Putting energy security back in the hands of government is the ultimate solution to the recurring problem of brownouts rather than the stop-gap measures of beleaguered transmission network concessionaire National Grid Corp. of the Philippines (NGCP), an energy official said.
NGCP has relented as it indicated on Tuesday it will now hold a competitive bid for ancillary service (AS) contracts needed to maintain reserve power after the Daily Tribune ran a series of reports on the violations of its concession agreement with state-owned National Transmission Corp. (TransCo).
Among these breaches is NGCP’s failure to obtain AS contracts that would provide stand-by electricity ready for dispatch during supply shortfalls.
Yet, NGCP insisted that the problem behind the power outages is about capacity of power plants rather than the availability of backup electricity, adding that the new AS contracts will lead to higher monthly bills.
TransCo President Melvin Matibag countered that energy security should be in the hands of the government because it is a function of the state.
“We have seen for the last 10 years that NGCP’s main concern was not energy security but ‘profits security’, to the detriment of the whole energy sector,” Matibag pointed out.
“The System Operation function should not be in the hands of transmission provider NGCP. It should be reverted to the government because this not only involves Energy Security but also National Security,” according to Matibag.
Not a solution?
NGCP issued a statement late on Wednesday, saying it wanted “to guarantee the best pricing for AS, especially since this is a passed-on cost to consumers”.
“With an open and public bidding process, we ensure full transparency and comply with internal governance imperative of accountability, which all our stakeholders deserve,” NGCP president and CEO Anthony Almeda said.
The electricity concessionaire, however, in the same breath said procuring AS on either “firm or non-firm” basis is “not a solution.”
However, an industry expert said there is no such thing as “firm or non-firm” contract. These terms were allegedly coined by NGCP to confuse the public.
“What we have is a supply and not a distribution problem. For the grid to effectively address imbalances between supply and demand, we need to increase the power capacity of the country to meet rising demand as we start to recover and fully reopen the economy,” Almeda added.
Almeda insisted that “firm” contracting will “not result in additional supply, it will only lead to a change in payment terms where all power, used or unused, will have to be shouldered by the public.”
When asked to comment on the claim of NGCP that price of power will increase along with contracting of AS, an industry expert called it ‘intellectual dishonesty’ of the concessionaire. With billions in profits, he said that they can simply pare down their spread from a very high of 15 to 7 percent like in Malaysia and Thailand, the expert added.
Failure of compliance
Department of Energy (DoE) chief Alfonso Cusi recently told a public Senate hearing that the recent power interruptions were not an issue of power supply shortage but by the NGCP’s failure to comply with its mandate.
Thus, Cusi said the government needs to take the country’s grid system operations away from the hands of the allegedly non-compliant private sector.
“The issue on the recent rotational power interruption is a serious matter and should not be mixed with other issues. What we have right now is not a power crisis but a compliance issue,” Cusi argued during a public hearing of the Senate Committee on Energy.
Since the power industry is at the mercy of the private sector — from generation to transmission, Cusi pointed out that passing the grid operations to the government would give the DoE more teeth to craft and implement stricter policies.
Under the Electric Power Industry Reform Act (EPIRA), the DoE and the Energy Regulatory Commission (ERC) are mandated to promote competition, encourage market development, ensure consumer choice, and penalize abuse of market power in the restructured electricity industry.
Relatedly, Cusi also reiterated the need to fast-track the completion of the P52-billion Mindanao-Visayas Interconnection Project (MVIP) to generate additional capacity in Luzon.
“The delays connecting Negros and Panay to Cebu and Mindanao to the Visayas, which had they been put in place by NGCP in time with the grid schedule, could have facilitated the importation of more energy to the islands of Luzon,” Cusi said.