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DoE to NGCP: reduce fees and comply with required reserves

Grid operator says department policy will not eliminate brownouts

By Angelica Y. Yang, Reporter

THE Department of Energy (DoE) told privately owned National Grid Corp. of the Philippines (NGCP) on Monday to reduce its transmission fees and ensure compliance with the ancillary services (AS) requirement if the latter wanted to help consumers.

Earlier, the system operator pointed out that if it implements a 100% firm-contracted requirement for its reserves, consumers will see “astronomical increases” in power rates.

Citing initial estimates, NGCP spokesperson Cynthia P. Alabanza previously explained the move would hit typical households in Luzon, Visayas and Mindanao with an additional P128, P108, and P278 in their power bills, respectively.

“It is not for NGCP to say that electricity will be more costly if they comply. Having the required reserves is not optional. 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, and finish the transmission projects on time,” the DoE said in a statement on Monday.

The department also reiterated its call for the grid operator to ensure sufficient reserves instead of “making excuses to justify continued noncompliance with the DoE’s issuances.”

According to a department circular issued two years ago, the NGCP is required to procure 100% of firm-contracted reserves to guarantee the reliability of the grid.

The DoE said its 2019 AS policy clearly states that NGCP may engage in forward contracting, which allows the entry of additional capacities.

NGCP previously said it had contracted most of its reserves through a combination of firm and non-firm arrangements but added that its contingency reserves for Luzon are short of 72 megawatts, as of end-2020.

To avoid electricity price spikes, industry participants must comply with their obligations to increase the generation capacity, the DoE said.

“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,” it said.

Sought for comment on DoE’s statements, NGCP’s Ms. Alabanza said that the company does not deny its obligation to secure sufficient reserves.

“What we are asking is that the take-or-pay procurement policy being enforced by DoE first undergo scrutiny by the Energy Regulatory Commission because of what NGCP’s simulations show to be a significant impact on consumer rates,” she told BusinessWorld on Viber on Monday.

Firm contracting will not add new capacities to the grid since this will only change the payment terms of existing contracts, she said.

“Even if fully implemented, the thinning of supplies, and the possibilities of further rounds of red alerts and power interruptions throughout the Luzon grid will not disappear or be in any way mitigated,” Ms. Alabanza added.

According to her, the country has enjoyed better services and lower rates under NGCP.

“Since it took over operations in 2009, consumers have enjoyed a 23% reduction in transmission rates and a 75% reduction in transmission outages,” she said.

‘TAKE BACK CONTROL OF THE GRID’
In the same statement, DoE Secretary Alfonso G. Cusi said that “it is time for the government to take back the country’s grid,” as he cited issues of national security.

He was referring to the State Grid Corp. of China, one of China’s two grid companies, which holds a 40% share in NGCP. He previously described NGCP as a private firm with “substantial foreign ownership.”

In a public hearing last week, Mr. Cusi asked the Senate Committee on Energy to consider reverting grid control to the government to better manage power reserves and ensure national cybersecurity.

He also asked the chamber to consider giving authority to the DoE to prepare the annual transmission development plan (TDP), which is currently under the mandate of NGCP.

Mr. Cusi said the DoE did not approve the TDP because NGCP did not let state-led National Transmission Corp. review it.

Four months ago, NGCP said it had been consulting agencies and stakeholders about the updated TDP. The latest version of the plan, which covers the years 2021 to 2040, accounts for the needs of the power grid.

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