FIT-All payments to start in January billing–ERC

Consumers are to pay, starting this month, an additional P0.406 per kilowatt-hour (kWh) in electricity rates, representing so-called feed-in tariff allowance (FIT-All).

The rate will be collected from electricity end-users and will be reflected in their electricity bills as a separate item, as mandated by the Renewable Energy Act of 2008 (RA 9513).

The Energy Regulatory Commission (ERC) issued an order in October last year provisionally approving the application of the National Transmission Corp. (Transco) to collect FIT-All payments.

“The commission hereby provisionally approves the FIT-All of P0.0406/kWh, effective in the January 2015 billing of all on-grid electricity consumers,” the ERC said in its 27-page decision released on Thursday.

The FIT-All serves as an incentive for renewable-energy (RE) developers, such as those operating wind, run-of-river hydro, solar and
biomass facilities. ÍThe mechanism was established pursuant to the Renewable Energy Act of 2008, which aims to spur the development of green power sources, which have been hampered by high investment costs and limited markets compared with conventional generating plants.

Benefits of FIT

While the FIT system effectively asks consumers to pay a few extra centavos for the electricity they consume, the scheme does encourage the construction of more RE plants down the line.

Industry experts pointed out that RE plants help temper prices in the Wholesale Electricity Spot Market (WESM) as it pushes out the more expensive plants, like diesel, since RE prices are not subject to the volatility of the market.

Moreover, they pointed out that “for a few centavos, it will help improve or, at least, stop the worsening of air quality, which has led to different ailments like asthma, for those living in the metropolis.”

RE power plants, experts stressed, allow the displacement of other more polluting sources of electricity, such as coal and oil. This, in effect, lessens the carbon emissions otherwise emitted by these plants.

For instance, the recently commissioned 150-megawatt (MW) Burgos wind farm of EDC, a unit of First Gen of the Lopez Group, will be able to displace approximately 200,000 tons of carbon emissions annually.

“If the country continues to develop the RE industry, it might eventually become the leader in the region. To date, we are one of the leaders in Southeast Asia in wind farms. The solar industry is becoming more popular. In geothermal, EDC is already a global leader. If we continue in this direction, a new RE industry will emerge. This means more new jobs created because of this new industry,” the experts said.

The Department of Energy said 2014 was a banner year for RE with the commissioning of large-scale power plants throughout the country for solar (the 22-MW San Carlos Solar Power Project in Negros) and wind power plants (in Ilocos Norte the 33-MW Northwind Power Project, the 150-MW Burgos Wind Power Project and the 81-MW Caparispisan Wind Power Project; and the 54-MW San Lorenzo Wind Power Project in Guimaras).

To date, total installed capacity of RE on-grid stood at 5,396.82 MW. At
the same time, the DOE also awarded a total of 638 RE projects, with a total potential capacity of 10,068.031MW.

TransCo’s role

TransCo was tasked to administer the FIT-All payments to RE developers. It filed before the ERC provisional authority to collect FIT-All payments.

Wind-power developers are entitled to FIT rate of P8.53 per kWh; solar for P9.68 per kWh; hydro at P5.90 per kwh; and biomass at P6.63 per kWh.

After collection, the money is placed in a fund administered by TransCo.

“For this purpose, all distribution utilities, retail electricity suppliers and the National Grid Corp. of the Philippines [NGCP] are hereby directed to adopt the necessary modifications in their respective billing and collection systems, to effect the implementation of the said FIT-All as a separate line item in their bills to end-users starting January 2015 billing and remit the same in accordance with the FIT-All Guidelines,” the regulator said.

The ERC said TransCo should administer the FIT payments in a bid to  “resolve the issue that public fund[s] should be handled by [a] public entity.”

It said the public funds will be managed by a government-owned and -controlled company and not by the private, Sy-controlled NGCP.

NGCP manages and operates
TransCo’s nationwide power-transmission system, which links power plants with the various utilities across the Philippines. However, according to TransCo on its official web site, ownership of all transmission assets remains with TransCo.

Regulators have also approved the template contracts RE developers would have to enter into with TransCo and the distribution utilities or
electric cooperatives.

The two types of contracts are the renewable-energy payment agreement (Repa) and the renewable-energy
supply agreement (Resa).

The Repa is a contract developers would have to sign with state-run TransCo for the payment of FIT incentives, which the latter will administer.

The Resa is a contract that RE producers would have to ink with electricity distributors if the plants are not connected to the WESM.

The approval of the contract templates is expected to speed up the grant of FIT incentives to qualified RE  plants. The tariff incentive grants developers guaranteed rates over a 20-year period that will be shouldered by consumers.

Source: http://www.businessmirror.com.ph/fit-all-payments-to-start-in-january-billing-erc/