Electricity users to pay extra to fund renewable energy development

MANILA, Philippines - Electricity users will start paying soon additional fees to cover the so-called feed-in tariff (FIT) allowance to encourage the development of more renewable energy (RE) sources in the country.

The Energy Regulatory Commission (ERC), the power sector watchdog, formally issued over the weekend the rules for the much awaited FIT which allow the collection of additional charges to electricity consumers for the next 20 years.

The FIT charge would be reflected in the electric bills in a separate portion under the universal charge (UC).

The tariff, however, has yet to be determined by the National Renewable Energy Board (NREB), a body created under the Renewable Energy Act to oversee the implementation of the law.

“The process of establishing the FITs starts with the submission by the NREB with the ERC of its proposed tariffs, which should be linked to the installations targets that will be set for each technology and the timeframe set to achieve these,” the commission said.

ERC believes that the FIT rules establish the FIT system, which is one of the incentive mechanisms in the RE Act of 2008 intended to accelerate the exploration and development of RE resources.

“It offers guaranteed payments over a definite period of time to RE developers utilizing emerging RE resources such as wind, solar, run-of-river hydro, biomass and ocean,” the ERC said.

To comply with the legal requirement for the FIT system rules to provide for priority connection to the grid and priority purchase and transmission of these emerging RE, the rules mandate the transmission operator, National Grid Corporation of the Philippines (NGCP), and the distribution utilities, in the case of RE plants embedded in their distribution systems, to connect and take in the energy generated and delivered by these plants.

The ERC rules also provide for the guaranteed use of the energy coming from RE sources.

The ERC rules also provide that the FITS shall likewise be subjected to degression to encourage the developers to invest at the initial stage and hasten deployment of RE.

The FITs would be adjusted by ERC in cases when the installation targets are already achieved or when they are not achieved within the period targeted, or when there are significant changes to the costs or when more accurate cost data become available.

However, the readjusted tariffs that may be set by the ERC following this review shall apply only to the new RE developers.

The ERC, meanwhile, said they hope that the FIT would not be so much of a burden to the consumers.

“With the FITs, we hope to remove another barrier to the entry and development of RE in the Philippines, without burdening the electricity consumers with an unreasonable rate imposition,” ERC executive director Francis Saturnino Juan said.

He said the ERC is also optimistic that it was able to come out with a new set of rules that would spur the growth of RE industry.