NGCP’s Attempts to Connect Mindoro and Palawan to Its Franchise Area of Luzon Not Totally Objectionable but must be Done Right, and over a Right Transition Period (Part 1)

Part 1

David Celestra Tan, MSK
27 September 2020

The two largest islands close to Luzon are Mindoro and Palawan but they are not yet connected to the National Grid via Luzon.

In March 2019 the National Grid Corporation of the Philippines applied for an ERC approval to inter-connect to the Luzon grid the off-grid areas of Mindoro and Palawan. They are seeking to immediately inter-connect Mindoro to Batangas and the clearance to undertake a feasibility study to connect Palawan.

The first time NGCP attempted to annex Mindoro in 2011 but could not convince even a sympathetic ERC that the project will benefit the Luzon consumers who they are asking to pay P0.04 per kwh. Now, NGCP is asking to inter-connect Mindoro as part of the goal to connect Palawan.

Your consumer group MSK was an intervenor in 2011 and was trying to insure the project is beneficial and will be charged at fair and reasonable rates. We are not against the inter-connection because it has its benefits. But we are seeking an appropriate feasibility study to determine if NGCP’s proposal for a 230kv connection and all its aspects are proper for these two islands and will correct the declared problems NGCP is trying to solve.

The ERC recently asked NGCP and the intervenors to submit their position papers on the inter-connection.

We want to share with you your organizations manifestation to the ERC. As of this writing we have yet to receive NGCP’s supporting information and documents.

MANIFESTATION

(To the  ERC Order dated August 26, 2020)

In compliance with the Directive of the Energy Regulatory Commission (ERC) to file respective comments on the Compliances filed by the NGCP via records.erc.gov.ph, MSK hereby submits the following Manifestation and Comments:

BACKGROUND

The National Grid Corp of the Philippines had filed in 2011 an application with the ERC under Case No. 2011-104 RC for investment and recovery rate approval for a P11.9 billion Batangas to Mindoro 230KV power transmission inter-connection.  In that application, the Matuwid na Singil sa Kuryente Consumer Alliance Inc (MSK) served as one of the intervenors.

NGCP was proposing to build a 25km 230kv submarine cable line from Batangas to Calapan Oriental Mindoro and from there a 200 kilometer plus overhead 230KV transmission line to San Jose City in the southwestern most part of Mindoro Island.

MSK was perplexed by this transmission project because the whole of Mindoro only had 85mw of power demand and San Jose City only had 12mw at that time. Why are we building a 230kv line that can carry 1,500mw of power? Up to today 2020, the total demand of the whole island is still under 85mw.

Asked in the hearing for whose benefit the project will be and who will be paying for the project costs, NGCP said they will charge P0.04 per kwh to Luzon consumers because they will benefit from a 300mw coal power supply from Mindoro. It was also claimed that Mindoro has 100mw of mini-hydro power that can be exported to Luzon.  MSK asked NGCP in open court if it will not be cheaper for Luzon consumers to just buy the 300mw from a Luzon project and not have to carry the burden of a P11.9 billion inter-connection? We don’t recall NGCP giving an answer and it appears no hearing on the application was scheduled again.

MSK also, on checking the facts, discovered that the claimed coal mine cited by NGCP in Bulalacao town in Oriental Mindoro had long been declared as unviable by the Department of Energy.  Instead, the nearest coal mine is 35 kilometers away in another island of Semirara. Additionally, the province of Oriental Mindoro had declared a 25 year moratorium on mining on the island.

The Inter-connection of Mindoro Island to Batangas is one of the programs mentioned in the Department of Energy’s Missionary Electrification Development Plan (MEDP) for 2016-2020. As Part of Program No. 3, the Transco and NGCP were supposed to undertake a joint feasibility study for such BMIP Inter-connection. In the plan, the 230kv Batangas-Mindoro inter-connection was supposed to be a bridge line for a subsequent Mindoro to Panay interconnection to provide a second route for the Visayas to Luzon inter-connection in the western side of the islands. It is not clear whether any joint study was undertaken by Transco and NGCP for a Batangas to Mindoro inter-connection.

In March 18, 2019, NGCP apparently filed another inter-connection project, this time a Palawan Mindoro Inter-connection project (PMIP) with ERC case No 2019-022RC.  In this application, NGCP is seeking an urgent provisional approval from ERC to conduct a feasibility study for a Palawan inter-connection with authority to immediately start the Luzon to Mindoro backbone. This latter one was the same inter-connection that could not be justified by NGCP and not approved by the ERC in 2011.

In this new application, NGCP claimed that the project is to improve the power supply in Palawan because the IPP’s there were not performing and it was needed because President Duterte complained about the power service in a visit in late 2018.

NGCP did not give the merits of the Luzon to Mindoro inter-connection other than that it is a necessary stage 1 to achieve a Luzon to Palawan inter-connection, something that it is still asking to do a feasibility study. It indicated that the Luzon to Mindoro backbone inter-connection will be finished in five (5) years.

In this 2019 application, NGCP further stated that Section 9(d) of the EPIRA Law directs NGCP to submit any plan for expansion facilities for approval by the ERC.

The Electric Power Industry Management Bureau (EPIMB) of the Department of Energy for its part, had been informing the electric coops in Palawan and Mindoro islands that missionary subsidies will be phased out and that the possibility of a Luzon to Mindoro and Palawan inter-connection should be provided for in its new power supply contracts. The Occidental Mindoro electric cooperative in fact was instructed by the EPIMB to shorten the term of new power supply contracts for CSP to only 3.5 years instead of the normal 10 or 15 years.

It appears there is no unified direction yet on the nature and timetable for this proposal by NGCP of Palawan and Mindoro inter-connection to the national grid.

