Green Energy Option

Interested players listen intently during the launch of the NREP

As we speak, the Philippine Energy Regulatory Commission (ERC) is busy hearing the application for the Feed-in-Tariff.

On  the (far?) horizon for Renewables is another mechanism called the “Green Energy Option” mandated under Section 9 of the Renewable Energy Law (RA 9513), to wit:

“Section 9. Green Energy Option. – The DOE shall establish a Green Energy Option program which provides end-users the option to choose RE resources as their sources of energy. In consultation with the NREB, the DOE shall promulgate the appropriate implementing rules and regulations which are necessary, incidental or convenient to achieve the objectives set forth herein.

Upon the determination of the DOE of its technical  viability and consistent with the requirements of the green energy option program, end users may directly contract from RE facilities their energy requirements distributed through their respective distribution utilities.

Consistent herewith, TRANSCO or its successors-in-interest, DUs, PEMC and all relevant parties are hereby mandated to provide the mechanisms for the physical connection and commercial arrangements necessary to ensure the success of the Green Energy Option. The end-user who will enroll under the energy option program should be informed by way of its monthly electric bill, how much of its monthly energy consumption and generation charge is provided by RE facilities.”

Insofar as it allows end-users to “directly contract from RE facilities their energy requirements distributed through their respective distribution utilities,” the  Green Energy Option (GEO) is similar to the concept of “open access under Section 31 of the Electric Power Industry Reform Act (RA 9316), thus:

“SEC. 31. Retail Competition and Open Access. – Any law to the contrary notwithstanding, retail competition and open access on distribution wires shall be implemented not later than three (3) years upon the effectivity of this Act, subject to the following conditions:

“(a) Establishment of the wholesale electricity spot market;

“(b) Approval of unbundled transmission and distribution wheeling charges;

“(c) Initial implementation of the cross subsidy removal scheme;

“(d) Privatization of at least seventy (70%) percent of the total capacity of generating assets of NPC in Luzon and Visayas; and

“(e) Transfer of the management and control of at least seventy percent (70%) of the total energy output of power plants under contract with NPC to the IPP Administrators.

“Upon the initial implementation of open access, the ERC shall allow all electricity end-users with a monthly average peak demand of at least one megawatt (1MW) for the preceding twelve (12) months to be the contestable market. Two (2) years thereafter, the threshold level for the contestable market shall be reduced to seven hundred fifty kilowatts (750kW). At this level, aggregators shall be allowed to supply electricity to end-users whose aggregate demand within a contiguous area is at least seven hundred fifty kilowatts (750kW). Subsequently and every year thereafter, the ERC shall evaluate the performance of the market. On the basis of such evaluation, it shall gradually reduce threshold level until it reaches the household demand level. In the case of electric cooperatives, retail competition and open access shall be implemented not earlier than five (5) years upon the effectivity of this Act.”

The initial impression seems to be that the GEO may have the effect of partially superseding the conditions prescribed for open access under the EPIRA. The question therefore, is whether the Renewable Energy Law authorizes the implementation of the Green Energy Option Program (GEOP) even if all the conditions of open access are in effect.

Unfortunately, it does not seem that an answer is immediately forthcoming given the status of the implementation of the RE Law and the rate the current deliberations for the more important incentives are going.

Nonetheless, our firm has rendered an opinion that official debates before the members of the Lower House and the Senate strongly suggest that the GEOP was intended to be implemented even prior to open access and hence, regardless of whether the conditions for open access are met.

A contrary interpretation would also mean that the GEOP should be “synchronized” with open access. However, implementing the GEOP at the same time that open access is declared and under the same parameters or limits would have the effect of making the green energy option legally indistinguishable from open access. In other words, when open access is declared, end users which fall within the open access demand thresholds would already have the right to directly contract with RE facilities whether or not a GEOP is in place. This interpretation would render Section 9, Chapter III of RA 9513 a surplusage which is generally not favored under certain deeply entrenched rules of statutory construction.

While that may be the case “strictly speaking,” a way out for the NREB could be the same Section 9 of the RE law which  provides that the right of end users to “directly contract” their energy requirements with RE facilities is conditioned on the determination by the Department of Energy of its “technical viability.”    This would imply that the DOE has the authority to limit or restrict the GEO for reasons of technical viability.

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