ERC drafts off-grid renewable energy rules to cut costs

By Francis Allan L. Angelo

The Energy Regulatory Commission has drafted rules that would give renewable energy priority over diesel generation in off-grid communities, with the goal of lowering electricity costs and reducing a subsidy paid by power consumers nationwide.

The proposed Off-Grid Renewable Energy Distributed Energy Resources Rules would establish operational and financial mechanisms to encourage more solar, wind, and other renewable energy projects in missionary areas.

Missionary areas are remote or isolated communities where electricity service often depends on costly diesel generators and government-supported subsidies.

The ERC said greater use of renewable energy could reduce the country’s dependence on imported diesel, limit exposure to volatile fuel prices, and ease pressure on the Universal Charge for Missionary Electrification, or UC-ME.

The UC-ME is collected from electricity users nationwide to help subsidize power generation in off-grid areas where the full cost of service is often too expensive for local households to shoulder.

ERC Chairperson and CEO Francis Saturnino C. Juan said the proposal seeks to improve electricity affordability and reliability while supporting the transition to cleaner energy.

“At the heart of these reforms is a simple objective: to deliver more affordable, reliable, and sustainable power to our off-grid communities while easing the burden on all electricity consumers who bear the UC-ME charge,” Chairperson Juan said.

Under the draft rules, renewable energy sources such as solar and wind would be dispatched before diesel plants whenever sufficient supply is available.

Diesel generators, including facilities covered by existing contracts, could be placed on standby when distributed renewable energy resources can meet local demand.

The arrangement would allow diesel operators to recover fixed costs while avoiding additional fuel expenses when their generators are not needed.

The proposed framework also introduces an 80-20 export payment arrangement for electricity supplied by distributed energy resource owners.

Under the scheme, renewable energy system owners would receive 80% of the subsidized and approved generation rate, while distribution utilities would retain 20% to help finance grid improvements.

Qualified renewable energy developers could also receive a cash incentive equal to 50% of the UC-ME rate for every kilowatt-hour generated.

Renewable Energy Certificates produced by qualified facilities would be credited to mandated participants in off-grid areas for compliance with national renewable energy requirements.

Juan said the mechanisms are intended to ensure that renewable energy projects are not only encouraged through incentives but are also given priority in actual off-grid system operations.

The proposal could allow renewable energy to displace more expensive diesel generation whenever solar, wind, or other clean-energy supply is available.

For ordinary electricity users, the plan matters even if they live on the main power grid because the UC-ME subsidy is included in the electricity charges paid by consumers across the country.

Reducing diesel use could eventually ease pressure on that charge, although any effect on monthly electricity bills would depend on the final rules, the cost of renewable energy projects, grid improvements, and how quickly new systems are installed.

For residents of remote islands and communities, more renewable energy could also mean less exposure to fuel delivery disruptions and sudden increases in diesel prices.

The proposed rules are not yet final and will still undergo public review before the commission decides whether to approve or revise them.

The ERC will post the draft rules on July 10 and accept comments from interested parties until July 23.

A public consultation will be held through Microsoft Teams on July 30, 2026.

Consumers, distribution utilities, renewable energy developers, diesel plant operators, and other affected groups may use the consultation period to raise concerns about costs, incentives, reliability, and implementation.

The ERC said the proposal forms part of its forward-looking reforms intended to strengthen renewable energy use in off-grid systems and improve the power sector’s long-term affordability and sustainability.