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Business

Burdensome scheme

HIDDEN AGENDA - The Philippine Star

Better known as the Renewable Energy Act of 2008, Republic Act no. 9513 seeks to accelerate the exploration and commercialization of renewable energy sources such as solar, hydro, geothermal, wind, biomass and ocean energy by providing tax breaks, duty-free imports of RE machinery and equipment, along with other fiscal and non-fiscal incentives for their development and use.

Enacted into law on Dec. 16, 2008, RA 9513 aims for the Philippines to achieve energy self-reliance and reduce its dependence on harmful fossil fuels and vulnerability to price fluctuations in the international oil and coal markets.

Hence, its paramount purpose is to strike a happy balance between attaining the country’s economic development goals and protecting health and the environment through the reduction of green gas emissions responsible for global warming.

While giving incentives to RE developers is good, making households and business establishments unduly pay for it - and in advance at that - is not.

We are referring here to the not-so-bright idea of the Energy Regulatory Commission (ERC) and the National Transmission Corp. (TransCo) for the latter to collect an extra charge from all on-grid electricity end-users equivalent to 40 centavos per kilowatt hour (kWh), for a new incentive fund to encourage government-accredited RE developers to put up RE generation plants or facilities.

Under a resolution issued by the ERC last October, the monthly power bills of electricity consumers would, starting this January, include a separate line item similar to the Universal Charge (UC) to be called the Feed-In Tariff Allowance (FIT-All), which would be paid to FIT-eligible RE users as a means to entice them to build power plants that either harness solar, wind, run-of-river hydro or biomass energy or any hybrid RE system for commercial supply.

Section 2.5 of ERC’s October 2014 resolution requires electricity end-users to “share in the cost of the FITs in part through a uniform charge to be referred to as FIT-All and applied to all billed (kilowatt hours).”

Although relatively paltry at P0.40/kWh, the rate hike has been estimated to reach P2.7 billion in 2015 year alone.

This would spell windfall profits for accredited RE developers for the next two decades - at the expense of hapless electricity consumers - because the ERC has empowered TransCo to collect the extra charge for 20 straight years and would be paid over that long period even to RIT-eligible companies that have yet to build their power plants.  

Fortunately for consumers, last January 6, lawyer Remigio Michael Ancheta asked the Supreme Court to stop the ERC for the time being from allowing Transco to collect this additional P0.40/kWh from electricity consumers beginning this month.

The SC would do Filipinos a lot of good by granting this TRO and requiring the ERC and Transco to first conduct extensive public hearings and consultations on this FIT-All scheme before even considering this additional charge.

Ancheta argued in his petition for a temporary restraining order that this scheme is unconstitutional as it provides for the advance collection of extra fees from all electricity users as payment to FIT-eligible RE developers through the creation of the FIT-All Fund, which is not provided for or contemplated in RA 9513.

The lawyer, who had filed the petition as a taxpayer, told the High Tribunal that this new scheme is “unreasonable and oppressive” as it unduly compels electricity end-users to pay for RE-generated electricity in advance, given that the generation facilities covered by this FIT program have yet to operate or build their power plants.

The implementation of the FIT-All Fund is likewise illegal, said Ancheta, because it deprives electricity consumers of their property without due process of law.

Citing TransCo’s national RE sales forecast of 68,016,055,191 kWh for 2015 in its petition before the ERC, Ancheta said the FIT-All Fund will total P230.12 million per month or P2.7 billion for the entire year.

The ERC has designated TransCo as the FIT-All Fund administrator and, as such, is empowered to collect the extra tariff from power consumers for payment to FIT-eligible developers so the latter could produce or continue generating their RE electricity.

Based on the per-month consumption of 200 kWh of average residential consumers, Ancheta said this FIT-All fee would translate into an extra charge of P8.12 each in their monthly bills.

For Ancheta, the ERC committed a grave abuse of discretion in approving TransCo’s rate-hike application for FIT-All because in doing so, it went beyond the provisions of RA 9513.

While resulting to runaway profits, most especially for the FIT-eligible RE developers that have yet to build their power plants, the extra four-centavo charge would be an added financial burden to consumers and business owners - and could lead to decreased competitiveness of Philippine industries and possibly even massive lay-offs or job losses;

These favored RE developers also stand to reap windfall profits at the expense of residential and business consumers of electricity because FIT sets a fixed rate of collection from all on-grid users even when advancements in RE technology are supposed to reduce the developers’ operating cost over time;

Also, electric cooperatives could end up with higher default rates and higher volume of illegal connections as a consequence of higher electricity rates-thanks to the FIT-All uniform charge added to the monthly power bills;

More importantly, this scheme could make the Philippines far less attractive to foreign investors, because Malacañang is slapping another burden on local businesses and entrepreneurs, as against the practice in other countries of subsidizing the electricity costs of their local industries to sharpen their competitiveness;

Developing RE plants on such a relatively limited scale would not do much anyway in reducing emissions of greenhouse gases.

The Philippines contributes less than one percent to the world’s carbon emissions and already produces 30 percent of its power from RE sources like geothermal energy;

 A better government option with greater impact on lowering carbon dioxide emission levels is fixing the mass transportation system, which would not only better cut greenhouse gas emissions, but would also be an added support as well for local industries through the provision of a more efficient and cost-effective transport system.

For comments, e-mail at [email protected]

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