“As usual, bumagsak na naman ang napakaraming planta ng kuryente ngayong napaka-init at kailangang-kailangan ng kuryente ng mga tao. ‘Di mo tuloy masisi ang mga consumer na isiping sinasadya ito ng mga generation companies para sumirit pataas ang presyo ng kuryente.”–ACT Teachers’ Party Rep. FRANCE CASTRO
Seventy percent of hydroelectric plants in the country are running below capacity due to the effects of El Niño, with Luzon forecast to suffer further decreases in power supply output this year.
Citing Department of Energy (DOE) data, the Institute for Climate and Sustainable Cities (ICSC) reported that Luzon already suffered a 22% decrease in power output from its hydroelectric plants in the first quarter of the year and expected to experience even tighter power supply in the coming months.
It may lead to “yellow alerts” as El Niño continues to threaten power sufficiency during the country’s dry season, ICSC in a press conference in Quezon City said Tuesday.
Already, 980-megawatt (MW) has already been made unavailable by the ongoing prolonged dry spell from the maximum of 12,000-MW capacity of the country’s baseload power plants, ICSC reported.
Baseload power plants are relied upon to provide the minimum amount of electric power needed by an electrical grid.
“As El Niño reduces the available capacity from hydroelectric power plants, all baseload power plants need to be compliant with the approved Grid Operating and Maintenance Program of the National Grid Corporation of the Philippines (NGCP) and the DOE,” ICSC chief data scientist Jephraim Manansala said.
“Any unplanned outages may further deplete operating reserve levels and affect the grid’s reliability,” Manansala added.
ICSC predicted that Luzon will suffer the tightest power supply in the last two weeks of May.
ICSC however said that while Luzon is threatened with insufficient power supply, Visayas and Mindanao are projected to maintain normal reserves in the second quarter.
El Niño will have minimal impacts on the Visayas grid due to the region’s limited hydroelectric capacity. Many Visayan islands rely on the more expensive bunker and diesel fuel as well as coal for power generation.
The region also receives 540-MW from Mindanao’s reserve levels.
The NGCHP meanwhile announced a yellow alert status over all of Luzon and Visayas on Tuesday.
PH needs more ‘resilient’ power sources
ICSC urged energy sector players to efficiently deliver its committed capacities as well as work on preventing power outages .
The group also urged the sharing of power supply capacities among major grids.
“Activating the DOE’s Interruptible Load Program (ILP) can also augment the power supply in Luzon during yellow or the more precarious red alerts,” ICSC energy transition advisor Alberto Dulusung III said.
Resorting to ILP means that the power supply has already deteriorated, signaling the grave reality of the country’s power supply vulnerability, the expert said.
ICSC said workplaces and households may help in increasing efficiency by shifting their use of energy-intensive activities to non-peak hours.
They may also upgrade to more efficient technologies, the group said.
“The recurring issue of power supply deficiency in the country highlights the vulnerability of the current centralized and baseload-reliant grid system. Our country must prioritize flexibility and distributed generation in energy policy-making and planning,” ICSC senior policy advisor Pedro Maniego Jr. said.
The Philippines must transition to greater integration of renewable, indigenous and clean energy into the grid to ensure a resilient, dependable and sustainable electricity supply for consumers, he added.
“Relying on imported fuel makes us highly-vulnerable to the vagaries of geopolitics and global market prices. With no end in sight to the Ukraine war and escalation of the Middle East conflicts, fuel prices might reach record levels once again,” Maniego warned. # (Raymund B. Villanueva)
BY ELYSSA LOPEZ / Philippine Center for Investigative Journalism
Second of two parts
Part 1: Philippine power transmission monopoly NGCP questions rate review amid calls for refund
In its preliminary review, the Energy Regulatory Commission (ERC) disallowed expenses of the National Grid Corporation of the Philippines (NGCP) totalling P3.7 billion, which it said were “improperly documented or not recoverable for customers.”
The biggest items disallowed were for public relations, corporate social responsibility (CSR), and advertising-related expenses.
NGCP’s advertising expenses, for example, reached P130 billion from 2016 to 2020.
The NGCP argued that its advertising expenses were “not for marketing purposes” but for “information dissemination.” The ERC however demanded proof of the need to spend such an amount on ads.
