No quick fix

For the nth time, regulators, policy-makers and energy players try to provide answers to the power outages, but end up with more questions.

THE Luzon grid should have been spared from brownouts during the summer months until June, the Department of Energy (DOE) had assured everyone in April. Fast forward, the opposite happened.

The recent power plant outages led to almost 4,000 megawatts (MW) in lost capacity, with 90 percent of the plant shutdowns unscheduled, leading lawmakers who held the April hearings asking, anyare? (what happened?) and those in charge tossing blame, as usual.

Nearly 340,000 households from 90 barangays in 16 local government units lost their electricity on June 1. There were even two vaccination centers in Valenzuela that experienced power interruption. Businesses mightily struggling to recover from prolonged pandemic-induced shutdowns suffered serious effects from the rotational brownouts. Online classes were interrupted.

Ironically, senators demanding answers were cut off from each other, as half were physically in the Senate building, and the rest—some of them suffered from the brownouts—were virtually present from home.

Power-generation companies (gencos), whose plants went on forced outage, were supposed to provide a seven-day notice to system operator National Grid Corporation of the Philippines (NGCP) if they are going on emergency shutdown. But they did not comply, nor were they part of the annual scheduled maintenance shutdown.

The Energy Regulatory Commission (ERC) thus summoned 17 gencos to explain why they should not be sanctioned. The Department of Energy (DOE) was not spared as the Senate Committee on Energy set a new inquiry on the recent spate of rotational brownouts. After all, it was the agency that gave assurances that there was no high risk of supply shortage during the summer season.

Energy chief Alfonso Cusi insisted his office has not been remiss in its duties and that his team is on top of the situation by issuing several department circulars to ensure unimpeded power supply.

These include: the Competitive Selection Process (CSP) policy so that Distribution Utilities (DUs) may already bid out their requirements for new investments to come in; the introduction of amendments to the market to allow more transparency in sending out investment signals; the moratorium on new coal-fired power plants to emphasize the need for system flexibility; Ancillary Services (AS) policies so that the NGCP will contract, on a firm basis, all AS requirements given that they must do forward-contracting of these requirements and not rely solely on what is available in the system; the introduction of the Reserves Market to co-optimize the utilization of energy and reserves.

“I believe we, at the DOE, have done enough. We have laid down all the policies to ensure unimpeded power supply, but the problem is compliance. They don’t comply,” said Cusi.

Gencos, except for those operating hydroelectric power plants, are not allowed by the DOE to conduct power plant maintenance during the peak quarter. They are also required to give NGCP their maintenance schedule a year ahead to ensure plant shutdowns are phased, and do not bunch up in one period.

Some gencos caught the DOE’s ire because their maintenance activities were extended throughout the summer months. Not only did this violate a DOE circular, but also a directive from the Energy Regulatory Commission (ERC) pertaining to the Reliability Performance Indices and Equivalent Outage Days Per Year of Generating Units.

Being a performance issue, the DOE pointed out that it’s the ERC that should look into these outages and exercise its regulatory functions.

They said that sanctions will be imposed when warranted and after observance of due process.

“Based on the examination of our technical group, there are 17 gencos that have breached the maximum allowable unplanned outage days as of April 2021,” ERC chief Agnes Devanadera said.

The ERC limits the number of days that power plants may undergo shutdowns, both planned and unplanned. This is meant to promote accountability among power plant operators and the transmission grid operator.

The 17 gencos on the ERC list are Sem Calaca Power Corp. (SCPC), GN Power Mariveles Center Ltd. Co. (GMEC), Masinloc Power Partners Co. Ltd., Southwest Luzon Power Generation Corp., Team Sual Corp., SPC Power Corp., Panay Power Corp., SN Aboitiz Power-Benguet Inc., CBK Power Co. Ltd., SPC Island Power Corp., First Natgas Power Corp., FGP Corp., First Gas Power Corp., Power Sector Assets and Liabilities Management Corp., Energy Development Corp., Hedcor Bukidnon Inc.; and PSALM-Soosan ENS Co. Ltd.

