NGCP to file appeal against penalties slapped by ERC

BY LENIE LECTURA – NOVEMBER 11, 2022
from Business Mirror

The National Grid Corporation of the Philippines (NGCP) will appeal the decision of the Energy Regulatory Commission (ERC) to penalize it for non-compliance with the policies on ancillary service issued by the Department of Energy (DOE), according to Synergy Grid and Development Philippines Inc. (SGP).

SGP, the indirect controlling shareholder of NGCP, said Thursday it was informed that “NGCP intends to file a Motion for Reconsideration within the period allowed by the rules and regulations.”

It did not provide other details. The NGCP has yet to reply as of press time. A check with the ERC had it that NGCP has 15 days upon receipt of the order to file an appeal.

During the board meeting held November 9, SGP said it received notice from the NGCP that the ERC, in a decision promulgated last October 27, imposed a penalty of P5.1 million for alleged non-compliance with DOE Department Circular 2021-10-0031, entitled “Prescribing the Policy for the Transparent and Efficient Procurement of Ancillary Services by the System Operator” (AS-CSP Policy) requiring procurement of AS or reserves.

The ERC likewise directed NGCP to submit the Terms of Reference (TOR) and Instructions to Bidders (ITB) to the DOE in compliance with Section 7.4 and 7.5 of the AS-CSP Policy within 30 days from receipt of the decision.

Based on the decision, the agency considered NGCP’s failure to submit the TOR and ITB as one violation; and its failure to publish and maintain on its website without prior DOE approval of the ITR and ITB, another violation.

The NGCP said last Tuesday that it was “sorely disappointed at the recent turn of events,” and that the grid operator is “still dealing with the same economically motivated political maneuvers.”

“We were wary and defensive, given the overtly biased and intrusive political atmosphere prevailing at the time. The relentless attacks we suffered, and the fault finding where there was no fault to be found was a clear indication to us that this, and other contemporaneous moves undertaken by certain players in the industry, were part of a larger, orchestrated plan to put their economic interests above ours, even at the expense of the consumers,” NGCP said. It did not elaborate.

Under the said DOE circular, all AS must be procured via an open and competitive process under a firm contracting agreement. This aims to improve transparency, competitiveness, and wide dissemination of bid opportunities among qualified facilities. For energy security, it is crucial for NGCP to meet and maintain the required reserve levels, the ERC said.

Section 7.4 of the policy requires NGCP, as System Operator (SO), prior to the publication of the ITB, to submit for DOE’s approval the TOR to determine if such is consistent with the CSP policy and the draft instruction to bidders.

In its explanation filed with the ERC, the agency said the NGCP admitted that it did not comply with Section 7.4 of the AS-CSP since the said provision is allegedly not valid.  Given this admission and what it deemed as an unmeritorious defense, the ERC found the NGCP in violation of its obligations under Section 7.4.

Section 7.5 of the AS-CSP policy requires the Third-Party Bids and Awards Committee (TPBAC) to publish and post the ITB in accordance with the periods specified in the DOE Circular. The ERC said it found that when NGCP proceeded to publish and post the ITB without prior DOE approval, it committed a violation of said provision of the AS-CSP policy.

NGCP said it submitted to the DOE the appropriate submissions on AS-CSP. However, “as if timed to the hour, the ERC show-cause [order] was issued the very next day,” the NGCP said.

“On the alleged willful disregard mentioned by the ERC, this has to be put in the proper context, and our acts shouldn’t be taken in isolation,” it added.

The NGCP is willing to cooperate with the industry leadership “if vested interests are set aside, and fairness made to prevail,” hoping that “national economic recovery and energy stability will be prioritized above self-interest.”

The ERC decision further stated that no amount of monetary penalty can sufficiently equate to or compensate for the willful disregard by NGCP of validly issued regulations of the government and its administrative agencies.

SGP indirectly owns 60 percent of the outstanding capital stock of NGCP, SGP’s sole operating asset, with an effective equity interest of 40.2 percent.

NGCP holds a 25-year concession and a 50-year Congressional franchise to expand and operate the country’s power transmission grid. NGCP is the sole and exclusive operator of the country’s nationwide transmission network linking the power generators and distribution utilities to deliver electricity to end-users.