September 23, 2014

Senate of the Philippines, Official Seal

Juan Ponce Enrile

OFFICIAL WEBSITE OF THE SENATE PRESIDENT REPUBLIC OF THE PHILIPPINES

Levy on generators

The Proposed P0.40/kwh levy on business self-generators

The Proposed P0.40/kwh levy on business self-generators

  1. Self-generators have been forced to invest in expensive generating equipment because of the failure of Napocor and the distribution utilities to provide satisfactory electric service.

    Why they should be know penalized with a universal levy every time they had to use their generators?

  2. Self-generation is an inalienable right that comes with the constitutional right to property and ownership just like the right to build a deep well and pump your own water, the right to grow your own food, mill your own rice, and ride your bike instead of a public transport.

  3. On top of that, under Rule 6 Section 4, if you own a generator;

    1. You must register in 90 days.

    2. Self-generators, regardless of size, must comply with the technical and financial standards to be prescribed by ERC.

    3. Secure a certificate of compliance from the ERC before you operate.

  4. Self-generators must now put electric meters on their generators and the Transco will send meter readers regularly to assess the universal charge due.

  5. The "non-by passable" concept of universal levy does not apply to the Philippines because of the existence of a big self-generation sector that came into being because of the power crisis in the early 1990's.

  6. Universal levy should be applied only to grid supplied power and services.

"SELF-GENERATORS'-

Is it fair to penalize them with a universal levy?

  • Self-generators as a group is a major sector in power & consumption that is largely the country's last line of a protection against total power failure and grid-service inadequacies. Without these self-financed generators the country's industry and commerce would grind to a halt. Yet, the EIRA and its draft IRR is effectively penalizing self-generators by charging them universal levy approx P0.40 per kwh.
  • Self- generators are self-practicing businessmen who had to invest precious funds in generating equipment because competitive, reliable, and/or quality power is not assured by the utilities and the government.
  • There are at least 1,500 mw of self-generating and stand-by power in the country; approximately 1,000 mw of which are in the Meralco franchise area.
  • These are mostly diesel engines ranging in capacity from 20kw to 10mw that are used for standby or peaking power, running up to 10 hours a day. There are also solar, windmill, and mini-hydro generators in the 5 to 50 kw range.
  • Most manufacturers, commercial establishments, buildings, resorts, hospitals, private schools, have their own generators at least for stand-by power.

HOW IS THIS SECTOR BEING TREATED IN THE EIRA AND THE DRAFT IRR?

  1. EIRA - Mentions self-generators in two areas.

    1. Section 34 Universal Charge
      "Any end-user or self-generating entity not connected to a distribution utility shall remit its corresponding universal charge directly to the Transco."

    2. Sec. 43 (i) (ERC) Allow Transco to charge user fees for ancillary service to all electric power industry participants or self-generating entities connected to the grid.

    3. Self-generating is not defined by RA 9136.


  2. Self-Generation Coverage Under the Draft IRR (Nov. 14,2001)

    1. Rule 5 Definition of Terms

      "KKKK" "Self-Generation Facility" refers to a power generation facility owned and constructed by an end user for such end-users own consumption or internal use excluding generating sets for households use or those falling below the threshold level fixed by the ERC for this purpose."

    2. Rule 6 Generation Sector

      Section 4 (f) "A self-generation company shall remit directly to Transpo the corresponding universal charge set by the ERC. In relation to this, Transco shall have access to the customer side of the meter in order to determine the utilization of such generation facility for the purpose of assessing the corresponding universal charge as provided in Rule 19.

      b.1 Section 1 Guiding Principle

      No person may engage in generation of electricity as a generation company unless such person has received Certificate of Compliance from the ERC authorizing such person to operate facilities used in generating of electricity.

      b.2 Section 2

      These rules apply to all facilities used or to be used for the generation of electricity including…(VIII)… "Self-generation facilities".

      b.3 Section 4

      A person owning an existing generation facility shall register with ERC within 90 days from the effectivity of these rules. A generation company must comply with technical and financial standards under par. (b) of section 4.

    3. Rule 19 The Universal Charge

      c.1 Section 1

      There shall be a universal charge to be determined, fixed, and approved by the ERC that shall be imposed on all electricity end-users, including self-generation entities.

      c.2 Section 5

      "Any end-user or self-generation entity not connected to a distribution utility shall remit its corresponding universal charge directly to the Transco.

      c.3 Section 7 Fines and Penalties

      (b) In cases where a self-generation facility refuses to pay the universal charge, the ERC may impose the appropriate fines and penalties.

  3. What's wrong? Serious Concerns

    (1) It is not right for the government to charge a business end-user the universal levy about P0.40/kwh for running his generator during brown outs.

    (2) It is not fair to penalize a self-generator for the stranded costs of Meralco and Napocor.

    (3) We are effectively adopting a national policy to discourage self-generation.

  1. Self-generation is an inalienable right that comes with the right to property and ownership. Can we imagine the MWSS charging deep-well pump owners a fee for their water?
  2. The huge stand-by power and self-generation capacity in the country is a result of the failure of the electric power sector to satisfactorily serve end-users specially industries. This is unique to the Philippines power infrastructure and must be considered in writing the rules.
  3. Private industry has already been penalized by having to invest in generating facilities when Napocor and Meralco failed to provide competitive and assured power. The universal levy is the salt that will be added to the injury.
  4. Effectively penalizing self-generators by slapping them with a universal charge is to deny them with the ultimate consumer choice, ie. The choice to self-generate power. Consumer choice is the goal of RA 9136.
  5. Self-generation is already inherently expensive power. Nonetheless it is the ultimate competitor to grid supplied power and must not be penalized nor discouraged. The DU's must win them back competitive and reliable power and not by legislative fiat.
  6. Penalizing self-generators with the universal levy will increase their cost of power and make them even less competitive which is contrary to the declared objective of the power deregulation law
  7. Self-generators did not factor-in this universal levy that can alter their economics. If there is a change in law an argument can be made in fact that the self-generators generating facilities can be entitled technically to stranded cost recovery.
  8. Even self-generators using renewable energies such as solar, wind, and hydro are being penalized instead of being encouraged. Is this really the intent of the law?
  9. A national levy containing stranded costs of distribution utilities and Napocor is a form of inter-grid cross subsidies that is precisely being eliminated by the Act.
  10. The "non-by-passable" concept of universal levy that was borrowed from foreign deregulations need to be modified for the Philippines because of the uniquely large self-generation capacity. These countries did not suffer the power crisis the Philippines did in the early 1990's.


MINIMUM CORRECTION:

  1. Definition of "Self-Generation" facility under Rule 5 is too narrow. It is limited to "owned and constructed" by and end-user." (What if an end-user leases the equipment and did not construct the facility)?

    CORRECT THE DEFINITION OF SELF-GENERATION UNDER Rule 5 "Definitions"
    "Self-Generation facility," for purpose of these implementing rules and regulations, refers to a power generation facility dedicated to serve the end-users own consumption or internal requirements, and generating electricity that goes through either the wires of a power distribution utility or the transmission facilities of Transco".

  2. Self-generated power should be exempted from the universal levy.

  3. Self-generators of 750 kw and smaller should be exempted from obtaining an authority to operate from the ERC and from being subjected to operating, technical and financial standards. 750 kw is the declared threshold contestable market under RA 9136.

  4. The Ancillary charges of the Transco should be included in the pricing for emergency or capacity fee arrangements. It must not be based on the electricity generated by the self-generators.

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