NGCP risks franchise loss

ERC, Congress move to start probes While the system check is ongoing, National Transmission Corp. president and CEO Melvin Matibag reiterated the need to expedite the handover of the System Operation of the power grid back to the government

All roads lead to electricity network concessionaire National Grid Corporation of the Philippines (NGCP) losing its privilege to operate the transmission backbone either through an ongoing performance audit or revocation of its franchise by Congress.

The Department of Energy (DoE) had pointed to

NGCP’s neglect in fulfilling its commitments under its contract with the government for the thin electricity reserves that result to frequent power outages during periods of high demand or when a number of power plants fail.

Energy Regulatory Commission (ERC) chairperson Agnes VST Devanadera said on Sunday the long-delayed comprehensive system operations audit of NGCP is ongoing.

However, Devanadera did not disclose when the results of the audit would be released.

While the system check is ongoing, National Transmission Corp. (TransCo) president and CEO Melvin Matibag reiterated the need to expedite the handover of the System Operation of the power grid back to the government. The Transmission Network O&M and the grid’s System Operation or SO businesses of TransCo were privatized and awarded to NGCP in 2008. The SO which is also a concern on national security represents only 6.8 percent of the privatized business but it is the function that is responsible for the operating reserve to prevent brownouts.

“The System Operation will be returned to the government,” Matibag told the Daily Tribune.

“Government doesn’t have physical control (over NGCP) that’s why it’s hard on our part. The ERC should be the one to impose and enforce an audit,” he added.

Franchise can be revisited

Legislators had sought a comprehensive system operations audit of the grid operator to clarify apprehensions on its true ownership and the extent of foreign participation in its management.

In a virtual briefing early this week, Pampanga Representative Juan Miguel Arroyo warned that Congress might use its power to revoke the franchise of erring or non-compliant generation companies and even NGCP itself.

“Congress can always revisit any franchise given if there are violations. That is a strong possibility that’s why there should be some form of compliance,” he said.

To follow is its mandate Meanwhile, Department of Energy

(DoE) Secretary Alfonso G. Cusi clarified that the agency issued the policy directing the NGCP to secure Ancillary Services (AS) as a means to ensure supply reliability.

“The only function that the NGCP is mandated to perform as the grid operator is to implement this directive to maintain the prescribed and correct reserve capacity. This is their mandate under the concession contract,” Cusi said.

“Predicting the price of reserve power and playing with the sentiments of consumers by suddenly becoming concerned about prices is both questionable and irresponsible,” he added.

Cusi contended that if NGCP was truly sensitive to the needs of its stakeholders, then the timely establishment of the interconnection lines and the prompt contracting of reserve power would have mitigated an unfavorable price impact.

“As it is now, the delay and non/ compliance can only result in losses from power outages while we also have wasted stranded power in the Visayas and Mindanao,” he said.

Non-firm deals

Cusi also stipulated that by defying the policy of procuring only firm AS, NGCP is “not able to prevent rotational brownouts.”

“The operations records of NGCP bear witness to the fact that the consumers in Luzon suffered 20 rotational brownouts in 2019, 10 in 2020, and already three brownouts in the first quarter of 2021 due to the activation of Automatic Load Dropping which was not announced unlike the Manual Load Dropping which was announced by issuing Red Alerts,” he said.

“These rotational brownouts happened because the reserves that NGCP contracted are ‘non-firm’ which gives the option to AS providers to provide it or not. It is not enough that the car has a spare tire. The spare tire must have a firm air pressure. The air pressure cannot be optional.”

Cusi also emphasized that since non-firm AS does not work, it was unjust for NGCP to let consumers suffer “inconveniences from the brownouts that it failed to prevent during unplanned outages of operating plants.”

Made up scare

NGCP compelled all consumers to pay an additional P0.30 in 2019 and P0.34 in 2020 for each kilowatthour of electricity consumed to pay for non-firm AS contracts.

Contracting firm AS deals will stabilize the grid and will prevent price hikes in the wholesale electricity spot market (WESM) which always happens when the grid is not assured of its stability due to lack of firm operating reserves.

“NGCP has invented a price hike scare to escape accountability for its failure to serve the public for the business that it assumed and financially benefited since 2009,” the DoE said.

The 2019 DoE Department Circular on Ancillary Services is implementing rules and regulation of the Republic Act 9136 (EPIRA Law) that prescribe NGCP to comply with the requirement of the Philippine Grid Code (promulgated by ERC in 2001) to operate the grid in a secured manner, that is, avoid rotational brownouts.

But for NGCP, based on its statement posted on 10 June 2021, in social media, the government policies, orders, rules, and regulation are mere “proposals” and therefore it has the discretion to either be followed or ignored.