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Not a power crisis, but a compliance issue, says Cusi

To avert power outages in the future, Energy Secretary Alfonso Cusi on Thursday asked lawmakers to allow his office to engage in power generation, grant authority to sanction violators, consider the use of nuclear energy and amend the franchise of the National Grid Corporation of the Philippines (NGCP).

Cusi told the Senate Committee on Energy to help the Department of Energy (DOE) in allowing government to be involved in power generation business, albeit “limited” so as not to compete with power generation companies (gencos). “It’s meant to augment energy supply when needed,” Cusi said.

Energy Regulatory Commission (ERC) chairman Agnes Devanadera said that while the Electric Power Industry Reform Act (Epira) requires the privatization of National Power Corporation (NPC) assets, “we can’t find an expressed provision that prohibits the government to engage in generation.”

In fact, she pointed out that state firm Philippine National Oil Company (PNOC) has generation projects, including renewable energy (RE). “Maybe the decision will have to be done by the national government whether or not the government will still fund the construction of the generation facilities.”

Commenting on this, DOE Undersecretary Felix William Fuentebella cited a need to amend the Epira because, according to PNOC and PNOC-Exploration Corp. (EC), this is considered “shaky legal ground.”

This proposal, said committee head Senator Sherwin Gatchalian, would be taken up in another hearing.

Cusi also suggested the use of other energy sources for baseload such as nuclear, subject to technical and safety requirements. “If found feasible and doable, allow the same as congress may deem appropriate.”

He also asked that his office be allowed to sanction violators of DOE policies and be allowed to issue measures to protect the consumers during a state of emergency.

Amend NGCP franchise–Cusi

But more important, Cusi stressed, a legislation must be crafted to amend NGCP’s franchise so it could take back the responsibility to prepare the Transmission Development Plan (TDP) and remove the delegation of the governmental power to expropriate because, he said, NGCP is wrongfully registering properties under its name instead of the National Transmission Corp. (TransCo) as owner.

The NGCP took over the management and operation of the power grid since 2009. TransCo still owns the assets.

Cusi went on further to say that the rotating power outages from May 31 to June 2 was “not a power crisis but a compliance issue,” particularly on the side of NGCP.

He cited NGCP’s refusal to include TransCo in crafting the TDP, refusal to allow TransCo to inspect NGCP’s facilities, delays in NGCP’s vital power projects and non-compliance with a DOE circular ordering NGCP to contract 100-percent firm contracts for ancillary services (AS), among others. “If it had only contracted firm contracts, we wouldn’t be here talking about the brownouts last week,” Cusi said.

Based on DOE figures presented at the hearing, Luzon should have a regulating reserve (RR) of 491megawatts, contingency reserve (CR) of 668 MW and dispatchable reserve (DR) of 647 MW.  But the NGCP, according to the DOE, was only able to contract 237 MW RR, 180 MW CR and 145 MW DR. These three types of reserves are also known as AS.

During the hearing, the NGCP warned of a sharp spike in power rates if compelled to procure all of its AS requirements under 100% firm contract.

NGCP explained that initial simulations show power rates could rise by P0.64 per kilowatt-hour (kwh) for Luzon, P0.54 per kwh for Visayas, and P1.39 per kwh for Mindanao.

NGCP issued this warning in light of the DOE’s insistence on the dispatch of AS as a response to thin operating margins and possible load dropping in the Luzon grid at various points this year, due to multiple power plants on extended outage.

NGCP President Anthony Almeda said during the hearing that the red alerts experienced last May 31 and June 1 were due to generation deficiency since several power plants went on forced or unplanned outages while others were running on de-rated capacities. Almeda said AS contracting will not solve this supply problem; new power plants will.

“Why is the problem with supply suddenly NGCP’s responsibility? We can only deliver what is being made or generated by suppliers. Nothing more,” he stressed.

NGCP sources the power it needs to support its AS from the same pool of energy suppliers serving end consumers. “AS is not extra energy, nor is it replacement power for power plants that go down. If power supply is not enough to meet the needs of the consumers, how can there still be power for AS?” Almeda insisted.

AS, the NGCP stressed, is a stop-gap measure, dispatched only to stabilize and balance the grid in cases of power supply and demand imbalance. In times when supply is sufficient, it is meant to run only long enough to bridge the gap between the loss of supply event, and the time that replacement power can be scheduled by the Independent Electricity Market Operator of the Philippines Inc. (Iemop), usually within the succeeding hour or two. It should not run for days, weeks, or months on end without violating the Epira and prevailing regulatory approvals.

NGCP currently contracts both firm and non-firm arrangements for its ancillary services.

Shifting from the current non-firm arrangements to a firm arrangement, it said, will not solve the current lack in supply, as they are taken from the same pool of power plant suppliers.

We’ve been bullied–NGCP

“NGCP has constantly been bullied not just over the past couple of days, but in the past years—being used as the scapegoat; the easy target to blame for the issue. We were blamed for not contracting enough AS, as if it is the solution to the problem,” said Almeda.

Cusi said Marubeni has informed DOE that 70 MW of capacity could be tapped by NGCP as AS. “There are available solutions but how come these are not being done? We are going back to the issue on reserves. If I am the system operator, I have to find ways. I disagree that it will cost additional burden to the consumers,” said Cusi.

During the hearing, energy officials said the entry of GNPower Dinginin Ltd. Co. (GNPD) Unit 1 “plays a very important role,” saying without it, “we will be having red alerts.”

The plant is still undergoing testing and commissioning. It is expected to be commercially available in August, according to the ERC.

“We are earnestly working at remedial measures to resolve the issue and enable Unit 1 of the Dinginin Plant to resume testing and commissioning and augment supply to the grid with its ability to make available 668 MW.

“Rest assured that we are working closely with our government and industry stakeholders in making sure this capacity is provided to the grid without delay,” said GNPD Vice President Roberto Racelis Jr.

The issuance of red alert could also be triggered by the simultaneous maintenance shutdown of Sual and Ilijan Block B plants. These plants were supposed to go offline this month but the DOE had sought deferment of maintenance activities.

“These are two critical power plants scheduled to start maintenance procedure this June and we have requested them to move the schedule and we have yet to receive the submission of NGCP and the gencos on this,” said DOE-Electric Power Industry Management Bureau Director Mario Marasigan.

The estimated cost of power outage in Meralco residential customers during the May 31 and June 1 brownouts amounted to P116,838,129.30, according to the Philippine Independent Power Producers Association  Inc. (Pippa).

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