[Statement] No to emergency powers; NGCP to provide reserves -NASECORE

No to emergency powers; NGCP to provide reserves

The grant of emergency powers to the President ostensibly to address an unverified looming power crisis is baseless and unnecessary.

House Committee on Energy Chairman and Or. Mindoro Rep. Reynaldo Umali announced last week the filing of Joint Resolution No. 21 giving President Benigno S. Aquino III emergency powers “to provide for the establishment of additional power generating capacity as mandated by RA 9136 to effectively address the projected shortage of the supply of electricity in the Luzon grid from 12 March to July 2015”.

Sec. 71 of RA 9136, Electric Power Crisis Provision, provides: “Upon the determination by the President of the Philippines of an imminent shortage of the supply of electricity, Congress may authorize, through a joint resolution, the establishment of additional generating capacity under such terms and conditions as it may approve.”

The factual bases of an imminent supply shortage have not been established. On the contrary, Rep. Umali is quoted in published reports that the Department of Energy (DOE) and the National Grid Corp. of the Philippines (NGCP) cannot arrive at a common supply outlook for 2015.

At the October 20, 2014 public hearing of the HOR Committee on Energy, Irma Exconde, DOE Director for Power Planning, assured the House that there would be available capacity for the critical summer months of 2015. She submitted the following projections/outlook for Luzon in 2015: March – available capacity, 9,059MW to 9,296MW, with peak demand at 8,110MW to 8,480MW; April – available, 8,888MW to 10,178MW, with peak at 8,290MW to 9.013MW; May – available, 10,199MW to 10,497MW, with peak at 8,860MW to 9,017MW; and, June – available, 10,086MW to 10,176MW, with peak at 8,820MW to 9,000MW.

If at all, she told the committee at that time, the “shortfall” will be in the net reserve – the gross reserve minus the regulating reserve – but this would only be in the range of 21MW to 31MW, and only in the 1st and 2nd weeks of April, respectively.

It thus comes as a huge surprise to Nasecore that after having come to the conclusion on October 20 that the feared looming crisis was just a case of thinning reserves, the House Committee does a volte face or turns about-face and gives President Aquino emergency powers under Sec. 71 of the Power Reform Law or EPIRA.

This is supposed to be a watered-down resolution after the option to lease and/or purchase modular gensets was taken out of the Malacanan version but the power to contract additional generating capacity still remains. The President’s choices, however, are apparently limited to the current players who may be the only ones with the capacity to fill the supply gaps, if any.
Is this, perhaps, a solution that simply opened windows when it closed doors? Only an outright withdrawal or denial of the joint resolution will dispel such doubts.

Unless the DOE has withdrawn the Exconde estimates, there is no real reason or valid justification for the grant of emergency powers.

If Director Exconde’s projections have been changed, what are the bases for the new estimates and projections?

The proposed joint resolution states that the emergency powers will expire in July next year.

Does this also mean that contracts for additional generating capacity under emergency powers must expire in July 2015?

Moreover, the joint resolution does not set any cap or limit to the additional generating capacity to be contracted. Such an open-end grant of vast powers cannot but stir fears and anxiety over a possible repeat of the over-contracting at onerous terms, under emergency powers, in a previous regime.

When the policy arm (DOE) and the system operator (National Grid Corp. of the Philippines) cannot agree on the projected shortfall, consumers have to be extra wary of the extent and levels of additional generating capacities the President will contract.

The DOE and NGCP are the lead agencies for determining and setting supply levels of electricity, the former as the agency to “integrate the individual or joint development plans of the transmission, generation and distribution sectors of the electric power industry” under Sec. 37 of RA 9136 and the latter as system operator under a legislative franchise as national transmission company.

Meanwhile, cited in recent news reports is a House Energy Committee “working figure” of 1,040MW described as ‘negative reserves’, a concrete estimate reportedly arrived at by the Committee after DOE and NGCP could not agree on a common shortfall estimate. This will consist of 440MW contingency or spinning reserves and 600MW back-up or dispatchable reserves.

This is way over the 21MW to 31MW reserve deficiency reported by Dir. Exconde to the Committee. How did the Committee arrive at a deficit 20- to 30-times higher than originally projected? Nasecore seeks answers, in concrete and verifiable terms.

Moreover, if the grant of emergency powers is to answer for the reserves, the joint resolution is misdirected, misplaced and inappropriate.