DISCUSSION

1. NGCP Needs Congressional Franchise Approval to Annex to its Franchise Area new territories like Mindoro and Palawan

a. Arguably NGCP can apply for expansion and improvement of its transmission facilities in its franchise area.

b. We argue however that Mindoro and Palawan are currently in the off-grid areas and are not part of the current NGCP franchise area which is the National Grid.

c. Before NGCP can expand into these new off-grid islands, it would need an official annexation of these new territories to its franchise area first by the Department of Energy, The Transco, and the NEDA. Finally, we believe that a revision in the franchise territory of NGCP to annex new territories that are not currently part of the national grid will require the approval of the franchising authority which is the Congressional Franchising Committee.

2. ERC approval for an NGCP expansion

a. NGCP claims in its 2019 application that it is authorized by the EPIRA Law to seek the approval of the ERC for expansion and improvement of its facilities.

b. A check with the relevant provision of the Epira Law or RA 9136 under Section 9(d) , showed that it is the Transco that is empowered to seek the approval of the ERC for expansions.

c. In any case, it is our position that the authority of the ERC, as a rate making agency, is to approve the expansion and improvement if it is needed to improve market competition in the grid and to approve the rate of recovery for the investment. Assuming of course that the territory being expanded into is part of the applicants franchised area.

d. The inter-connection of Mindoro and Palawan to the national grid is not a simple expansion and improvement but an annexation of new territories that are not currently part of its franchise area which is the national grid. Hence, it would require the appropriate authorities to justify the annexation by the Department of Energy, the policy making body for the implementation of the Epira Law, by the Transco, and by the NEDA to determine the economic development merits of the annexation of the two islands to the national grid.  Finally, as mentioned, an appropriate approval by the Congressional Franchising Committee to amend the NGCP franchise, to add the new territories of Palawan and Mindoro.

e. In comparison, the inter-connection of Mindanao to the Visayas was appropriate because both islands are part of the National Grid.

f. Allowing NGCP to simply apply for inter-connection and expand its territory is akin to allowing Meralco to just apply to expand and improve its distribution lines and annex all of Batangas, Laguna, Quezon, Bataan and Pampanga. It is not a simple rate approval process.

3. Need for Macro-economic assessment and Feasibility studies

a. The inter-connection of an off-grid island to the national grid involve issues way more than just bringing power to a territory.

b. An assessment of the economic development objectives for islands as strategic as Palawan and Mindoro would require the study of the NEDA and the sanction of the national government. These two large islands close to the main island of Luzon have economic development choices that need to be carefully assessed not only by the energy agencies but by the economic planners, the local governments, and the people on the islands.

c. Palawan is a tourism island with an international reputation. Bringing an industrial grade 230kv line to its area may be harmful to its long term aspiration to be a tourism haven.

d. Similarly, Mindoro has its own development potential that need to be carefully assessed and defined in line with the national economic development goals. Should it be an agricultural island to serve the food supply needs of the main island of Luzon or at least the Calabarzon area?

Should it be developed as an industrial area? Or another tourism island that is close to Luzon? Should the people of Mindoro not be asked on what they want to do with their island?

e. These two islands are currently enjoying missionary subsidies. It is true that it is costing the government significant annual subsidies that are passed on to the consumers. But the reasons for the skyrocketing subsidies may not necessarily be solved by a 230kv inter-connection.

f. There is a need for a clear path to power costs going lower or at least not increasing from the current generation rate of P5.6404 per kwh after the inter-connection. There is a need for a reasonable transition schedule from an off-grid subsidized electric supply system to a non-subsidized grid connected system. How do we make sure the people on these islands are benefited and not hurt by an inter-connection?

g. As far as we know, there is no comprehensive feasibility study to support the need for a 230kv line to these two islands nor a clear defensible reason that had been enunciated for the interconnection. NGCP in its applications since 2011 had struggled to come up with solid macro-economic reasons for the inter-connection. Do these islands really need a 230kv connection? Why not 69KV or 138KV?

h. For power reliability, power supply on these islands still need to be maintained. Completely relying on a submarine supplied power had been a disaster for the islands of Panay and Negros in the 1970 and 1980’s, with total demand of 600mw, when power supply only came from Leyte and Cebu via submarine cables.

i. The routing of the power lines also needs to be reviewed for the 230kv lines proposed by NGCP may not be optimum and consistent with the economic activities in Mindoro island. Let alone the fact that the island is hit by devastating typhoons every few years that can damage the overhead lines as what happened in the Decembers of 2014 and 2015.

j. It is the Department of Energy and the Transco who are the authorities under the Epira Law to determine the need for a transmission inter-connection, its proper sizing, and routing. Further its financing and method of recovery. Would the interconnection be part of the government’s missionary subsidy reduction program?

k. NGCP has a vested financial interest in the inter-connection and may not be able to objectively determine its purpose, routing, and sizing that considers the economic development aspirations for each island. Industrialization is not necessarily the achievable goals of each island and not the mandate of NGCP.

We believe it is upon the government agencies, the Department of Energy, the Transco, and the NEDA, to first determine that the proposed 230kv inter-connections of Palawan and Mindoro that can cost more than P20 billion will be used and useful, for Luzon consumers that will pay for it and for the people of Palawan and Mindoro who will be affected.

Under the DOE’s MEDP, there is supposed to be a joint feasibility study to be undertaken by Transco and NGCP on the inter-connection of Mindoro to Luzon. The same plan does not however mention specifically a connection of Palawan to the national grid.

(to be continued)

The Concerns of Consumers

Matuwid na Singil sa Kuryente Consumer Alliance Inc.
matuwid.org
david.mskorg@yahoo.com.ph