State Of National Energy Emergency Declared

He’s still not calling the situation a crisis, but President Marcos declared on Tuesday, March 24, a “state of national energy emergency” as fuel prices continue to soar and as supply nears depletion.

Through Executive Order No. 110, the President ordered the adoption of a whole-of-government approach to easing the burden of affected sectors under a Unified Package for Livelihoods, Industry, Food and Transport or UPLIFT.

It is the first time that a president exercised such authority to respond to oil supply disruptions under Republic Act No. 7638, which authorizes the Chief Executive to declare a critically low energy supply and implement energy allocation.

With the suspension of fuel excise taxes already in motion, senators, meanwhile, are eyeing the reduction or suspension of the 12-percent value-added tax (VAT) on petroleum products as further relief for consumers battered by the Middle East crisis.

In issuing EO 110, Marcos said the US-Israel war on Iran that forced the closure of the Strait of Hormuz has triggered “uncertainty in global energy markets, severe disruption in supply chains and significant volatility and upward pressure on international oil prices, thereby posing a threat to the country’s energy security.”

As a net importer of oil products, the Philippines is vulnerable to disruptions in global oil production and transportation, according to Marcos. In the EO, the President cited a recommendation from Energy Secretary Sharon Garin that measures like fuel and energy allocation have to be taken, as current circumstances “pose an imminent danger of a critically low energy supply.”

The President will chair the UPLIFT, with the secretaries of energy, transportation, social welfare, agriculture, finance, budget and economy, planning and development.

The committee is tasked to formulate longer-term demand-side solutions and strategies to decrease consumption of petroleum products across residential, commercial, industrial, and public utility sectors, among others.

These include accelerating the transition to renewable energy through the use of electric vehicles in mass transport, integration of renewable energy in agriculture logistics, and manufacturing, development of active transport infrastructure, and supporting behavioral change through public awareness campaigns.

The EO also directed and authorized the Department of Energy (DOE) to take appropriate measures such as the implementation of fuel and energy optimization plans and taking action against hoarding, profiteering, and supply manipulation.

It also allows the DOE to exercise such powers authorized in times of emergency provided under applicable laws, including but not limited to RA 8479, or the “Downstream Oil Industry Deregulation Act of 1998,” RA No. 12120 or the “Philippine Natural Gas Industry Development Act,” and RA No. 9511 or “An Act Granting The National Grid Corporation of the Philippines a Franchise to Engage in the Business of Conveying or Transmitting Electricity Through High Voltage Back-Bone System Of Interconnected Transmission Lines Substations And Related Facilities, and for Other Purposes.”

The order likewise directed DOE’s attached agencies and government owned- and -controlled corporations including but not limited to the Philippine National Oil Company (PNOC) and PNOC Exploration Corporation (PNOC-EC) to assist in ensuring the stability and adequacy of the domestic fuel and energy supply, including monitoring of the supply, distribution, and availability of fuel and other energy sources, and the procurement of fuel and related petroleum products, as may be necessary,

“For this purpose, the DOE, PNOC, and PNOC-EC are authorized to undertake the procurement of required fuel and petroleum products to ensure a timely and sufficient supply, and when deemed necessary, as certified by the Secretary of Energy, to make advance payment of an amount exceeding 15 percent of the contract amount in accordance with applicable laws, rules, and regulations,” it said.

The DOE is also tasked to adopt and implement a resource conservation and prioritization mechanism, and may recommend to the Energy Regulatory Commission (ERC) when warranted by extraordinary price volatility or risks to electricity supply reliability, the adoption of appropriate regulatory measures in the operation of the Wholesale Electricity Spot Market (WESM), including the possible suspension of market operations or the declaration of a temporary market failure, in accordance with existing laws, market rules, and regulatory procedures.

The resource conservation and prioritization mechanism, as determined by the DOE, shall consider the optimal dispatch of power plants, taking into consideration grid reliability, priorities in the use of cheaper technologies, and the conservation of fuel that will mitigate price impact and prolong supply.

“The resource conservation and prioritization mechanism, as determined by the DOE, shall consider the optimal dispatch of power plants, taking into consideration grid reliability, priorities in the use of cheaper technologies, and the conservation of fuel that will mitigate price impact and prolong supply,” it said.

It also ordered the adoption and implementation of measures to accelerate the availability and` connection of additional generation capacity to ensure the timely delivery of energy to consumers.

Concerned entities, including the National Transmission Corporation, the System Operator ERC, and the Independent Electricity Market Operator of the Philippines, are enjoined to facilitate and expedite, within their respective mandates, the processing of permits, clearances, and approvals and to undertake the necessary actions to enable the projects as may be identified by DOE to deliver power immediately.

The Department of Transportation (DOTr) is directed to provide support for the public transport sector through complementary transport assistance programs, such as, but not limited to, fuel subsidy allocations and commuter fare subsidies; and expand and improve public transport services, including through the implementation of the Libreng Sakay Program, the extension of operating hours of the Light Rail Transit and Metro Rail Transit systems.

The DOTr is also directed to review and implement appropriate measures to reduce transport costs, such as the temporary reduction, suspension, or deferral of toll charges, aviation charges, landing fees, and other similar assessments, in coordination with the Land Transportation Franchising and Regulatory Board, Civil Aviation Authority of the Philippines, toll operators, and other relevant government agencies or private entities.

The Department of Social Welfare and Development, meanwhile, is directed to expedite the release of assistance under the Assistance to Individuals in Crisis Situations (AlCS) and provide appropriate social welfare and livelihood support to affected sectors, including but not limited to transport workers, farmers, fisherfolk displaced workers, repatriated Overseas Filipino Workers (OFWs), and other vulnerable groups through the Sustainable Livelihood Program.