They were directed to submit their explanations within seven days.

Travel curbs

SOME explanations raised for extended plant outages are travel restrictions imposed on foreign nationals, and delays in the arrival of supplies and materials brought about by the pandemic.

“Foreign technicians could not enter the country or their travel has been put on hold because of inward travel restrictions imposed by the IATF,” said Isidro Consunji of Sem Calaca Power in a text message. “So, many power plants are either delayed commissioning or extended outage because of travel restrictions. It is difficult to get exemptions from IATF.”

For this to be resolved, the DOE has endorsed their requests to government agencies like the Department of Foreign Affairs and the Bureau of Immigration, as well as to the Bureau of Customs.

The NGCP appealed for understanding as the timeline of its vital transmission projects has been pushed back by the Covid-19 pandemic.

It said that work completed in a single “pre-Covid-19 month” is now projected for completion within at least two up to four “quarantine months.” This means that if a project was set to be completed within four months from March 2020 (beginning of quarantine measures), the new estimated time of completion would be moved eight to 16 months from the original completion target.

Aside from power plant shutdowns, the DOE blamed the lack of ancillary reserves of around 1,223 MW in Luzon that should have been contracted by the NGCP.

The DOE said the NGCP’s level of firm contracted ancillary service at end-2020 was still way below the requirement of a department circular and the ERC-approved AS Procurement Plan.

The DOE, Cusi had said, sees the NGCP “is consistent [in] not complying with its responsibility with the firm contracting requirement. The NGCP has been dragging its feet by pursuing insufficient capacity and even opting an unreliable contracting of ‘non-firm’ AS Procurement Agreements [ASPAs].”

The NGCP strongly disagreed, saying the lack of supply hampers the procurement of power reserve.

“If there is no supply provided by generation companies, there is no reserve or there is no ancillary services to be procured,” said NGCP counsel for legal and regulatory affairs Ronald Dylan Concepcion in the recent Joint Congressional Energy Commission hearing.

He also pointed out that AS are not a remedy for the lack of power supply because if and when a plant shuts down, the availability of supply is affected along with the contracted reserves.

The ERC, meanwhile, stepped in and directed the NGCP to enter into ancillary service (AS) contracts.

“The completion of the NGCP transmission projects is a crucial element in ensuring the stability of electricity in the entire country.  In the same manner, there must be sufficient ASPA in place to support the transmission of power capacity and energy from generation sources to consumption loads and maintain the reliable operation of the transmission system,” Devanadera added.

But could the rotational power outages been avoided had the gencos complied?

DOE’s assurance

When the DOE presented its projections during the JCPC hearing, DOE officials said they saw no demand-driven energy shortage in the summer season simply because there was less power consumption during the community quarantine.

“Based on our assessment, the consumption continues to decline. We will not be able to reach the projected 11,841-megawatt peak,” said Mario Marasigan, director of the DOE’s Electric Power Industry Management Bureau.

As a rule of thumb, he said an estimated 100 MW must be allotted for every degree of increase in temperature.

DOE Assistant Secretary Redentor Delola explained that demand has been consistently below target since January. “We will have sufficient levels of supply as long as there are no additional outages.”

Delola said the peak demand forecast may not be reached as the Independent Electricity Market Operator of the Philippines, operator of the Wholesale Electricity Spot Market (WESM), expects peak demand to reach only 10,511 MW.

“If we maintain the same demand profile, we will have enough reserves for the summer months. Even if we reach 11,000 MW, we will still have sufficient reserves. The worst case is we experience yellow alerts for two periods,” Delola earlier said.

Cusi, however, said that unscheduled power plant outages do happen. “That’s why it’s called unscheduled. We have put in place redundancies and even double redundancies. We have laid out contingencies for a stable, reliable and accessible power for all. Despite our efforts, this still happened.”

