LKI Press Statement 2021-034

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LKI Press Statement  2021-034

September 8, 2021

Consumer group says the  Green Energy Auction Program  perpetuates  FIT and FIT Allowance contrary to policy announcement

It can be recalled that the  Department of Energy or  DOE initially issued Department Circular 2020-07-017 entitled “Promulgating the Guidelines Governing the Policy for the Conduct of the Green Energy Auction Program in the Philippines”, on 14 July 2020.  The objective of this DC is for mandated Renewable Portfolio Standards or RPS participants, like Distribution Utilities or DUs and Electric Cooperatives or ECs, to obtain Power Supply Agreements or PSA for RPS compliance.

On 4 August 2021, however, the Department of Energy (DOE), posted on its website a Draft Circular “Providing the Revised Guidelines for the Green Energy Auction Program in the Philippines”.  In contrast to the original Circular, the proposed revision to the GEAP Guidelines is to adopt the mechanism of the Feed-in-Tariff (FIT) Program.  Winners of the auction will become FIT-eligible plants, with guaranteed payments like the existing FIT plantsHowever, theFIT rate is proposed to be determined through the auction.

Electricity customers nationwide will share in the payment of GEAP winners thru the payment of FIT-Allowance / Charge.

  • This means that the already very high FIT-All charge will continue to increase with the entry of new capacity from the GEAP.
  • Recently, the DOE Secretary announced in an economic forum in Washington DC that the DOE had stopped the FIT because the FIT is a heavy burden to the consumers.
  • Likewise, in the recently concluded Public Consultation of the 2020 to 2040 Philippine Energy Plan, the DOE reiterated that they had stopped the FIT on the question raised by this writer as President of Laban Konsyumer Inc.
  • The proposed revision to the GEAP Guidelines appears to be a stealthy way to perpetuate the FIT and the FIT-All subsidy burden on consumers.

According to the DOE, the new capacity that will come from the GEAP aims to achieve the target RE share set by the DOE.

  • This objective seems to disregard the potential rate impact to the customers.
  • The draft revisions do not consider price impact and the protection of consumers in the implementation of the program.

As there is no set capacity/volume for the entire program, GEAP appears to be an unlimited FIT Program

  • There was no mention of a set/limited capacity for the program.
  • This makes participation in the FIT, and the consumer burden of the FIT-All, open-ended as more and more RE plants can become part of the FIT through GEAP.
  • There is also no technical study that looked into the technical aspects/penetration level (especially from intermittent technology like solar and wind) and rate implications of additional RE.

Further, the National Transmission Corporation or Transco filed the 2022 FIT Allowance application at a very steep price. This is intended to load the FIT fund portfolio with cash for the GEAP winners.

On 29 July 2021, Transco filed its Application for Approval of 2022 FIT-Allowance. In its Application, Transco proposed a FIT-All rate of Php 0.3320/kWh for 2022. This rate is significantly higher than any of the approved FIT-All rates since the program was implemented in 2015.

The significantly high 2022 Feed in Tariff Differential or FD is largely due to the use of the 2022 FIT Adjusted FIT Rates. Note that all Solar Plants who were able to avail of the FIT 1 will enjoy a rate of Php 10.85/kWh, while those who received FIT 2, Php 9.96/kWh. For the Wind Plants, the FIT 1 availees will have a rate of Php 9.62/kWh, and FIT 2 availees, Php 8.48/kWh.

These FIT adjustments are subject of pending litigation in the Energy Regulatory Commission or ERC as well as in the Anti Red Tape Authority or ARTA.

The ERC set the initial FITs in 2012 and issued the adjusted/escalated FITs only in May 2020 through Resolution No. 06, Series of 2020. In the same resolution, the ERC also stated that the actual recovery of the arrears shall be for a period of five (5) years. Thus, those with January 2016 generation period shall start billing in December 2020, and payment schedule starts in January 2021, following the 5-year recovery period.

In a letter addressed to Transco dated 20 December 2020, the ERC clarified that the source of funding for the implementation of the adjustment shall be the Working Capital Allowance (WCA). Thereafter, the same may be included in the computation of future FIT-All filing of Transco.

The impact of the ERC’s approval of the FIT adjustments can be clearly seen in the calculation of the proposed 2022 FIT-All.

On behalf of the consumers, we shall pursue the advocacy for the least cost of power or electricity and shall oppose all “ways of skinning a cat “.  And Congress can pass a law to repeal the FIT program as the cost of  Renewable Energy has declined resulting to  lower contracted generation costs.

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