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EXECUTIVE ORDERS
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EXECUTIVE ORDER NO. 100 - ACHIEVING
PARITY BETWEEN ROYALTIES ON THE EXPLOITATION OF INDIGENOUS ENERGY
SOURCES AND DUTIES ON IMPORTED ENERGY FUELS PURSUANT TO Sec. 35 OF
REPUBLIC ACT NO. 9136 OTHERWISE KNOWN AS THE “ELECTRIC POWER INDUSTRY
REFORM ACT OF 2001”
WHEREAS,
it is a policy of the State to promote the utilization of indigenous
energy resources in power generation in order to reduce the country’s
dependence on imported energy;
WHEREAS, Presidential Decrees No. 87, 972 and 1442 were issued to
promote the discovery and development of the country’s indigenous
energy resources through the utilization of government and private
resources, local and foreign, under the arrangements embodied under
said Presidential Decrees;
WHEREAS, under existing service contracts for the exploitation of
geothermal and petroleum resources, a production sharing scheme has
been provided whereby the Service Contractor is entitled to 40% of the
net proceeds from the sale of the energy resource and the government is
entitled to receive 60% of the net proceeds;
WHEREAS, the aforementioned production sharing scheme under a service
contract arrangement has created inequalities between the rate of
Royalty on the exploitation of indigenous energy sources and the duties
on imported energy sources thereby affecting the competitiveness of
energy from indigenous sources with imported energy fuels;
WHEREAS, under existing service contracts for the exploitation of coal,
a production sharing scheme has been provided whereby the Service
Contractor is entitled to 70% of the net proceeds from the sale of the
energy resource and the government is entitled to receive 30% of the
net proceeds. Thus, the existing Royalty on local coal is lower than
the duty on imported coal;
WHEREAS, Sec. 35 of Republic Act No. 9136 (RA 9136) mandates the
President of the Philippines to reduce the royalties, returns and taxes
collected for the exploitation of all indigenous energy sources,
including but not limited to, natural gas and geothermal steam, so as
to effect parity of tax treatment with the existing rates for imported
coal, crude oil, bunker fuel and other imported fuels;
WHEREAS, under existing laws, the rates of taxes on the exploitation of
indigenous energy sources and imported energy fuels on a per fuel type
basis are equal;
WHEREAS, paragraph 2 of Sec. 35 of RA 9136 mandates that the
reduction of Royalty shall ultimately benefit the end-users using
indigenous energy sources and toward this end, the Energy Regulatory
Commission (ERC) shall reduce the rates of electricity from all
indigenous energy sources;
WHEREAS, the Department of Finance (DOF) and the Department of Energy
(DOE) recommend the issuance of this Executive Order;
NOW, THEREFORE, I, GLORIA MACAPAGAL-ARROYO, President of the
Philippines, by virtue of the powers vested in me by law, do hereby
order:
Section 1.
Sec. 2.
Tax
Equalization = [Tax Burden per kWh on Indigenous] - [Tax Burden per kWh
on Imported Energy Fuel]
Where:
Tax
Burden (P/kWh) on Indigenous = [Royalty in pesos + Excise Tax in pesos]
divided by å of Electricity Sales per plant in kWh;
Tax Burden (P/kWh) on Imported
Fuel = [Duty in pesos per kWh] + [Excise Tax in pesos per kWh];
Provided, That [Tax Burden per kWh on Indigenous] > [Tax Burden per kWh on Imported Fuel].
Indigenous Natural Gas and Geothermal Energy shall be benchmarked with the appropriate imported energy source as determined by the DOF and the DOE.
Considering that the existing Royalty on local coal is lower than the duty on imported coal, the Royalty on the development and utilization of coal shall remain.
Sec. 3.
Sec. 4.
The administrative guidelines for this Executive Order shall provide
the details for its implementation.
Sec. 5.
Sec. 6.
Sec. 7.
Sec. 8.
Sec. 9.
DONE in the City of Manila,
this 3rd day of May, in the year of Our Lord, Two Thousand and Two.
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