Host communities press incentives: More pay for use of natural resources in power pushed

By Gina Dizon

BONTOC, Mountain Province – Stakeholders in an energy forum here last week pushed more incentives and payments for the use of natural resources in power generation. 

What benefits do communities get for the use of their natural resources for power generation?

The waters, wind, and sun are part of the making of an energy project. Can these form part of the project capital and eventually form part of the calculation of benefits for the community? Can communities derive benefits from carbon credits that the renewable energy developer gets?

These and more related questions on benefit sharing on the use of the natural resources for power energy were asked by participants of the  energy forum conducted July 8 here conducted by the Peaceful Environment for the  Advancement of Communities and Education  (PEACE) with the participation of  the Montanosa Press Club.

When asked by Jaime Dugao, Indigenous Peoples representative to the Sangguniang Bayan of Sagada if natural resources- wind, water, sun- form part of the capital of energy projects, Regional Director Milagros Rimando of the National Economic Development Authority said NEDA shall study how these shall form part of the capital.

Cost of equipment forms a major chunk in the computed capital of energy projects and  natural resources is financially unvalued.  Though Dugao said an energy project cannot proceed without the natural resources so there should be a 50-50 share in benefits by communities and the energy developer.

Share in benefits  currently stand at one-centavo per kilowatt-hour  of the electricity sales which applies to generation facilities located in all barangays, municipalities, cities, provinces and regions based on Dept of Energy Regulation 1-94.

The national government gets a 40% share of the gross collection derived from taxes, fees and charges in any co-production, joint venture or production sharing agreement in the use of the national wealth as the Local Government Code provides.

Of the 40% share, 20% is allocated to the province, 45% to the city/municipality; and 35% to the barangay.

The share of local government units from the utilization and development of national wealth shall be released without need of any further action, directly to the provincial, city, municipal or barangay treasurer on a quarterly basis.

While the Local Government Code provides for the automatic release of the share of LGUs, experience has shown that LGUs still have to lobby for their share in the national resource use as in the case of Ifugao on the use of waters from the Magat river for hydropower and Benguet on its mining shares.

Gov. Leonard Mayaen said in the case of energy company Hedcor which shall soon operate its 14 megawatt hydro plant by 2015, the company shall pay directly its taxes to the LGU where its address is based in Sabangan, Mountain Province. 

The national wealth share of LGUs is a separate financial benefit from the internal revenue allotment which the LGU regularly receives from the national government.

The proceeds from the share of local government units shall be appropriated by their respective sanggunian to finance local development and livelihood projects provided, however, that at least 80% of the proceeds derived from the development and utilization of  the national resource for energy shall be applied solely to lower the cost of electricity in the local government unit where such a source of energy is located as the Code provides.

The share of LGUS is an obligation of energy companies  to communities hosting energy generating facilities. The local government code provides that fund generated from the  80% of the national wealth tax shall, in no case, be used by any local government unit for any purpose other than those for which it was intended. 

Consistent with the Renewable Energy  law also provides for an 80%  of the  government share shall be used directly to subsidize the electricity consumption of end users in the RE host communities/LGUs whose monthly consumption do not exceed one hundred (100) kwh.

The Renewable Energy law also provides for a one percent share of the LGU of the gross income of RE resource developers resulting from the sale of renewable energy.

But is one percent share good enough as share of beneficiary communities?  Executive Director Matthew Tauli of the Montanosa Research and Development Center said the one percent share needs amendment of the law.  

NEDA regional director supported the comment of Tauli saying that the one centavo per kilowatt hour be increased to update real value considering inflation thus need for legislative action.

In the same forum, engineering consultant David Tauli, president of the Mindanao Coalition of Power Consumers  who talked on the rationale for the development of hydroelectric power projects by LGUs under the renewable energy law, forwarded  joint venture arrangements of the LGUs with the energy developer.

With the arrangement, the LGU and the energy developer share in the income of the power project over the 20-years period of the  feed- in-tarrif  payments followed by the turn over the project  to the LGU after the 20 years term of the joint venture agreement, Tauli said.

Meantime, what else do the communities hosting the energy resource get?

Apart from real property taxes and shares in the national wealth, the Electric Power Industry Reform Act (EPIRA) specially provides for an environmental guarantee fund where participants in the generation, distribution and transmission of the industry shall comply with all environmental laws and regulations including the establishment of an environmental guarantee fund.

ER 1-94 as amended based on the Department of Energy Act of 1992 and the Electric Power Industry Reform Act (EPIRA) of 2001 and its implementing rules provides additional financial benefits accorded to the host community- an electrification fund at 50% of one centavo per kWh; development and livelihood fund at 25% of one centavo per kWh; and reforestation, watershed management, health and/or environment enhancement fund at 25% of one centavo per kWh.

But do  localities where  watersheds are located in and where the waters  are traced from  have a share in the benefits as accorded by law  was the  question posed by  Mayor  James Edduba of Pasil,  Kalinga. Pasil locates the mighty Pasil River which in its source traces full watersheds cradling part of the waters which flow to the mighty Chico River.

Equally, the same concern was raised by Mayor Abraham Akilit of Bauko where sources headwaters of the Chico River from the Mountain Province side.

Host communities as identified by EPIRA are those where the energy project is located.

Rimando said legislative action is needed to redefine “host community” to include all LGUs and communities where the natural resources come from.

Bill 1428 filed by Ifugao Rep. Theodore BaguilatJr proposes a redefinition of host communities to mean the

location where the energy source or watershed is traced from to the location where the energy plant is located. Said bill which also calls for equal sharing of  benefits of host communities as redefined in the bill is pending at the Committee on Energy since July 2013.

A similar bill was filed by Mountain Province Rep. Maximo Dalog for an amendment of Section 66 of the EPIRA for the redefinition of 'host communities' to include those from the source of water of the hydro power plants.