PE2 seeks DOE help to defend pioneer status of EE&C projects to be endorsed to BOI

Date Published: 
August 17, 2020
  • (Images: DOE, BOI)
    (Images: DOE, BOI)

MAKATI CITY, 17 August 2020 – The Philippine Energy Efficiency Alliance (PE2) submitted a position letter to the Department of Energy (DOE) earlier today, seeking the assistance of DOE in preserving the proposed pioneer status of all energy efficiency and conservation (EE&C) projects to be endorsed to the Board of Investments (BOI) for fiscal incentives under 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 resource that needs to be tapped, qualifies for Pioneer Status, as provided for under Executive Order No. 226, or the Omnibus Investment Code of 1987. 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.

The PE2 Policy Committee forwarded other comments on the Draft Department Circular containing the “Draft Guidelines for the Endorsement of Energy Efficiency and Conservation Projects to the Board of Investments for Fiscal Incentives.”

In the same letter to DOE, PE2 also sought clarification on the qualification of EE&C projects, which should be implemented by an energy service company (ESCO) whether fully Filipino-owned or up to fully foreign-owned. The comment is consistent with Section 25 of the EE&C Act by clarifying that even foreign-owned ESCOs may be eligible for the incentives under the EE&C Law.

The Alliance likewise supports the guideline that sets minimum energy savings thresholds for EE&C projects within a defined project boundary in three categories, each offering different rates of income tax holiday. Because a uniform minimum 15% energy savings threshold was set for all EE&C projects availing of fiscal incentives, PE2 notes that the reduced (5%+) energy savings thresholds for facility-wide energy savings project were removed. The effect of this removal would be to make facility-wide EE&C projects (across the entire establishment) trying to hurdle 15% energy savings, albeit not impossible, now more improbable.

PE2 also manifested in the position letter that it fully supports the inclusion of ESCOs among the qualified project proponents to apply for BOI registration. This would certainly ensure that an energy savings-based discipline is adopted, and the objectives of DOE and BOI to incentivize EE&C projects that are objectively delivering measurable and verified energy savings are met. While PE2 has no strong objections to the exclusion of self-financed EE&C projects, PE2 shared its observation that such exclusion will disallow Top-500 Corporations, many of which have in-house engineering and energy management resources, from seeking fiscal incentives for EE&C improvements that were financed using their own capital budgets.

Lastly, the PE2 position letter said that the draft guidelines do not specify the entity that will shoulder the cost of Independent Verification services.

On 4 August 2020, DOE Energy Utilization Management Bureau (EUMB) Director Patrick T. Aquino released an invitation to all stakeholders in the EE&C industry to participate in the first virtual public consultation (PubCon) on the draft guidelines for DOE endorsement of EE&C projects to BOI for fiscal incentives. The PubCon will be held at 9:30am of Monday, 24 August 2020. Register here for the PubCon

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

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R.A. 11285 - An Act Institutionalizing Energy Efficiency and Conservation, Enhancing the Efficient Use of Energy, and Granting Incentives to Energy Efficiency and Conservation Projects

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