ERC slaps P5M fine vs. NGCP, warns to push for revocation of franchise

The Energy Regulatory Commission (ERC) has slapped a fine against the National Grid Corp. of the Philippines (NGCP) and threatened to push for the revocation of the grid operator's congressional franchise should it continue to violate the Department of Energy’s (DOE) rules on procuring power reserves.

In a statement posted on its website on Tuesday, the ERC said it ordered the NGCP to pay a penalty of P5.1 million.

The power industry regulator said the grid operator violated DOE’s Department Circular No. DC2021-10-0031, entitled “Prescribing the Policy for the Transparent and Efficient Procurement of Ancillary Services by the System Operator” or AS-CSP Policy.

Under Section 7.4 of the policy, the NGCP, as System Operator (SO), is required to submit for the DOE’s approval the Terms of Reference (TOR) prior to its publication of the Invitation to Bid (ITB).

“The ERC finds that when NGCP proceeded to publish and post the ITB without the prior approval of the DOE, it committed a violation of said provision of the AS-CSP Policy,” the regulator said.

In its decision, dated October 24, the ERC said it considered NGCP’s failure to submit to the Energy Department its TOR and ITB as one violation and its failure to publish and maintain on its website the ITB without the prior DOE approval of the TOR and ITB as another violation.

“The ERC underscores 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,” it said.

With this, the ERC warned the NGCP that its “non-compliance with laws, rules, orders, and regulations issued by authorities may result to the cancellation of its Certificate of Public Convenience and Necessity (CPCN) and the endorsement by the ERC to the Philippine Congress of the revocation of its legislative franchise.”

When asked for comment, the NGCP said that appropriate submissions to the DOE were made hours after its meeting with the leadership of the department two months ago, during which the issue of the AS-CSP submission was raised.

"The relentless attacks we suffered, and the fault finding where there was no fault to be found [were] a clear indication to us that this, and other contemporaneous moves undertaken by certain players in the industry, were part of a larger, orchestrated plan to put their economic interests above ours, even at the expense of the consumers," the NGCP added. 

In its explanation submitted to the ERC, the NGCP admitted that it did not comply with Section 7.4 of the AS-CSP since the said provision is allegedly not valid, according to the regulator.

“Given this admission and its unmeritorious defense, the ERC finds that the NGCP violated its obligations under Section 7.4,” it said.

“On the other hand, Section 7.5 of the AS-CSP policy requires the Third-Party Bids and Awards Committee (TPBAC) to publish and post the Invitation to Bid in accordance with the periods specified in the DOE Circular,” it added.

The AS-CSP Policy requires all ancillary services or reserves required by the grid to be procured pursuant to an open and competitive process under a firm contracting agreement, the ERC said.

The regulator said the policy aims to improve transparency, competitiveness, and wide dissemination of bid opportunities among qualified facilities.

“For energy security, it is crucial for NGCP to meet and maintain the required reserve levels,” it said.—AOL/VBL, GMA Integrated News