He recently apologized on national TV for what happened. “We had rotational brownouts, and it’s because power plants with a capacity of more than 2,000 megawatts broke down all at once,” he said.

Senate Energy Committee head Sherwin Gatchalian, in a statement, said it is crucial to hold the DOE to account for its failure to address power-supply shortages since 2016.

“They should explain why their projections are off! They are the sole agency tasked to assure the public of constant flow of electricity to homes,” he said in a tweet.

The NGCP, for its part, said it made a forecast ahead of the JCPC hearing that red alerts are likely to be issued because of thin power supply. “In fact, the first round of red alerts was predicted for late April to early May, which is why we released the statement to warn the public and to ask government to put in place contingency measures to alleviate this,” said NGCP spokesman Atty. Cynthia Alabanza over a TV interview.

But most areas were placed under ECQ, and that significantly drove demand down—which is why the red alerts were never issued as expected.

NGCP: Demand-supply balance crucial

Alabanza stressed that it is crucial to balance demand and supply. “It depends on the dynamic of supply and demand because the margins between the two are very thin. If we had more than enough supply available to the grid, then we won’t be talking about this,” she said.

As a way forward, the DOE said it is working closely with the other enforcement agencies in pursuing options to ensure that unplanned, prolonged and, perhaps, even alleged malicious activities of certain players in the energy sector are scrutinized, investigated and possibly penalized by the ERC, the Philippine Competition Commission and the Department of Justice.

When sought for comment, Aboitiz Power Corp. President Emmanuel Rubio rejected allegations of collusion among power- industry players to jack up electricity prices.

“Well, this issue has been raised in the past and we have consistently explained that the goal of gencos like AP [Aboitiz Power] are to keep the plants operating as much as they can. We only make money when our plants are operating,” said Rubio.

Aboitiz Power’s baseload plants are contracted almost at capacity and if these are on outage, AP still has to continue supplying customers by buying from the spot market or through replacement power contracts, if available.

‘No sense in gaming WESM’

“MOST probably, when a base­load plant goes down, prices in the spot market spike, thus the cost of power that we supply our customers bought from WESM will be usually higher than our selling prices. Thus, it makes no sense to intentionally put a plant in outage to game WESM, since we have to buy at high prices to fulfill our contracted commitments,” he said.

Power firms said they continue to heed the DOE’s call to put in more investments in the power sector.  More power projects mean fewer brownouts, if not none, and cheaper electricity rates.

“New power plants and CSP will address this supply problem by 2023,” said San Miguel Corp. (SMC) President Ramon Ang  in a text message.

The conglomerate’s power arm has won the recent competitive auction to supply the Manila Electric Co. some 1,800 MW of new capacity to be sourced from its new power projects.

AC Energy President Eric Francia said policies are not enough to assure unimpeded power supply.

“The long-term solution requires “all of the above” in terms of capacity augmentation of both transmission lines and generation capacity. That said, these unfortunate shortages highlight the need to build adequate reserve capacity, which is best addressed by right sizing the reserve requirements and creating an open and transparent reserve market.

The system should acknowledge that it is inevitable to have forced outages during times of need, and hence having adequate reserves is a must,” he said.

Sought for comment, DOE Assistant Secretary Redentor Delola said the agency will soon introduce the Reserves Market to co-optimize the utilization of energy and reserves. “It’s like the market but you are trading AS. All generators will offer their capacity for energy and reserves. The optimal solution will be dispatched by the WESM. This allows investments signals for AS,” said Delola.

The implementation of the proposed policy may take a while but just like the other DOE policies, Delola said, “it is not going to happen overnight. There is no quick fix to all of these.”

For now, the Luzon grid has returned to normal as some of the power plants that went on forced and extended shutdown are now back on line. Moreover, demand slowed down due to a cooler temperature brought about by Tropical Storm Dante—breaking a series of sizzler days.

Barring any sudden increase in demand—which is likely to be triggered by simultaneous plant shutdowns—there are no rotational outages expected to happen this weekend.

But tomorrow is another day.


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