NGCP to face penalties on project delays

The Energy Regulatory Commission (ERC) will mete out administrative penalties on transmission firm National Grid Corporation of the Philippines (NGCP) if it cannot provide justifiable explanation or grounds why it had been swamped with project delays.

“The ERC required the NGCP to explain why it should not face administrative penalties for the delays, non-completion, and failure to commence ERC-approved transmission projects,” the industry regulator has announced via a media statement.

On the strength of a show cause order (SCO) dated June 14, 2023 and issued on July 4, the ERC primarily required NGCP on “explanation for delays in the completion of 37 projects in which 26 are still uncompleted and three (3) are yet to commence.”

“NGCP is given 15 days from the receipt of the SCO to submit their verified explanation,” the regulatory agency has stipulated.

In response to media queries, the transmission firm said it will “file appropriate response to the ERC order.”

The Commission highlighted that “on the average, NGCP’s delays in the 37 projects are at 820 days, ranging from 21 to 2,561 days.”

The regulatory body has not specified yet the schedule of penalties awaiting NGCP if it will eventually be established that it had been remiss in fulfilling its mandate as private firm-concessionaire of the electricity transmission network of the Philippines.

NGCP argued “there are many causes for delays in project implementation that are beyond (its) control, including procurement of rights of way and protracted permitting procedures, among others.”

The company likewise cited that “late issuance of regulatory approvals may also be a reason for implementation schedules outside of those proposed in the TDP (Transmission Development Plan).”

If reckoned on the TDP that NGCP had submitted to the Department of Energy (DOE), the ERC emphasized that the rate of expansion actually delivered for the grid just hovered at a very marginal 8.0-percent – that was from 19,425 circuit-kilometers in 2009 to 21,027 circuit-km in 2022.

The year 2009 was the milestone period when NGCP took over the management and operation of the country’s power transmission, being the winning-entity of the 25-year concession deal on that ‘crown jewel’ of the government.

The regulatory body similarly conveyed that “during pre-pandemic years (2011-2018), NGCP’s line expansion, on the average, is only at 1.05-percent progress rate per year.”

The ERC thus reminded the company that “as the concessionaire contracted to operate the transmission assets owned by the National Transmission Company (TransCo), the NGCP bears the responsibility of improving, expanding, and maintaining the national grid.” State-owned TransCo is the owner of the power transmission assets of the country.

The transmission firm, nevertheless, contended that “while the TDP provides a roadmap of transmission projects, NGCP prioritizes operationally critical projects that have a real impact on power system dynamics, which may be managed in many ways while projects are being pursued.”

It added “the goal of NGCP, as transmission service operator, is to provide stable bulk power delivery services with minimal impact to the consumer,” noting that “currently, only two (2) projects may be considered as having urgent operational impact, both of which are at varying levels of energization and are expected to be completed within the year.”

The ERC expounded that NGCP’s franchise under Republic Act 9511 similarly mandates it “to enhance the grid’s capacity to efficiently transmit power from generating plants to directly-connected consumers, public utilities and ultimately to ordinary electricity consumers.”

Expansion and efficient improvements in the country’s power transmission system will also be the linchpin in concretizing the massive-scale renewable energy (RE) investments being enticed by the Marcos administration.

If the system operator fails on improving that part of the infrastructure requirement fervently sought by investors, then that could prompt the country’s jettison not just from its decarbonization goals but it will also be wasting investment-dollars already knocking at its doors.

As a matter of fact, grid integration dilemmas already reared its ugly head on the outcome of the RE capacity auction recently administered by the energy department.

In line with the SCO served on NGCP, Senate Committee on Energy Vice Chairman Sherwin T. Gatchalian stated that “the ERC must consistently demand accountability and enforce appropriate fines and penalties against erring industry players whenever applicable,” adding that “the delay in the completion of these transmission projects has affected energy supply to consumers.”

He further opined “the show cause order would also help lead the ERC in identifying solutions that would deter delays in the completion of energy-related projects as we aim towards achieving sufficiency and stability of energy supply in the country.”