COVER STORY Does the 'FIT-All' fit at all in your electric bill?

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Metro Manila (CNN Philippines) — The Philippines is not tapering its electricity use.

Data from the Department of Energy (DOE) shows the country consumed over 94,370,341 megawatt-hours (MWh) of electricity in 2017, the highest in a steady increase spanning 15 years.

Power rates had to keep up. A household consuming 200 kilowatt-hours (kWh) a month now spends around ₱2,000 — almost a fifth of a minimum-wage earner's monthly salary.

Electricity Consumption in the Philippines

Source: Department of Energy, April 2018

But on May 28, the Energy Regulatory Commission (ERC) decided to allow the National Transmission Corp. (TransCo) to collect ₱0.0733 more per kWh from all customers on the grid under a so-called "FiT-All" or feed-in-tariff allocation charge.

While developers of renewable energy resources will get various incentives from these funds collected under FIT-All, the recent decision hikes bills from the original rate of ₱0.0183 centavos per kWh to ₱0.2563 per kWh.

That may result in an additional charge of ₱51.26 for the average household. But, the way Filipinos are eating up electricity now goes beyond average.

Why is FIT-All problematic?

The increase did not sit well with consumer groups.

Laban Konsyumer Inc. (LKI), one of those opposing the hike of FIT-All, docketed two cases before the ERC.

"We have written the DOE and the ERC last year that we oppose the FiT-All incentives scheme where consumers are locked for a total of 20 years paying high tariff(s) to the prejudice of the consumers," said Atty. Vic Dimagiba, LKI Chairperson.

Their group wants to amend the FIT-All scheme introduced in the Renewable Energy (RE) Act of 2008 (R.A. 9513). The law aims to attract private entities to invest in renewable energy to bulk up the country's power supply, because of the belief that it is expensive to invest in it.

Under Section 7 of the Act, the FIT system requires electric power industry participants to source electricity from RE generation at a guaranteed fix price for 20 years to be determined by the ERC, on top of other incentives.

Senate Committee on Energy Chairman Sherwin Gatchalian says the FIT-All Scheme is an answer to a so-called trilemma: ensuring that the country has equitable, secure and sustainable energy in the long term.

"If the policy is to achieve energy security, you want to promote renewable energy. Right now we import 15 percent of our power through coal," he said. "The question is, how much are you willing to pay (for) energy security?"

Following the money

Collections from the scheme are placed in the FIT-All Fund managed by TransCo, to be disbursed to the developers of renewable energy sources.

Each firm gets an incentive proportional to how much electricity from renewable sources they add to the power grid. As of 2017, the DOE says renewable energy makes up 25.44 percent of the country's power mix.

But TransCo sought an increase, saying the collections are not enough to cover over ₱7.38 billion unpaid dues to developers from 2016 to 2017.

However, because of the guaranteed price lockdown, the transition to cleaner and more affordable energy was confronted with higher electricity charges. Moreover, ERC adjusts the FIT-All yearly due to inflation and foreign exchange adjustments.

To avoid the price hike, Dimagiba believes in sticking to coal and natural gas.

"Coal and natural gas are much cheaper than renewable energy; and the issue of clean energy is a technical matter where technology is abundant to ensure safer and cleaner energy resources," said Dimagiba.

Coal, although cheap, is notorious for the increase of greenhouse gases and carbon emissions which fasttrack the process of global warming. The Philippines, a signatory of the Paris Agreement which aims to phase out these emissions, runs on 44.51 percent coal to power up the nation.

But former Department of Environment and Natural Resources Undersecretary Antonio La Viña believes FIT-All is no longer warranted under current market conditions of renewable energy.

"The implementation of the FIT under the RE Act has resulted in additional costs passed on to the consumer, which could have been avoided, or even lessened, because of the dwindling global RE prices," La Viña said in his report.

An October 2017 study from the International Energy Agency said auction prices for RE sources such as solar and wind go as low as US$0.03 per kWh (₱1.60 per kWh). These prices were recorded in countries including India, the United Arab Emirates, Mexico and Chile.

Data from the International Renewable Energy Agency in October 2017 also show the total cost to install utility-scale solar photovoltaic power plants has gone down since 2010.

Utility-scale solar PV total installed cost trends in selected countries, 2010-2017

Source: IRENA Renewable Cost Database, October 2017

Another study from Germany-based Friedrich Ebert Stiftung said costs of solar projects in the Philippines dropped by 80 percent between 2011 and 2016, while costs of wind projects dropped by around 50 percent.

It added offers from solar developers to distributors ranged from ₱3.50 to ₱5.29 per kWh.

Is FIT-All still necessary?

With prices dropping in global markets, Gatchalian believes giving incentives to developers of solar and wind energy is no longer needed, as prices for these have gone down.

"Tingin ko kaya nang lumaban ng solar and wind nang patas nang walang FIT [I think solar and wind can compete in the market without FIT]," Gatchalian explained.

However, Gatchalian said the scheme can stay for biomass, hydro and other renewable energy sources.

"Security also has short-term expense," he said. "But in the long-run meron ka naman sariling kuryente [you will have your own supply]. At di ka magiging [And you wouldn't be] beholden to importing coal," Gatchalian said.

Gatchalian says renewable energy sources can still flourish in the Philippines but developers have a hard time entering these markets due to a "complicated system".

He said some distribution utilities are asking for plenty of requirements from the RE developers. Gatchalian believes the process is biased in favor of non-renewables such as fossil fuels.

"The competitive selection process is biased and that's also one reason why RE developers cannot fight," he said.

But Gatchalian said prices of electricity can still go down by about ₱1.50 per kWh, if reforms happen in the industry.

"There's a price to pay for energy security, there's a price to cleaner energy, and that's where we are right now," said Gatchalian. "Clean energy, secure energy, and affordable energy -- we're balancing it."