EU-funded program helps DOE craft policy on UCME subsidy
By Lenie Lectura – October 15, 2020
from Business Mirror
THE European Union-funded Access to Sustainable Energy Programme (EU-ASEP) will assist the Department of Energy (DOE) in the crafting of a policy that seeks to remove the universal charge for missionary electrification (UCME) subsidy.
UCME is a subsidy provided under the Electric Power Industry Reform Act (EPIRA). This collected from all on-grid electricity consumers by the National Power Corp. (NPC) to energize far-flung areas that are not connected to the transmission grid.
“The DOE is currently conducting the Subsidy Rationalization Study through the assistance of the EU-Access to Sustainable Energy Programme to provide an evidence-based analysis on the demand side aspects of the subsidy rationalization framework,” a DOE memorandum dated October 8 stated. The results of the study will be completed by December this year.
The agency released last year a circular that seeks to rationalize existing tariffs in off-grid areas, including the removal of the UCME subsidy. This move is meant “to ensure an efficient and well-targeted provision of subsidies and to reduce the social inequity in the implementation of the program.”
The agency will implement the UCME subsidy removal in phases. “There will be no abrupt removal of UCME subsidy without appropriate safety nets to mitigate the effect of the rationalization to the household consumers in off-grid areas.” As such, the policies and procedures on the provision of UCME subsidy to the electricity rates of the generation for both existing and upcoming New Power Providers (NPP) in off-grid areas shall continue until a new tariff and subsidy rationalization policy is issued by the DOE and implemented through a complementary regulation of the Energy Regulatory Commission (ERC).
The DOE would need to issue a supplementary circular that would detail strategies and initiatives to rationalize existing tariffs in off-grid areas, including the phase-out of the UCME subsidy in a socially acceptable manner at a certain transition period.
“The concerned distribution utilities, NPPs, NPC, and the National Electrification Administration, are enjoined to undertake a collective due diligence in facilitating and negotiating the eligibility of the new Power Supply Agreements to the UCME in line with energy efficiency and the subsidy rationalization policy, subject to the full review and approval by the ERC.”
