Energy department plans to scrap charge for off-grid area subsidy

THE DEPARTMENT of Energy (DoE) plans to issue by next week a missionary electrification policy for off-grid areas that will lead to detailed circulars, including one that will end the collection from consumers of funds for rural power development.
“This month we will come out with the missionary electrification policy that will do away with the UCME (universal charge for missionary electrification),” DoE Undersecretary Felix William B. Fuentebella told reporters last week.
He said the DoE has decided that the cost of future electrification programs will not be charged to consumers, but will be shouldered by the government, he said.
“So we are basically answering that question of why are we charging inefficiencies to the consumers. It should be government. So we are addressing that,” he said.
He did not disclose the funding required by the government to cover rural energization without the UCME, but said it would be part of the state’s total electrification program and aligned with the plans of the National Power Corp. (Napocor) and the National Electrification Administration (NEA).
“Part two is the detailing of the phase out of the UCME,” Mr. Fuentebella said when asked whether the omnibus policy will already spell out the abolition of the universal charge.
Napocor is mandated by law to provide power in areas that are not connected to the transmission grid. The UCME is collected from all on-grid electricity end users as determined by the Energy Regulatory Commission (ERC) and called for under Republic Act No. 9136 or the Electric Power Industry Reform Act of 2011, or EPIRA.
In a regulatory filing with the ERC in July, Napocor sought provisional approval to collect P17.8 billion from electricity users next year, through a P0.1948 per kilowatt-hour (/kWh) charge in their power bills, to cover electrification of “far-flung areas” of the country. Napocor said the UCME in consumers’ monthly electricity bill will reflect an increase of P0.0768/kWh from the current amount.
The government-owned and -controlled corporation said the proposed basic UCME “is necessary in order to cover the required subsidy requirements and at the same time, maintain a reliable and stable funding source for its operating costs requirements.” It said the amount includes subsidy for payment to new power providers, renewable energy developers and qualified third-parties that have taken over in full or in part the power generation function of Napocor in certain areas.
Mr. Fuentebella said the department would be bidding out areas for electrification, but would be made clear to prospective bidders that bringing electricity to these areas would no longer be subsidized by the UCME.
He said new technology should enable bidders to bring down the cost of electricity. He said the resulting price per kilowatt-hour would be the “true cost” and not the subsidized cost of power in these areas.
“We have to make them aware that this is the true cost. It should be your behavior in accordance with the true cost and then we will introduce the new technologies,” he said.
Distribution utilities in off-grid areas will be given a transition period of two to five years without the UCME, he said.
Mr. Fuentebella said “rich major islands” like Palawan or Mindoro would lose the UCME in two years, involving a reduction by 50% per each year.
“For the poorer ones, five years, 20% [each year],” he said. — V. V. Saulon