FIT-All collection freeze not seen affecting RE developers

By Sheldeen Joy Talavera – August 27, 2023 | 7:33 pm
from Business World

THE Energy Regulatory Commission (ERC) said renewable energy (RE) developers will not be affected by the extended suspension of feed-in tariff allowance (FIT-All) collections.

“The suspension of the FIT Allowance collection will not affect the FIT RE Developers as there are sufficient amounts in the fund to cover payments due to them,” ERC Chairperson and Chief Executive Officer Monalisa C. Dimalanta said in a Viber message.

For the third time, the ERC extended the suspension of FIT-All collections. The extended suspension takes effect in September and will remain in force “until otherwise lifted by the Commission.” 

“This decision introduces remedies to ease the financial burden on consumers in the midst of escalating costs of electricity,” the commission said in a statement last week.

The FIT-All is a P0.0364 per kilowatt-hour charge reflected in the bills of power consumers. It accumulates in a fund that is paid out to qualified RE developers.

FIT-All is designed to encourage the private sector to increase the share of RE in the energy mix.

As of the end of 2022, RE made up about 22% of the energy mix, with coal-fired power plants accounting for nearly 60%.

The government hopes to increase the RE share to 35% by 2030 and 50% by 2040.

FIT-All is among the incentives provided to RE developers under the Republic Act No. 9513 or the Renewable Energy Act of 2008.

The ERC first suspended FIT-All collection in November, with that order covering the period between December and February. This was then extended until August.

“The FIT payment mechanism works in such a manner that there is just a need to draw from the Fund if payments from WESM (Wholesale Electricity Spot Market) are not sufficient to cover payments to FIT RE Developers that supplied power during that relevant supply period,” Ms. Dimalanta said.

Ramnath N. Iyer, climate and RE finance lead at the Institute for Energy Economics and Financial Analysis, told BusinessWorld in an e-mail that the extension may have a negative impact on the RE industry, and urged the government to be transparent about its future plans. 

“The extended suspension of FIT-ALL can potentially be a negative for the renewables industry. In the near term, it appears, based on comments from ERC, that the FIT-ALL fund is sufficiently well funded to pay the industry’s dues,” he said.

Mr. Iyer said it is a question “whether the same can apply indefinitely or even beyond a few months.”

“Hence it is important for the government to provide clarity to the renewable energy developers of what contingency plans are in place in case of further extensions,” he said.

Ms. Dimalanta said the ERC is monitoring the sufficiency of the funds, which depend on the prevailing WESM prices.

“We continuously monitor the status of the fund and will lift the suspension as soon as we see that there will not be enough to settle the payments to FIT RE Developers,” Ms. Dimalanta said.

Under the FIT-All scheme, the ERC directs distribution utilities, the National Grid Corp. of the Philippines, and retail electricity suppliers to serve as collection agents. Their collections are remitted to the FIT-All fund, which is administered by the National Transmission Corp.