Meralco: Solar rooftop users should pay grid costs

Posted on November 02, 2016
http://www.bworldonline.com/content.php?section=Corporate&title=meralco-solar-rooftop-users-should-pay-grid-costs&id=135778

MANILA ELECTRIC Co. (Meralco) wants solar power developers that have availed of the perks under the net metering rules to pay for the use of the utility’s electricity distribution network similar to payment being made by other generation companies.

“We’re having discussions with the ERC [Energy Regulatory Commission] because this [issue] has been raised in our net metering comments,” said Ivanna G. Dela Peña, Meralco first vice-president and head of regulatory management.

She said Meralco has submitted a letter to the ERC on the utility’s proposal in time for the regulator’s review of the rules on net metering, a scheme that allows consumers who own renewable energy facilities to contribute their excess electricity output to the grid.

Meralco first raised the issue in a Senate hearing when it enumerated several issues faced by household consumers, businesses and industry customers with the implementation of renewable energy policy mechanisms.

During the hearing, Ms. Dela Peña said users with “behind-the-meter” installations such as solar photovoltaic (PV) rooftops for net metering or own use, avoid paying their share of grid costs and contributions to public policy charges including universal charges, feed-in-tariff allowance and lifeline subsidies.

She said embedded feed-in-tariff [FiT] eligible plants are exempted from paying for the use of the distribution system, with the costs shouldered by electricity end-users. She did not provide the total amount avoided by what she called “free-riders” in the utility’s network.

Meralco, which connected the country’s first net metering customer, has the largest number of participants under the scheme. As of September, the number has reached 571 with an installed capacity of 3,748 kilowatts (kW). ERC figures as of May 2016 placed the number of customers at 473 for a capacity of 2,955 kW, of which around 92% or 2,735 kW come from those of Meralco.

Under the net metering system, solar rooftop owners are allowed to export excess power to the grid. This exported electricity is offset by the power they import from a distribution utility during times when their solar generation system is not active, say, at night.

Ms. Dela Peña said Meralco hosts at least 20 renewable energy projects, six of which are eligible to receive feed-in-tariff -- a fixed rate higher than what traditional power generation plants receive in the spot market.

She said customers with solar PV systems avoid paying grid-related costs even though they continue to rely on Meralco’s facilities and those of the National Grid Corporation of the Philippines.

She added that distribution utilities incur additional costs to accommodate embedded generation companies, or those directly connected to utilities’ network, which include renewable energy-based units. These costs cover infrastructure improvement and upgrades to the distribution system, operation and maintenance and increasing load volatility.

Ms. Dela Peña said exempting an embedded eligible renewable energy plant from paying wheeling services fees would imply that the capital and operating costs incurred by the distribution utility would have to be recovered from customers.

Distribution rates to customers will go up, with the increase more pronounced as the penetration of renewable energy generation increases within the distribution utility’s system, she added.

The arrangement can be considered as a form of cross-subsidy as the costs incurred to provide service to one class of users of the distribution system will be charged to another class of users, Ms. Dela Peña said.

In her presentation, she also said existing feed-in-tariff targets translate to P800 billion in payments to select developers, while the proposed renewable portfolio standard (RPS) could mean at least P322 billion in higher generation charges.

The RPS policy requires distribution utilities to source a portion of their power supply from eligible renewable energy resources.

Meralco also said the energy mix policy of the previous administration meant an additional cost of at least P890 billion.

“On top of these, additional costs will be incurred for needed ancillary services and transmission/distribution system support,” she said.

Meralco’s controlling stakeholder, Beacon Electric Asset Holdings, Inc., is partly owned by PLDT, Inc. Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has an interest in BusinessWorld through the Philippine Star Group, which it controls.