philippines, Hi-Cool Engineering, OSP ESCO International, Republic Cement, Schneider Electric Philippines, and Solid Cement (CEMEX).
DOE announced that it will soon schedule a second virtual PubCon on these endorsement guidelines related to the BOI registration of EE&C projects.
