‘MORE D.U. CONTRACTING WILL FILL POWER GAPS’
ENERGY security still hanging? Policy is key, says an energy expert who said power supply deficiency may be addressed by requiring distribution utilities (DUS) to contract more from power generation companies.
Speaking at the Philippine Competition Commission (PCC) webinar on Abuse of Dominance, lawyer Jay Layug said a policy on ancillary service (AS) will not address deficiency in power supply.
Layug is a former energy undersecretary and ex-chairman of the National Renewable Energy Board (NREB).
The PCC webinar was held for the Economic Journalists Association of the Philippines (EJAP).
“For a deficiency supply, we are now requiring NGCP (National Grid Corporation of the Philippines) to contract more reserves when in fact what should be done is increase supply via all the DUS contracting for more. It is not more ancillary we need, but more supply of electricity,” Layug pointed out.
He proposed that DUS be allowed to contract “a little more” to help address supply deficiency.
The NGCP has caught the ire of the Department of Energy (DOE) for not contacting enough firm AS contracts. A policy was issued thereafter that required the grid operator to “expedite the procurement of the required reserves to ensure the grid’s secured and reliable operations.”
The NGCP was also given 30 days to convert all of its non-firm AS contracts to firm.
In his personal opinion, Layug said, the NGCP has not violated its obligation to contract power reser ves. “I did check the records of NGCP based on ERC records. Is NGCP violating obligation to contract reserves? No. In fact, it has contracted a lot of reserves. It’s just that what the DOE now requires is all those reserves must be in firm capacity.”
Consumers to suffer
HE expressed concern that consumers will suffer from the conversion of non-firm to firm AS contracts.
“When we convert all those nonfirm reserves to firm capacity, that means those generators don’t need to run, they have to be on standby all the time, and they will get paid capacity fees even for not running. So, the impact now goes on to consumers,” he said.
Layug stressed that the power generation sector needs more supply while the transmission and distribution sectors need to put up more infrastructure in order for the country to be assured of stable and affordable power supply.
He is also willing to share his view with the PCC, which is coordinating with the Department of Energy (DOE) and the Energy Regulatory Commission (ERC) on an ongoing probe on power firms’ possible involvement in the Mayjune power outage incidents caused mainly by sudden and prolonged plant shutdowns.
PCC Chairman Arsenio Balisacan said his office is “working closely” with the two agencies “to get this coordination working as smooth as possible...to get the case moving.”
The DOE has turned to the ERC, PCC and Department of Justice for enforcement assistance and case build-up against power firms for their prolonged power plant outages; the grid system operator for not securing enough firm-contracted ancillary reserves; and the DUS for not conducting competitive power supply auctions on time.
“We have always asserted that competition is an important lever that the government should exploit in its pursuit of inclusive development. Fair competition pushes businesses to come up with innovative and better-quality products and services at competitive prices. It therefore benefits the public, especially the poor,” Balisacan said.
He said the PCC, being a relatively new government agency, is still unknown to many. Yet, the principles of fairness that the commission strives to uphold are not unfamiliar to the public.
“Even before the passage of the Philippine Competition Act, many of our stakeholders already understand the concept of abuse of dominance as manifested in the most basic ways. Examples are when dominant companies charge exploitative or unreasonably discriminatory prices to consumers and competitors, or set unfair trading conditions to suppliers and distributors,” Balisacan said.
However, he added, “the problem lies in the gap between what the public feels or thinks is unfair and what they know is actually punishable under the PCA. Many abusive practices go unchecked and unpunished, remaining as hearsay or open secrets mostly because of this lack of knowledge. On the other hand, knowing well what is lawful and not can bolster the confidence of consumers and firms to report abusive acts to the PCC,” he said.