The Market Monitor Minding the Nation's Business
The Department of Energy (DoE) on Monday reiterated its previous pronouncement that the National Grid Corporation of the Philippines (NGCP) should comply with its obligations and reduce its transmission fees if the latter is keen on helping consumers.
The agency is referring to NGCP’s mandate as a system operator to secure power supply reserves or ancillary services (AS).
“If NGCP wants to help consumers, be magnanimous, and lower the cost of electricity, they should just reduce their transmission fee, reduce the weighted average cost of capital (WACC), and finish the transmission projects on time,” said Energy Secretary Alfonso Cusi in a statement.
The DoE noted that the NGCP is not limited to procure from existing power plants in order to comply with its obligations under its franchise.
Ancillary services or power reserves are necessary to support the transmission of capacity and energy from resources to loads while maintaining reliable operation of the transmission system, as defined by Republic Act 9136 or the “Electric Power Industry Reform Act of 2001.”
As per Department Circular 2019-12-0018, the NGCP is mandated to procure 100-percent firm power reserves, as well as engage in the forward contracting of reserve requirements to ensure grid reliability.
The agency’s 2019 policy “clearly states that the NGCP may engage in forward contracting, which allows the entry of additional capacities.”
These steps, the DoE said, would help secure the availability of power services during untoward occurrences, such as the simultaneous plant outages and plants operating at de-rated capacity, which led to the issuances of red and yellow alerts last May 31 and June 1.
“To prevent electricity price spikes, the power industry players must comply with their obligations to increase the generation capacity,” said Cusi.
“This can be done through the purchase of replacement power by the distribution utilities and the procurement of ancillary services or reserves by the NGCP,” he added.
NGCP responds to Cusi
But NGCP spokesperson Cynthia Alabanza said the grid operator is not responsible for the power supply issue that Luzon recently suffered.
“Our firm position is, the issue on the power supply here is really a shortage and it’s not a transmission issue, so it cannot be NGCP’s obligation to provide the kind of power to replace the ones that was law. Under the law, we are not allowed to buy and sell electricity to consumers,” Alabanza said in an interview with One News.
“Apart from the fact that NGCP should not be made responsible for supply issue, what the DoE is asking us to do is not to procure additional supply but only to change the nature of our purchasing from what we are doing now, which is a non-firm arrangement or ay only when needed when dispatched, to a firm arrangement, which is akin to take or pay,” she said.
“Which means that even if it is not used, it will be paid for. This is the basis of NGCP’s warning for the impending power hike if we are compelled to procure all our AS on a take or pay basis,” she added.
The NGCP previously said that the initial simulations show that power rates can see an upsurge of P0.64 per kilowatt-hour (kWh) for Luzon, P0.54 per kWh for the Visayas, and P1.39 per kWh for Mindanao.
For a household consuming 200 kWh, this means an additional P128 in electric bills of consumers from Luzon, P108 for those in Visayas, and P278 for those in Mindanao.
“When we are supposed to do the firm, it will not add to the power supply. The firm arrangements are there, the non-firm arrangements are, and taken together we do have enough of these AS. Changing the nature of the contracts will not alleviate the impending power shortage,” Alabanza said.
Last week, the Energy department proposed in a Senate hearing the amendment of NGCP’s legislative franchise and the return to government control of the Luzon grid, citing power distribution and cybersecurity concerns.
Cusi and other DoE officials had several instances wherein the private company failed to comply with government policies that would ensure steady power supply.
“The DoE emphasizes that the operation of our national power grid is a matter of national security. It is time for the government to take back our grid’s systems operations,” Cusi said.