How will the FIT rates be determined?

A government agency, the National Renewable Energy Board (NREB) is charged with the duty of calculating and submitting FITs for approval by the Energy Regulatory Commission (ERC). It may be noted that since a FIT is a regulated price, the Constitutional due process clause requires notice and public hearing before the ERC can approve the proposed FITs. 

At the inception of the FIT scheme, the NREB “may base its calculations on a reference cost study for each technology based on a real candidate project or a hypothetical one depending on the available information. The project to be chosen shall be representative of the average conditions of the renewable energy resource and the pricing study shall consider also all non-price incentives in R.A. No. 9513.”

As already mentioned, the initially proposed FITs will be differentiated by technology, but not by plant size. The question may be raised as to whether the renewables law (RA 9513) requires a single-sized FIT per technology. Although Sec. 7 of RA 9513 refers to the determination of “the fixed tariff to be paid to electricity produced from each type of emerging renewable energy,” the same section states that the formulation and promulgation of FIT rules by the ERC would not be “limited to the following …”, which refers to the one-size FIT and suggests that the ERC has discretion to set FITs also based on plant size, as is the practice in other countries, particularly if such differentiation is needed to promote competition or ensure consumer choice. Indeed, by law, the role of the ERC is to “promote competition, encourage market development, ensure customer choice and penalize abuse of market power in the restructured electricity industry” (RA 9163, Sec. 43). 

Thereafter, the NREB will calculate new FITs in line with a methodology based on “optimal penetration” of RE-based electricity. The methodology appears to ignore the fact that there are economies of scale in electricity production.  It is not easy to comprehend. 

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