Meralco nixes bid to compensate net metering customers at full rate

By Lenie Lectura -  November 18, 2019

https://businessmirror.com.ph/2019/11/18/meralco-nixes-bid-to-compensate-net-metering-customers-at-full-rate/

A PROPOSAL to compensate the residential net metering (NM) customers at full rate will lead to higher power rates for all Manila Electric Co. (Meralco) customers, the utility firm has warned.

“The proposed higher compensation for exported energy of net metering customers will be recovered from all other customers through the generation charge. A higher rate of compensation for exported energy automatically means a higher generation charge for all captive customers of the DU [distribution utility],” said Meralco Vice President and Utility Economics Head Lawrence Fernandez, in a position paper submitted to the Department of Energy (DOE).
Under the net metering program, electricity end-users with renewable-energy installations—such as solar, wind or biomass—can sell electricity they generate in excess of what they can consume directly to their DU.

It is a nonfiscal incentive provided in the Renewable Energy (RE) law by way of granting credits earned from electricity produced net of consumption. A net metering customer is only charged for his net electricity consumption and is credited for any overall contribution to the electricity grid.

Based on the DOE’s latest draft circular—“Policies to Enhance the Net-Metering Program for RE Systems and other Mechanisms to Ensure Energy Security”—the  DOE proposed that excess generation from a billing period be valued as energy per kilowatt hour and kept as credits that offset consumption in subsequent billing periods. The remaining credits at end of the year, if any, are forfeited.

Fernandez explained that the monthly electricity bill consists of various components—generation, transmission, supply, metering—that reflect the full costs of providing electric service, as well as taxes and public policy changes, such as universal charges, feed-in-tariff allowance and lifeline subsidy. 

In contrast, NM customers’ excess solar PV production contributed only the generation component.

“More and more regulators and policy-makers in other countries that implement net metering have determined that it is only fair that NM customers share in such costs because, for example, they use distribution facilities to import energy from and export energy to the grid,” said Fernandez.

The Meralco official said the Electric Power Industry Reform Act  explicitly states that DUs charge based on cost service. Thus, to ensure equity and fairness, Fernandez said NM customers which still use DU’s lines should be charged with DU costs. This is also consistent with the DOE’s Causer’s Pay Policy,  he added.

Meralco also told the DOE to carefully consider the potential impact of allowing those with facilities more than 100 kilowatts to export their excess energy generation into the grid. “The anticipated benefits to the few large customers of the proposed measure should be weighed alongside the burden that the rest of the customers will have to carry to support the program,” said Fernandez.

A  net-metering agreement (NMA) serves as a proof that the DU will take in excess generation from the customer’s solar PV facilities and compensate the customer for it.  Fernandez said this compensation becomes part of the generation charge that is collected from all.

Unlike a regular PSA that will go through a Competitive Selection Process, Fernandez noted that the NMA is pre-approved by the ERC; it has no expiration and will continue to be in effect until the participant is no longer a captive customer of the DU.  “This proposal means allowing nonresidential customers [such as manufacturing plants and warehouses] with large-scale solar PV facilities to enjoy the benefit of a pre approved NMA, whose costs will be passed on to other customers, particularly residential end-users, of the DU,” Fernandez pointed out.

As of September 2019, Meralco’s NM customers reached 2,303, with an aggregate capacity of 16,089 kW.

The DOE is still collating comments from other industry stakeholders in connection with the draft circular.