Universal charge hike proposed to sustain off-grid power services

THE Department of Energy (DoE) will propose raising the universal charge to sustain off-grid services provided by the National Power Corp. (Napocor) as diesel prices rise.

In a virtual briefing on Monday, the DoE and Napocor are considering a higher universal charge for missionary electrification (UCME), which funds Napocor’s operations in off-grid areas, many of which are reliant on generator power.

“As you know the price of diesel in the international market has been on the uptick in the last week or so, and for the rest of the year there are indications that unless there are economic developments in the global area that the price will remain high,” Energy Secretary Raphael P.M. Lotilla said.

Republic Act No. 9136 or the Electric Power Industry Reform Act authorizes the collection of UCME to fund Napocor’s operations, including those of its Small Power Utilities Group (SPUG), which serves remote areas not connected to the grid.

“Electricity prices in missionary areas are subsidized but the subsidy comes from on-grid customers. When increases are needed in order to support the off-grid areas, the on-grid areas customers will have to bear the burden, subject to the approval of the ERC (Energy Regulatory Commission),” Mr. Lotilla said.

The DoE and Napocor are proposing a UCME increase of about 15 centavos per kilowatt-hour (kWh), adding that they hope the ERC would “act swiftly on the petition.”

ERC Chairperson and Chief Executive Officer Monalisa C. Dimalanta said in a Viber message that the ERC is currently completing its review of UCME applications.

“The ERC is committed to support the rest of the government in addressing the financing issues of NPC-SPUG in the short term and, in the long term, to come up with a viable program for sustainable development of our off-grid areas,” Ms. Dimalanta said.

Assuming that the ERC approves the petition, Bernadette T. Rivero, Napocor spokesperson, said the increase could take effect as early as May.

Mr. Lotilla said regulators are also taking steps to fund a sustainable solution that addresses the “financial woes that are crippling the operations of Napocor.”

As of Jan. 26, Napocor’s outstanding fuel payables to operate SPUG power plants and barges amount to P1.03 billion for the November-December billing period. Its payables to new power providers and qualified third parties amount to P5.51 billion, representing three to four months of arrears.

The DoE and Napocor’s board are planning to borrow P5 billion from government financial institutions, which will require special authority from the President.

“The big issue here is there is a funding deficit, there is fuel to be bought but the problem is the funding. If we can work together to manage a rationing system, it will be better for everybody; of course, we will do our best to garner additional funding but we have to be prepared to bear some of the cost,” Fernando Martin Y. Roxas, Napocor president, said.

If Napocor fails to secure funding, it will need to cut back on SPUG operating hours.

The proposed reduction in SPUG operating hours of SPUG power plants will start on March 1 and run until Dec. 31. Power plants that operate for 24 hours a day will be reduced to 15 hours, while power plants that operate for 16 hours will run for 12 hours. Those that operate for less than 16 hours will run for five hours.

Separately Mr. Lotilla said that the DoE is working on policy reforms to increase investment in the energy industry.

“It is the government that sets the policies but it is the private sector that drives investment and operations in the upstream, midstream and downstream sectors. All our efforts in this administration have been directed at reforming policies that blocked entry of new investment,” Mr. Lotilla said on Monday during the panel discussion of Philippine Development Plan 2023-2028 Forum.

Mr. Lotilla added that the DoE will take a market-driven approach to attracting more energy investment.

“One is the secondary price cap that was imposed way back in 2013… this has been difficult to lift at this time because of the impact on prices but we will have to deal with this if we want to attract more investment down the line,” he said.

The secondary price cap mechanism was designed to avert excessive rises in market prices. The ERC sets the secondary price cap at P6.245 per kWh in the event of a P9 per kWh breach in the rolling average of the generator-weighted average price over a three-day period.

“We’ve got to also to address the general attitude of government at all levels towards investment in energy,” Mr. Lotilla said, noting that local government units must not refuse the development of power projects.

“When we had typhoons last time in Luzon, a number of efforts to rehabilitate transmission lines could not be implemented immediately because some local government units refused. We’ve got to make all sectors realize that they cannot be blocking power projects that are going to benefit the entire country if we are to see the sustainable development of our economy,” Mr. Lotilla added.

He also called for the need to diversify the country’s indigenous sources to achieve energy security, adding that new technologies such as nuclear power are also an option.

“The tragedy of the past is that we tend to ban technologies but our effort is to be open to all technologies,” he added. — Ashley Erika O. Jose