Reserves are part of ancillary services, which are “support services necessary to sustain the transmission capacity and energy that are essential in maintaining the power quality, reliability and security of the grid.” This was a function of state-owned National Power Corp. but after privatization under RA 9136, this was taken over by a privatized NGCP and it is now a principal part of NGCP’s undertakings as system operator.

The NGCP website says it “assumes NPC’s authority and responsibility for planning, construction and centralized operations and maintenance of the high voltage transmission facilities, including grid interconnections and ancillary services.”

Under ancillary services, the Frequency Regulating Reserve is equivalent to 4% of the total system load, which would be around 360MW using the highest projected peak load (9,017MW) in May; Spinning Reserve should be equivalent to the biggest plant, or about 647MW, more or less the size of the Sual coal-fired plant; and Dispatchable Reserve, another 647MW that can be synchronized in 15 minutes.

NGCP should provide for these reserves, and it has been charging us fees for this service. Where did our payments for ancillary services go, if as the House Committee claims the reserve deficiency is or has been 1,040MW? (The deficiency, if at all, should only be the incremental increase on current reserve levels resulting from incremental demand growth.)

An initial check with the Energy Regulatory Commission website showed that NGCP had entered into Ancillary Services Procurement Agreements (ASPA) with the following generation companies: Trans-Asia Oil & Energy Dev. Corp.; First Gen Hydro Power Corp.; SN Aboitiz Power – Benguet, Inc. (SNAP-BI); Trans-Asia Power Generation Corp.; SN Aboitiz Power – Magat (SNAP-M); SPC Island Power Corp. (SIPC); San Roque Power Corp. (SRPC); Philippines & Green Core Geothermal, Inc.
ERC must furnish Nasecore copies of these ASPA’s. We want to know what we have been charged so far. Nasecore is asking for a full accounting of the capacities contracted by NGCP for ancillary services, the fees collected for them, and their actual use or dispatch. If NGCP cannot make a full and thorough account of these amounts, the ERC must order the immediate and full refund of such collections.

Nasecore is also asking the HOR Energy Committee and the Committee on Franchises to look into NGCP’s compliance with its undertakings in its legislative franchise. If there are short comings – like the failure to provide for and procure ancillary services – Congress must recall the franchise and Government must cancel the agreement allowing NGCP to operate the national transmission system.

Personally, I (Pete Ilagan) find it disturbing that the Chairman of the House Energy Committee had to go to NGCP to see “NGCP officials to try to get them to agree with the DOE on their projections”. To begin with, if NGCP was doing its job, Rep. Umali would not have had to go to NGCP to plead his Committee’s case.

When we re-nationalize the Transco and take it from the non-Filipino hands that presently run it, our congress will surely have a better grip on the grid.

Nasecore, as a final point, will remind DOE and the House Committee that DOE has ample powers in Sec. 37 of EPIRA, the DOE mandate, for the Department to lead power planning from up front instead of behind, and to issue and enforce energy conservation measures. Even the ILP or interruptible load program is within the scope of Sec. 37, if DOE would only assert and exercise it.

RA 9136 is quoted verbatim, and you be the judge if DOE still needs Sec. 71 to address our electric power needs:

Sec. 37, Powers and Functions of the DOE. a. Formulate policies for the planning and implementation of a comprehensive program for the efficient supply and economical use of energy… b.) develop and update annually Philippine Energy Plan… c.) prepare and update annually Power Development Program…d.) ensure the reliability, quality and security of supply of electric power… e.i) encourage private sector investments in the electricity sector… e.iii) in consultation with other government agencies, promote a system of incentives to encourage industry participants, including new generating companies and end-users to provide adequate and reliable electric supply…e.i) develop policies and procedures and, as appropriate, promote a system of energy development incentives to enable and encourage electric power industry participants to provide adequate capacity to meet demand, including, among others, reserve requirements…e.l) formulate and implement programs, including a system of providing incentives and penalties, for the judicious and efficient use of energy-consuming sectors of the economy… e.p) formulate such rules and regulations as may be necessary to implement the objectives of this Act… e.q) exercise such other powers as may be necessary or incidental to attain the objectives of this Act.

Ref. PETE ILAGAN, 09178461299
Email: ptilagan@nasecore.com

November 18, 2014

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