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MANILA, Philippines - The Energy Regulatory Commission (ERC) has put on the table fresh revisions to the proposed tariff incentive for renewable energy projects, which are seen key to a long-term solution of the Philippines' power requirements.
The revisions include the establishment of feed-in-tariff (FIT) rates through a competitive bidding, the government administration of the tariff, and the calculation of a uniform fee levied on consumers of renewable energy.
The Renewable Energy Act of 2008 mandates the establishment of the FIT for qualified renewable energy projects, the cost of which would be passed on to consumers. The incentive provides guaranteed rates over a period for green power projects. Unlike conventional power plants, renewables have been hampered by high investment costs and limited markets.
Renewable developers have been clamoring for the approval of the FIT, which would redound to an increase of P0.12 per kilowatt-hour in power rates based on industry projections. Based on the initial rules, the FIT of various renewable projects shall be calculated by the National Renewable Energy Board (NREB) for approval by the ERC, based on the cost of technology and the generating capacity.
The NREB in May last year filed its recommended FITs to the ERC, while the Department of Energy two months after approved the final installation targets - the volume of power generation from renewables that will be granted the incentive. Since then, the ERC has been conducting hearings on the FIT application.
Senator Sergio Osmena III, who chairs the Committee on Energy, had proposed that the ERC prescribe competitive bidding, instead of a cost-based method, to ensure lower FIT rates.
Industry groups also had been lobbying for a government agency to administer FIT transactions, instead of the National Grid Corp. of the Philippines (NGCP), which operates the country's power transmission highway.
"However, the legality of NGCP, being a private corporation, as the settlement agent for the FITs, is in question. It has been argued that the FIT-All fund is a public fund and hence, should not be left to the administration of a private entity," the ERC said.
The third revision involves the early calculation of the FIT-Allowance (FIT-All), or the line item in consumer electricity bills where the FIT of various renewable projects will be reflected.
Under its FIT rules, the ERC outlined the following factors determining the tariffs: forecast annual required revenue of renewable plants, previous years’ over/under recoveries, administration costs, forecast annual electricity sales and allowance for working capital requirements. The regulator, however, failed to indicate how the FIT-All would be calculated.
"For the smooth and expedient implementation of the FITs once approved by the ERC, there is a need, at this early stage, to review and set the manner by which the FIT-All will be calculated. This includes the methodology, formula and the procedure for the setting of the FIT-All," the ERC said.
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