SEVEN power generation companies (gencos) have offered a total of 1,349 megawatts (MW) of their capacity to be utilized as reserves for the power-hungry Luzon grid, the Philippine Independent Power Producers Association Inc. (PIPPA) said.
The group led by its president, Atty. Anne Montelibano, said during the Senate Energy Committee hearing last week that there are still available capacities for AS contracting.
“There are about 21 offers from operational gencos. Seven for Luzon, 10 in Visayas and 4 in Mindanao,” said Montelibano, adding that the offers from Luzon are still subject for verification by the Department of Energy (DOE) and the seven gencos.
“Are there available capacity for AS? The answer is yes. These are pending with the NGCP (National Grid Corporation of the Philippines),” she said. “I think the longest was like more than a year ago, if I recall right. I wouldn’t know the reason because that’s up to NGCP,” added Montelibano in a text message when asked to elaborate on the delays.
These gencos have also offered their capacity to the Wholesale Electricity Spot Market (WESM), she added.
AS contracting, she said, will increase grid reliability with minimal price effects. As such, PIPPA proposed to convert non-firm AS contracts to firm contracts to ensure a longer stability in reserves; expedite pending offers with NGCP; work on the CSP (competitive selection process) for AS contracting per mandate of the Department of Energy (DOE); expedite transmission and connectivity projects; and expedite implementation of a Reserves Market.
The DOE has already issued a circular governing the procurement of firm AS contracts to help secure the availability of power services during untoward occurrences, such as the simultaneous plant outages and “derating” incidents—which led to the series of Red and Yellow Alerts last May 31 and June 1.
Under Department Circular (DC) DC2019-12-0018, “Adopting a General Framework Governing the Provision and Utilization of Ancillary Services in the Grid,” the NGCP is mandated to procure 100 percent firm power reserves, as well as engage in the forward contracting of reserve requirements to ensure grid reliability.
The NGCP said procuring AS on either firm or non-firm basis is not a solution to the recurring brownouts in the country.
“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,” NGCP President Anthony Almeda said.
Also, Almeda said the firm contracting being insisted by the DOE 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.”
This take-or-pay arrangement, he added, would only lead to higher electricity cost for consumers.
Based on PIPPA computation, the AS cost impact on consumers in Luzon amounts to P27 per kilowatt hour. The figures could still go down if a CSP for AS is conducted as competition will bring prices down.
“Mere conversion of non-firm to firm will decrease the AS costs since firm rates are lower than non firm. Any increase in demand will lower per kWh costs and implementation of CSP will make AS rates competitive.”
