Feed-in tariff rules to boost RE development - ERC

MANILA, Philippines - The Energy Regulatory Commission (ERC) has released the draft rules on the much-awaited feed-in tariff (FIT) seen to further boost the development of the country’s renewable energy sources.

The ERC said these rules will regulate the method of establishing and approving the FITs, with the renewable energy charge (REC) to be collected from all electricity consumers.

ERC executive director Francis Saturnino Juan said the REC will be administered by a fund manager.

“There will be an entity to administer the fund, and we see no one better than the NGCP (National Grid Corp. of the Philippines) since they have information on metering and they are the operator of the grid,” Juan said.

For 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.”

For 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, refers to a renewable energy policy that offers guaranteed payments per kilowatt-hour to renewable energy developers for the electricity they produce.  

Under the rules, the REC shall be established and set by the ERC on an annual basis upon petition by the NGCP, which is tasked with the settlement of the FITs of the qualified RE producers.  

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 other relevant factors to ensure that no stakeholder is allocated with additional risks in the implementation of the FITs.

The ERC rules said NGCP shall ensure that the REC fund is sufficient to pay all RE producers regularly. As such, it shall be allowed to include in the REC an allowance over the working requirements in order to provide cash pledge in case some customers default or delay in their obligations to collect and remit the REC proceeds.  

Additionally, in order to minimize this risk, the ERC shall impose the appropriate penalties to the erring parties to discourage either delay in payment or default in payment of the REC proceeds. 

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. 

The National Renewable Energy Board (NREB) shall calculate the FITs for some or all technologies mentioned above based on the methodologies set forth in these rules and submit them for the ERC’s approval.