2006年-世界发展银行全球_Output-Based_Aid_in_the_Philippines___Improving_Electricity_Supply_on_Remote_Islands_4页_477kb

OBA Approaches 37357: Improving Electricity Supply on Remote Islands in the Philippines

Core Content

The Philippines has implemented an Output-Based Aid (OBA) subsidy scheme to enhance electricity supply in remote islands, aiming to improve living standards in underserved communities. This initiative is part of a broader effort to reform the country's electricity sector and promote more efficient and reliable power delivery.

Main Points

1. Objective of OBA in the Philippines

• To improve electricity supply in remote islands where access is limited.
• To reduce the financial burden on the government by shifting responsibility to private generators.
• To increase the efficiency and effectiveness of subsidy usage and improve service quality.

2. Background of Electricity Supply in the Philippines

• The Philippines has over 7,100 islands and 85 million people.
• Around 8% of Barangays (villages or neighborhoods) remained unserved in 2005, with about half in remote rural areas.
• The government aims to electrify all Barangays by 2008.
• The main electricity supply comes from three major grids with a total capacity of 16.8 gigawatts.
• Remote islands rely on the Small Power Utility Group (SPUG), which operates small, isolated diesel plants and faces high costs and unreliable supply.

3. Challenges with SPUG

• SPUG's electricity supply is inefficient and unreliable.
• High fuel and overhead costs make it difficult to recover expenses from local populations.
• Annual per capita income in these areas is low, around $450.
• Most families rely on subsistence fishing and farming.
• SPUG has been absorbing the subsidy gap, leading to financial difficulties.

Key Components of the OBA Framework

1. Subsidy Mechanism

• The subsidy is funded through a surcharge on all electricity users.
• It is paid to private generators selected via competitive bidding.
• The Energy Regulatory Commission (ERC) sets the subsidized tariff.
• A subsidy to cover the difference between full-cost and subsidized tariffs is provided.

2. Framework Development

• The International Finance Corporation (IFC) was appointed as the transaction adviser in 2004.
• IFC developed a framework for rural electrification projects, including:
  • A model power supply agreement.
  • Regulatory guidelines to govern the transactions.
• The framework ensures transparency and performance-based commitments from private generators.

3. Regulatory Regime

• Prior to the OBA project, there was no regulatory framework for private generation in off-grid areas.
• IFC supported the ERC in developing guidelines for selecting and approving private generators.
• These guidelines emphasize competitive bidding to determine the true cost of generation.

4. Implementation and Pilot Projects

• Three islands (Marinduque, Romblon, and Tablas) were selected as pilot areas.
• These islands are served by different electricity cooperatives.
• A bidding process was initiated, with 25 developers (17 Filipino, 8 international) participating.
• The winning bidder was a local consortium proposing a hybrid wind-diesel system.
• The approved tariff was $0.10 per kWh, leading to a subsidy of $0.028 per kWh.

Outcomes and Benefits

• The OBA scheme leads to significant cost savings and improved service quality.
• It reduces the total subsidy required and ensures financial sustainability for SPUG.
• $1,000 of aid can now fund 8.82 kW of capacity, compared to 1.5 kW under SPUG.

Risk Mitigation and Contractual Safeguards

• A subsidy administration agreement was established to ensure:
  • SPUG petitions for sufficient subsidies.
  • Private generators receive the subsidies they are entitled to.
• This agreement increases transparency and provides guarantees to private providers.

Conclusion

• The OBA initiative has successfully improved electricity supply in the three pilot islands.
• The government is preparing to expand the program to three more areas.
• The project supports aid effectiveness by aligning financial support with performance outcomes.
• It also contributes to sector reform by promoting private participation and market mechanisms in rural electrification.

About OBApproaches

• OBApproaches is a forum for sharing experiences and innovations in delivering basic services to the poor.
• It focuses on output or performance-based approaches in areas such as energy, water, and education.
• The case study is presented by the authors in agreement with the GPOBA management team and does not represent official policy of the World Bank or its donors.