A distorted view

Power industry watchers are perplexed on why Department of Energy (DOE) and National Power Corp. (Napocor) officials are seemingly obsessed with the spin that there is enough power supply in Mindanao despite the rotating power outages across the island.

To prop up this official line, power executives led by Energy Secretary Jose Rene Almendras no less are saying that the problem lies with the National Grid Corp. of the Philippines (NGCP), which, following the industry’s deregulation, took over in January last year the administration of Napocor’s national transmission system. 

Suspicions are rife that Almendras et al seem bent on distorting the Mindanao power situation apparently in favor of power producers, including the DOE chief’s former employer, the Aboitiz Group.

Despite official Napocor data pointing to a chronic supply shortfall instead of a transmission glitch as the root cause of the rotating power outages in the South, industry watchers have noted that Almendras and other energy officials had, at the end of a stakeholders’ meeting last Monday, stuck to the government line that there was enough supply of electricity in Mindanao.

The meeting Almendras had presided over aimed to tackle the Mindanao problem along with other industry concerns. Also present during that meeting were officials of the Power Sector Assets and Liabilities Corp. (PSALM), and the National Electrification Administration (NEA).

Just recently, Almendras was reported in the media as saying that the DOE would help the Aboitiz-controlled TMI secure financially advantageous supply contracts with distribution utilities for its two power barges, and has directed the NEA to help TMI and other energy producers enter into supply deals with electric cooperatives. 

At present, TMI has an Ancillary Services Procurement Agreement (ASPA) with the NGCP, which, as approved by the Energy Regulatory Commission (ERC), limits the NGCP to dispatch the electricity produced by TMI’s power barges as a “dispatchable reserve” type of ancillary services—and not as baseload supply.

Power dispatched for ancillary services cost more than power allotted for baseload supply, because the nature of the former type of electricity is for back-up or emergency supply only.

NGCP officials have explained in the past that this corporation does not profit from this arrangement with TMI because even if it is the former that bills and collects ancillary services charges from end-users in Mindanao, it remits such collections directly and entirely to the Aboitiz-led company.

It appears that TMI alone is profiting from this arrangement because the NGCP merely passes on the same cost to end-users and even bears the risk of collections. Even if NGCP customers do not remit payment for ancillary services from TMI, NGCP is obligated under the ERC-approved ASPA to pay the full amount of the ancillary charges billed by TMI.

NGCP has been maintaining that a short-term solution to the current power supply problem in Mindanao is for power generators to make the electricity they produce available as baseload supply.

Baseload plants are the production facilities primarily used to meet some or all of a given region’s continuous energy demand, and produce energy at a constant rate, usually at a low cost relative to other production facilities available to the system.

Ancillary services, on the other hand, refer to power supplier-driven services that are necessary to support the transmission of electricity from power resources to load customers to maintain the stability, reliability and quality of power services.

Power producers must enter into supply contracts with the distribution utilities in their localities so NGCP could dispatch such power as baseload supply for use by Mindanao consumers.

The NGCP contracts the use of power barges of the Aboitiz-led TMI for the provision of ancillary services only, not for the supply of power for the consumption of end-users.

Some interest groups familiar with the Mindanao power problem have called on NGCP to dispatch TMI’s power barges to make up for the lack of baseload supply in the grid.

Also, the cost of power from baseload supply for consumers is computed per kilowatt-hour, which means based on actual consumption. Power not used by consumers, therefore, does not earn revenue for NGCP because it cannot be stored.

Power supplied for ancillary services, on the other hand, is computed per kilowatt-month and is pegged at the highest peak use for that particular month, which explains the much higher rate.

Prior to the sale by government to the Aboitiz group, the Mindanao barges were being operated and dispatched by state-owned Napocor.

As approved by the ERC, power producers get a premium rate for generating power for ancillary services because their committed capacities have to be on call 24/7 to ensure that NGCP has a ready source for power whenever there is a need for the dispatchable reserve.

The NGCP cannot do anything about this setup because the rate fixing mechanism was approved by the ERC after due public consultation. The procedure was initiated long before NGCP’s time.

It is a setup that NGCP inherited since it formally took over on January 15, 2009 the crucial task of delivering safe and reliable electricity throughout the archipelago, a responsibility formerly held by the National Transmission Corp. (TransCo).

NGCP as a private company cannot control to whom the power producers sell their energy, whether for ancillary services or for baseload supply.  The ball is in the government’s court, so to speak.

Vigilance lauded

The Confederation of Sugar Producers Associations (Confed), the country’s largest aggrupation of sugar farmers, through its recently elected national president Atty. Marcelino Aganon, Jr., has lauded Mayor Darlene Custodio and the General Santos City police force for the apprehension and subsequent confiscation of 18 container vans of smuggled sugar that were produced in Brazil and believed to have been shipped illegally into the country via Singapore. 

The association, together with the Sugar Regulatory Administration (SRA), has been in the forefront of the sector’s fight against sugar smuggling, which deprives the government of much-needed revenues. Aganon earlier said that smuggling and the reduction of import duties under the ASEAN Free Trade Area (AFTA) agreement are the biggest threats to the sugar industry.

Aganon cited Custodio for the vigilance of her administration and the city police force in helping put to an end the rampant smuggling of sugar in the country. 

The Confed president has recommended that, if warranted, the said confiscated smuggled sugar be classified by the SRA as “C” or reserve sugar.

For comments, e-mail at [email protected]