THE INDUSTRIALIST: GOVERNMENT MUST SHOULDER FEED-IN-TARIFF (FIT)
Should power consumers be made to carry the burden of making the country’s renewable energy program attractive to investors, or is it not the responsibility of the government to entice investors to invest in its renewable energy program? This is a big question the Department of Energy (DOE) and the Energy Regulatory Commission (ERC) has to answer.
Beginning April this year, Meralco started charging power consumers the Feed-in-Tariff or FIT. Representing about 1.28% of our total electricity bill, the 8-centavo increase per kilowatt hour is the government’s incentive to entice power investors to invest in renewable energy and guarantees the return of their investment. The increase, according to Meralco, is an entirely pass-on cost for the government and not a single centavo goes to them.
The impact of FIT could vary, depending on the consumer. For an ordinary household consumer for instance that is billed P 5,480.00 for its 500 kilowatt hour electricity consumption, 1.28% of that or P 70.18 is payment for FIT. While this additional electricity cost may not hurt the pocket of some power users, this could be a big burden for wage earners. This may even result in less food on the table in some marginalized communities.
Big power users in the industry sector for their part would be affected by the additional cost of FIT. But they can tuck-in the increase in its cost of power to their production costs. This will, however, raise the price of finished products which will ultimately be charged to consumers.
Government must Shoulder the FIT
While we are not against renewable energy despite its higher cost of development compared to non-renewables because of its long- term environmental benefits, we find it improper though for the government to start collecting FIT from helpless power users when most of these renewable energy projects have yet to start.
Would this not make consumers the owners or part-owners of these non-fossil power plants ? The government is front loading the cost to develop these plants anyway through the FIT.
Starting a business includes taking the risk. Not even a monopoly, with its captive market, is without risk. As power investors, these companies should first invest their own money to put-up their renewable energy power plants and start collecting FIT once they start pumping energy into the grid.
And if investors demand a guarantee on the return of their investment, the government can provide that assurance through the taxes it now impose on power consumers.
Electricity User Over Taxed
Power consumers are already over taxed for their electricity consumption. Comprising about 10% of our total electricity bill, the government is raking in billions of pesos each month for taxes from power users. If part of that tax is applied to cover the difference between the grid rate and the FIT then the ordinary consumers will not be unduly burdened. Or the government can drop the outrageous taxes on subsidies and systems loss, to free up that amount and spare the consumers from additional sufferings.
If you go over your electricity bill, 40.09% of that is for the generation cost, 8.82% for transmission cost, 4.33% for systems loss, 31.22% for distribution cost (Meralco), 1.06% for subsidies, 9.56% for government taxes, 3.64% for universal charges and 1.28% for FIT.
There is enough room for the government to absorb the amount needed to guarantee the return of investment for investors in the renewable energy program without charging FIT to consumers.
Congress can also appropriate a subsidy to finance, partly or fully, the development of renewable energy plants. Or the BSP can open a window where banks may re-discount loans to finance such projects. With such re-discounting window, the private sector will be encouraged to invest in the country’s renewable energy program.
DR. JESUS LIM ARRANZA is the Chairman of Federation of Philippine Industries and a columnist of Trade In Magazine.