The Department of Trade and Industry is directed to monitor and when warranted, implement remedies to address excessive or unreasonable price increases on basic necessities and prime commodities

 It shall likewise implement support programs for micro, small, and medium enterprises (MSMEs) and promote the adoption and use of electric vehicles, renewable energy, and other energy-efficient solutions in the transportation, logistics, and manufacturing sectors to reduce dependence on petroleum products.

The Department of Agriculture (DA) is directed to monitor and ensure the adequate supply of agricultural inputs and food products and undertake the necessary measures to maintain their availability at the lowest possible cost.

When warranted, the DA may procure fertilizer and other essential agricultural inputs from available sources to support food security and protect agricultural livelihoods.

The DA shall likewise implement assistance programs for farmers and fisherfolk, including the release of funds under the Presidential Assistance for Farmers and Fisherfolk (PAFF) program and the utilization of the Quick Response Fund to provide appropriate support to affected beneficiaries.

The Department of Migrant Workers is directed to mobilize mechanisms for the monitoring, rescue, evacuation, and repatriation of distressed OFWs when warranted, and to expedite the release of the Agarang Kalinga at Saklolo para sa OFW na Nangangailangan (AKSYON) Fund and related financial assistance for qualified OFWs and their dependents.

The Department of Finance, in coordination with the DEPDev and the Bangko Sentral ng Pilipinas, shall closely monitor the impact of the ongoing crisis in the Middle East on Philippine peso, OFW remittances, and overall economy, including risks of peso depreciation arising from shifts in investor behavior and sustained higher oil prices.

The Department of Budget and Mangement shall ensure that complementary measures and programs shall be strictly implemented in accordance with the relevant provisions under the General Appropriations Act.

The DBM shall identify and make available appropriate funding sources to the national government agencies and LGUs, including the National Disaster Risk Reduction and Management (DRRM) funds.

The Philippine National Police and other law enforcement agencies shall provide support and assistance to relevant government agencies in the performance of their respective mandates, and maintain peace and order, including but not limited to the protection of communities, facilities, and critical infrastructure.

The funding for the implementation of the EO shall be sourced from existing appropriations of the concerned agencies and appropriate funding sources as the DBM may identify.

Earlier, Sen. Bam Aquino pressed energy officials on additional interventions to lower pump prices, noting that the Senate had already fast tracked the enrolled bill suspending fuel excise taxes. He pointed out that VAT accounts for a massive chunk of fuel costs.

“We’ve already talked about VAT. It is 12 percent of the price of fuel at the gas station. Is that a possibility – to also suspend VAT? Because if it’s 12 percent of P120, then it would be considerable. That’s what, P14 to P15 right away,” Aquino said in Filipino and English.

Energy Undersecretary Felix Fuentebella confirmed that discussions are underway, although they are leaning toward adjusting the tax rate rather than outright suspension due to supply chain complexities.

“It’s more of having a different rating, it’s not suspending because there’s a supply chain we have to note when we’re talking about VAT. Probably a zero rating or a lower rating for con-sideration of our economic managers,” Fuentebella explained.

Aquino assured the DOE that the upper chamber is willing to work overtime to pass the necessary tax reforms if economic managers give them the green light.

“Let me tell you for the record that the Senate is ready to pass such reform if necessary. We will, I think... go back and have a special session if needed, if we need to do reforms on the VAT,” Aquino declared, warning that even if the Middle East conflict ends tomorrow, it will take three to six months for global pump prices to normalize.

Slowdown

At a hearing by the Senate ad hoc committee on the Middle East crisis, Department of Economy, Planning and Development (DepDev) Secretary Arsenio Balisacan warned about a possible economic slowdown if both excise tax and VAT on fuel are removed.

Balisacan issued the warning after Sen. Loren Legarda asked him for his opinion on senators’ proposals to suspend or reduce not just the fuel excise tax, but also the VAT on fuel.

He said reducing tax on fuel would result in lower inflation rate because of reduced costs in transportation of goods and on motorists’ travel.

But this would also result in foregone revenues as well as affect the country’s credit rating. Removing VAT, he pointed out, will have “greater impact” on Gross Domestic Product.

He said GDP growth could slow down to 3.5 to four percent in 2026 under a worst case scenario of $200 per barrel for six months.

Sen. Risa Hontiveros asked Balisacan about the “double whammy” of economic “stagflation” and inflation, and what the Senate can do to “cushion that double effect.”

Balisacan said the crisis could also result in a budget deficit and reduced government spending, resulting in a “triple whammy” impact on the domestic economy.

In an interview, meanwhile, with Bloomberg News on Tuesday, President Marcos admitted that the government could only do so much with regard to the weakening of the peso since the US dollar is still perceived as a safe-haven asset.

“As a matter of policy, we defend the peso to a certain extent. But with the dollar moving the way it is, it’s moving whereas before it’s seen as a safe harbor currency,” Marcos said.

“The dollar’s increase in value has been because they are the largest oil producer,” he added.

Despite the weakening of its currency, the Philippines is not inclined to use all its foreign reserves to intervene in the foreign exchange market.

“I think it will be futile to spend all our foreign reserves to (defend) the peso. We will defend the peso to an extent, but we also recognize that there’s only so much you can do because the dollar’s going to move the way it does,” the President said.

Meanwhile, the House of Representatives transmitted to the Senate House Bill No. 8418 authorizing the President to temporarily suspend or reduce fuel excise taxes, after it was signed by Speaker Faustino Dy III.

Dy and Majority Leader Sandro Marcos were the principal authors of the measure. – With Marc Jayson Cayabyab, Alexis Romero, Jose Rodel Clapano