ERC threatens to push for NGCP franchise revocation

The Energy Regulatory Commission (ERC) has threatened to push for the revocation of the franchise of National Grid Corp. of the Philippines (NGCP) if it fails to comply with the rules prescribed by the Department of Energy (DOE) on securing the power reserves necessary to ensure the uninterrupted delivery of electricity from power plants to end-users.

According to its Oct. 27 decision, the ERC slapped a P5.1-million fine on NGCP for violating the DOE circular on contracting ancillary services or reserves through competitive bidding. It also directed NGCP to submit within 30 days from receipt of its order the terms of reference (TOR) and invitation to bid (ITB) to the DOE and “comply with the rest of its obligations under the said policy.”

Additional penalties

If NGCP fails to comply with the directive within the period, the ERC said it would be compelled to impose additional penalties, including the cancellation of its Certificate of Public Convenience and Necessity (CPCN) and a recommendation to Congress to revoke NGCP’s franchise. The ERC may also impose a maximum penalty of P50 million for each violation of the circular, as provided under the Electric Power Industry Reform Act.

NGCP is a privately owned company in charge of operating, maintaining and developing the country’s power grid. One of its obligations under the law is to provide ancillary services, which are power reserves needed to ensure the transmission of the electricity from the power plants in different parts of the country to the distribution utilities, electric cooperatives and large power users while keeping the electricity grid up and running.

In relation to this, the DOE has provided that the NGCP first secure its approval before it comes out with its terms of reference and invitation to bid for ancillary services on grounds of transparency.

Act of overreach

The NGCP argued, however, that it sees no need to secure the DOE’s approval of its terms of reference and invitation to bid as this constituted “an act of overreach on the part of the DOE.”

This did not sit well with the ERC, which said in its 20-page decision that it found that by publishing both the terms of reference related to the ancillary services twice sans the DOE’s approval, NGCP “willfully violated” certain sections of the ancillary services-competitive selection process policy.

“In asserting nonculpability, NGCP attacks the validity of the AS-CSP Policy, alleging that the policy constitutes an invalid exercise of control and regulation on the part of the DOE,” it added.

The ERC reminded NGCP that it must adhere to the policy on securing ancillary services through public bidding.

“In addition, the commission wishes to underscore the fact that no amount of monetary penalty can sufficiently equate to or compensate for the willful disregard by NGCP of validly issued regulations of the Philippine Government and its administrative agencies,” the ERC said.