NGCP issued show cause orders over AS procurement

The Energy Regulatory Commission (ERC) has issued show cause orders (SCOs) to the National Grid Corporation of the Philippines (NGCP) for failure to comply with the directives of the Department of Energy (DOE) in the procurement of ancillary services (AS).

On Saturday, the commission said it issued the orders, through ERC Case Nos. 129, 130 and 131 SC, last Friday.  NGCP, according to the ERC, must explain why it should not be penalized for not complying with the policies issued by the DOE in October 2021.

The ERC cited three sections of DOE Department Circular No. 2021-10-0031 entitled, “Prescribing the Policy for the Transparent and Efficient Procurement of Ancillary Services by the System Operator”, with which the NGCP failed to comply. These are Section 4.2 requiring NGCP to seek approval from the DOE on its Ancillary Service Agreement Procurement Plan; Sections 7.4 and 7.5 mandating NGCP to seek the approval of the DOE on the Terms of Reference (TOR) of the Ancillary Service Competitive Selection Process (AS CSP); and Sections 7.1 and 7.11 requiring NGCP to complete the AS CSP within six months from the effectivity of the circular.

While the ERC noted that NGCP has already issued the TOR and the schedule for the conduct of AS CSP, the latter has yet to comply with the said provisions in existing policies adopted by the DOE pursuant to its mandate as a policy-making authority.

The issuance of the ERC’s SCOs is consistent with the mandate of the agency to enforce the implementing rules and regulations of the Electric Power Industry Reform Act, including those formulated and adopted by the DOE.

The ERC directed NGCP to file within 15 days their verified explanation as to why no administrative penalty should be imposed upon it on the possible violations cited. The submission shall also include necessary proof that will support all the allegations in its verified explanation.

Ancillary services are necessary to support the transmission of capacity and energy from resources to loads, while maintaining reliable operation of the grid in accordance with good utility practice and existing rules. Meanwhile, the AS CSP is the process whereby ancillary service providers are awarded AS contracts through transparent and competitive bidding in accordance with the rules and regulations set by government regulators.

The NGCP has yet to comment on the SCOs.

According to the latest bid bulletin posted by NGCP, the bid submission deadline for Luzon, Visayas, and Mindanao AS CSP is on September 19, 20, and 21, respectively. Bids will be opened on September 20 for Luzon, 21 for Visayas, and 22 for Mindanao.

Bids will be evaluated from September 23 to 30. NGCP will issue notice of award on the week of October 17 to 21.

The latest bid bulletin was approved by the Third Party Bids and Awards Committee last August 25.

The AS CSP from interested grid-connected merchant plants and Independent Power Producers (IPPs) was already put off early this year due to “several issues” raised by the prospective bidders.

NGCP needs qualified AS providers that can supply starting this year’s grid requirements for regulating reserves, or 4 percent of the hourly system demand; contingency reserves, the most heavily loaded generating unit on-line and its scheduled reserve; dispatchable reserves, the second most heavily loaded generating unit on-line and its scheduled reserve; reactive power support; and black start service.

As system operator, the NGCP is responsible for determining, acquiring and dispatching the needed AS levels in order to maintain power quality and the reliability and security of the grid.

The power plants of interested bidders must be directly connected to an NGCP-owned facility with a dedicated connection while embedded generators must have expressed consent from host distribution utility that it can dispatch anytime when required for ancillary services provision.