A 10-year ‘graduation plan’ on systematic reduction and eventual scrapping of subsidy in off-grid areas, or those jurisdictions not physically connected to the main power grids, is being pushed by the Department of Energy.

In a draft circular, the DOE directed the National Transmission Corporation (TransCo) and the National Electrification Administration (NEA) to prepare the proposed 10-year plan that shall flesh out the “socially acceptable reduction and or phase out of UC-ME (universal charge for missionary electrification).”

The UCME is collected from all Filipino consumers serving as subsidy for electricity services provided in off-grid and remote areas.

Typically, these off-grid domains would source their electricity supply from more expensive oil-fired generating facilities. To make the rate affordable to consumers, a subsidy scheme called the UCME is being applied. The recommended subsidy phase out, according to the energy department, shall be “fully reviewed and updated every three years.”

The DoE emphasized that the ‘subsidy graduation’ shall be integrated into the Distribution Development Plan (DDP) and the Power Supply Procurement Plan (PSPP) of the distribution utilities (DUs) in the areas covered by the policy.

As noted, the gradual reduction and subsequent removal of subsidies shall consider key factors, such as: schedule of interconnection plan of the off-grid areas; the 10-year optimal power supply outlook that shall lump in the application of low-cost and advanced technologies; as well as demand-side management (DSM) and energy efficiency program.

For DUs with off-grid areas that are in parallel served by qualifying third parties (QTPs) or the so-called third party private investors, the DOE’s instruction is for them to coordinate with the local government units (LGUs) on firming up plans for the subsidy elimination.

The DOE further mandated that the NEA shall collaborate with TransCo and NPC (National Power Corporation) to review the individual UCME graduation and rationalization blueprint for the off-grid domains.

Following a review process, the electrification agency was likewise instructed to “consolidate the individual plans and submit the integrated UCME graduation and rationalization plan to the DoE for the updating of the Missionary Electrification Development Plan.”

The DoE further stipulated that part of the required NEA submission will be the evaluation and recommendation of the timeline of “achieving the following milestones for each DUs with off-grid area whenever applicable.”

On planned technology upgrades, the NPC, in coordination with DUs in off-grid areas, “shall fast-track the conversion and modernization of all its diesel-based generator sets in pocket islets into renewable energy-based micro grid system that offers optimal hours of services based on the electricity need in the said areas.”