....ELI - Efficient Lighting Initiative.....:::

Philippines

Introduction |Highlights | Overview of activities | Documents | Contacts

Overview of activities

Electric Utility Programs

Regulatory Intervention: In the latter half of 2001, ELI provided technical assistance to the Philippines’ Energy Regulatory Commission (ERC), in the promotion of regulatory reforms – such as lost revenue adjustment mechanisms – to remove any real and perceived disincentives for energy efficiency.

On 10 April 2001, the Philippine energy regulatory agency, the Energy Regulatory Board, now re-organized under recent legislation as the Energy Regulatory Commission, entered into a Memorandum of Agreement with ELI to review, amend and improve as may be appropriate the DSM Regulatory Framework in the Philippines. The objective of this ELI-ERC collaborative effort was to encourage and facilitate DSM activities by utility companies.

The framework makes explicit the cost recovery methodologies/mechanisms for DSM program expenses and lost revenues, and provides incentive mechanisms for the conduct of DSM activities.

A number of collaborative meetings, spearheaded by ELI Philippines and attended by the regulators, relevant government agencies such as the Department of Energy and the Department of Trade and Industry, the government-run transmission company, the utilities, power producers, non-government organizations, consumer groups, and the academe, were conducted during a four-month period beginning July 2001 for the purpose of discussing the merits of the amendments and the drafting of agreements that signified the collaborative assembly’s majority and unanimous support of the incorporation of the proposed amendments.

Barriers to Implementing DSM

There is a resistance of the utilities to implement DSM due to lack of clear-cut and more responsive regulatory policy to incentivize the promotion of the DSM program. In order to address this issue, the existing regulatory framework for DSM had to be amended to assure the utilities of cost recovery, lost revenues and financial incentives. The rationale for amending the framework was the removal of the perceived barriers to DSM implementation.

The barriers that have to be addressed in the framework that were raised during the collaborative assemblies are as follows:

First is the issue of lost revenues. The common perception is that when electricity consumers buy and install efficient lighting technologies, the impact is that their electricity bill will be reduced. Consequently, a decrease in kWh electricity consumption may translate into lower sales, and in turn, lower profits for the utilities.
Second is the issue on financing. The local regulatory agency adopts by practice, not as a requirement by law, an accounting process which treats DSM program costs as allowable expenses only when these are actually incurred, before the utilities are allowed by the regulator to recover said expenses through rates.
Third is the issue on customers with minimum bill. These customers are not in the position to benefit from energy savings out of their current minimum or below minimum consumption.
Fourth is the pilot project syndrome, which refers to the general tendency of project managers and implementors to precede a project with a scaled-down pilot.
Fifth is the disclosure of DSM costs as a separate line item on the bill. While this makes the bill more transparent, it is “politically” unfeasible to do so because of the negative connotation of the term “costs.”
Sixth is the issue on excess capacity. This means that marginal or avoided costs are low because the operational costs of existing supply are more expensive than the costs associated with energy efficiency.

DSM Plans under the Proposed Framework

In the new framework, the electric utilities are required to either submit a customized DSM Plan, or adopt a standard DSM Plan or implement a default DSM Plan. A customized DSM Plan is a plan that is tailored-fit for the electric utility. The utility is free to choose which DSM programs will address its specific DSM load shape objectives.

Under the new scheme, a utility can opt to use the standard DSM Plan, which can be assembled from a menu of nine given DSM activities. Three of the nine DSM options are efficient lighting programs. These are:

High Efficiency Compact Fluorescent Lamp Lighting Program which aims to replace the less efficient incandescent lamp with High Efficiency CFLs in the residential and commercial sectors;
High Efficiency Linear Fluorescent Lighting Program which aims to promote the use of high efficiency linear fluorescent lamps with high-frequency low-loss electronic ballasts in the residential and business sectors; and;
High Efficiency Streetlight Lighting Program which aims to encourage the use of high-pressure sodium lamps instead of mercury vapor lamps.

The standard DSM plan developed collaboratively by ELI Philippines, the ERC and key power sector stakeholders includes: a list of standard DSM programs that are cost effective and feasible to implement in most areas, a standard DSM cost recovery plan reflecting the estimated cost of each standard DSM program plus utility specific net lost revenues, and a standard program evaluation.

