ERC sees rules on feed-in-tariff finalized by this month

MANILA, Philippines - The Energy Regulatory Commission (ERC) expects the rules to govern the implementation of the feed-in tariff (FIT) to be finalized this month.

“We are about to promulgate the draft rules and adopt it as a mechanism. The rules will hopefully be out by July,” ERC executive director Francis Saturnino Juan said.

He said the ERC is finalizing the rules after consolidating comments from the industry.

“We’re on target because we received the final batch of comments that will determine other changes in the rules. Just around a few weeks maybe we can come out with it,” he said.

The ERC official said he is confident the approved FIT will be acceptable to the industry stakeholders.

“I am sure there will be no disruptions because the people working on the FIT rules have fixed terms,” he said.

Juan noted that FIT rules contain the framework and processes needed to design the mechanism, adding that the rules will be implemented within the year.

“This year, the FIT will be implemented. We just have to wait and see what the other institutions come up with,” he said.

FIT is a structured rate to be charged by renewable energy (RE) developers to guarantee their returns over a 15-year period. The FIT will be paid by electricity consumers connected to the transmission or distribution networks through a uniform charge to be known as the FIT Allowance (FIT-All), the implementation of which is similar to that of the present universal charge. 

Starting with the implementation of RA 9513 or the Renewable Energy Act in January this year, the total additional power capacity from new RE projects seen to be installed within the next five years now runs at 1,636 megawatts.

Juan said proceeds from the FIT, through a so-called renewable energy charge (REC), will be administered by a fund manager, most likely the National Grid Corp. of the Philippines (NGCP).

“There will be an entity that will administer the fund, and we see no one better than the NGCP since they have information on the metering and they are the operator of the grid,” he said.

As the REC will be imposed on all electricity consumers, Juan said “the benefits like reduced pollution will be felt by everyone so everyone will share the burden.”

As to the RE developers, the ERC official said “they will be paid based on the tariff that will be established to help them recover their investments.”

FIT, as defined in the proposed rules, will form part of the renewable energy policy that offers guaranteed payments per kilowatt-hour to renewable energy developers for the electricity they produce.

The REC shall take into account the forecast annual required revenues for the projected deliveries of the qualified RE producers, the applicable FIT for the year, the previous year’s over or under-recoveries, and such other relevant factors to ensure no stakeholder is allocated with additional risks in the implementation of the FITs.

Specifically, the REC shall be included in the transmission wheeling rates to be imposed and collected by the NGCP from its customers.

For off-grid areas, the REC shall be included in the distribution wheeling rates of the franchised distribution utilities (DUs) in these areas and the proceeds of the REC shall be remitted to NGCP based on the more detailed guidelines to be established for the collection and disbursement of the REC fund, and the settlement and payment of the FITs to the RE producers. 

For this purpose, NGCP shall consolidate the information on  physical sales of RE producers for the whole country, including isolated grids. 

The ERC shall review and adjust the FITs annually for the entire period of its applicability to allow pass-through of local inflation and foreign exchange rate variations.  For this purpose, the ERC shall employ a simple benchmarking indexation formula to apply to all technologies based on a 50:50 sharing between local and foreign capital. 

The commission shall publish these adjusted FITs annually and use them in the calculation of the REC for the current year. 

The FITs shall apply to technologies such as wind, solar, ocean, run-of-river hydropower and biomass power sources.