The default DSM Plan imposes upon the utilities that fail to submit either a customized or standard DSM Plan, to implement all four (4) DSM programs, namely:

High Efficiency Compact Fluorescent Lamp Lighting Program;
High Efficiency Linear Fluorescent Lighting Program;
Power Factor Correction Program; and,
Consumer Efficiency Awareness Program.

During the planning and development of the standard and default DSM plans, the collaborative assemblies consistently voted to include energy efficient lighting programs as the primary DSM activity of choice.

The general preference for efficient lighting DSM programs, especially the High Efficiency CFL program, is due to the relative ease of implementation from a utility’s perspective, and its implementation has a direct and immediate impact on the load profile objectives of the utility, as the efficient use of lighting almost always swiftly clips the early evening peak demand.

ELI Philippines saw this opportunity for a direct and immediate impact in promoting efficient lighting over a broad spectrum of customers, and paved the way for the collaborative efforts with the regulators, government agencies and the power sector stakeholders to amend the framework for demand side management.

On 26 October 2001, after a seven-month long collaborative process, representatives of at least 71 power sector stakeholders, made up of private electric utilities, electric cooperatives, independent power producers, the National Power Corporation, the Department of Energy, the Department of Trade and Industry, the National Electrification Administration, non-government organizations, environmentalists, consumer groups, and the academe, signed a landmark memorandum of agreement that signified their support to the proposal of the Efficient Lighting Initiative to amend the 1996 Regulatory Framework for Demand Side Management in the Philippines.

	ERB-ELI MOA Signing for RAP Regulatory Interventions & Technical Assistance 10 April 2001
	Signing of Collaborative MOA to Amendment the 1996 Regulatory Framework for Demand-Side Management, 26 October 2001
	Collaborative Stipulation and Agreement for ERC-DSM Framework Amendment 26 October 2001

Model Utility CFL Programs: ELI developed model CFL leasing programs with motivated utilities. ELI worked with local financial institutions to capitalize these programs, and assisted utilities in creating program designs that benefit consumers and the utilities alike by supporting their competitive interests irrespective of Demand Side Management (DSM) cost recovery mechanisms. Dozens of utilities have unrealized plans for CFL leasing programs. ELI developed viable designs to create models that provide win-win-win situations between consumers, utilities, and regulators.

For two years, ELI worked with electric utilities to determine their optimal designs for programs that promote efficient lighting. Funds were earmarked for working with select utilities that have demonstrated a predisposition to leasing energy efficient CFLs, such as the Manila Electric Company (MERALCO) and Cagayan Electric Power and Light Company (CEPALCO).

CEPALCO embarked upon it’s pilot CFL Project, dubbed Paylight, in October 2001. ELI used the data and implementation experiences from the pilot project to prepare a business plan which can be used to develop the scaled-up CFL program targeted at Cagayan de Oro’s 80,000 customers together with some commercial and industrial businesses.

In March 2002, after two years of negotiations, ELI and MERALCO signed a Memorandum of Agreement that sought to prepare a study for implementing the Smartlight CFL program in Metro Manila. Meralco agreed to promote the use of energy efficient CFLs to increase popularity in the residential center. Meralco, being the largest electric utility in the Philippines, holds a market of 3 million residential customers. The launch of a CFL program will serve as a model for the smaller, provincial utilities in the development of energy efficient DSM projects.

To assist in the implementation of the Smartlight program, ELI Philippines contracted a group of consultants to provide the technical and business knowledge as well as experience in actual CFL leasing programs to ensure its success. They were tasked to prepare business plans, bring in international models, develop case studies based on actual implementations, and seek assistance in financing.

All these activities were essential tools to ensure the implementation of the programs, the approval and regulatory endorsement from the ERB/ERC, which will secure support from the utilities.

	ELI-CEPALCO Signing of MOA for Paylight CFL Leasing Program 05 March 2001
	ELI-MERALCO Signing of MOA for Smartlight CFL Leasing Program 27 March 2001

ELI© Efficient Lighting Initiative,
a program funded by the Global Environment Facility (GEF),
and executed by the International Finance Corporation (IFC).