“There is a test of reasonableness [in assessing these expense items]. If these were spent on full-page ads saying: “Bawal humawak ng livewire,” [we must ask]: reasonable ba ‘yung full-page ad saying that?” ERC Chairperson Monalisa Dimalanta said in a news conference in November where she announced the results of the commission’s preliminary review.
In a separate news conference in November, NGCP Assistant Vice President Cynthia Alabanza said it was “unfair” for the regulator to “retroactively” apply new rules.
“Before you join a game, you need to know the rules. And to retroactively apply rules while you’re in a game, that’s unfair,” Alabanza said in Filipino.
“I’m wondering why they released it when it is still raw. It’s like if we had 100 steps to take to the finish line, we’re still in step two,” she said in Filipino in a press conference held right after ERC’s media conference.
Dimalanta said it was necessary to release the initial findings.
“I think we owe it to the public to let them know what is happening [in the review] and to provide guidance on what is allowed and disallowed [in the expenses of the NGCP],” she said in the press conference in November.
Alfredo Non, who served as ERC commissioner from 2012 to 2018, said there should have been “clearer guidelines” on what spending items were “acceptable.”
“As far as I am concerned, the ERC has not released guidelines on how regulated entities may spend on CSR, or salaries,” he said.
The former commissioner, however, did acknowledge that, during his time, the ERC had disallowed salary increases for a government-controlled corporation.
“When the Philippine Electricity Market Corporation asked before for higher market fees because that’s how they cover their budget, for salary increases, we disallowed it. Because they refused to show documents of their payroll,” he said.
“So if NGCP shows documents, then they should be allowed,” he added.
NGCP’s reply to the ERC findings, which has not been made public as of this writing, is expected to have addressed these issues.
ERC said the disallowances were intended to protect consumers.
“It’s not that the commission is prohibiting them (regulated entities), for example, from increasing the salaries of their employees, or giving donations, or engaging in CSR [activities],” Dimalanta said in the ERC’s November news conference.
“What we’re saying is, you can’t recover that from the rates [you impose on consumers]. You recover that from your profits,” she said.
The ERC had previously ruled, in cases involving power distribution utilities, that CSR expenses should not be charged to consumers.
In its 78-page order, the ERC also highlighted that the NGCP, as a public utility, is mandated to incur only “necessary and efficient costs,” with expenses kept “at a minimum.”
Adoracion Navarro, senior research fellow at the state think-tank Philippine Institute for Development Studies (PIDS) said ERC’s moves are intended to send a clear message to NGCP and other entities regulated to practice discipline.
“If before, they (the NGCP) got away with spending on these (disallowed expenses), then the regulator is now setting more discipline,” Navarro told PCIJ. She is a former deputy director general at the National Economic and Development Authority.
“The regulator is now just enforcing that we have to stick with the principles or the rules,” Navarro said.
ERC is making sure that NGCP is “not shortchanging the industry and the Filipino people,” according to a former energy official who asked not to be named.
The official said the entire rate-setting process is supposed to determine which expenses are considered prudent, and it’s up to the NGCP to justify its revenue requirements.
“Because how the commission works is… it is wary. It just wants to make sure that NGCP is functioning at its optimum efficiency, and that it is not shortchanging the industry and the Filipino people,” the official said.
“The concession agreement is a privilege, and that comes with attendant responsibilities,” the official added.
The ERC is expected to release its final determination of the rates in the first quarter of 2024.
Will there be cash refunds? The ERC said it is possible but it’s not guaranteed.
“What we’re seeing are just telltale signs, because they are claiming this much, and we are deciding that they can only recover this much, then there could be a downward adjustment [on their allowable revenue], or a refund,” Dimalanta said in November.
Instead of cash refunds, the ERC is inclined to implement a “reduction of transmission rates,” according to Sen. Sherwin Gatchalian at a Senate hearing to discuss ERC’s budget. He defended the budget of ERC during last year’s budget deliberations.
“In terms of modality, it’s easier to reduce the rates, and easier for the regulator to monitor and apply, and to supervise [that kind of] implementation,” he said during the hearing last Nov. 13, 2023.
How much that reduction would translate into consumers’ electricity bills has yet to be determined, he said. But he assured the public that it would be “significant.”
Non said it was the release of the partial results that “created a wrong impression that there would be refunds.”
The release of ERC’s final review of NGCP’s fourth regulatory period was initially expected as early as August 2023. Instead, a preliminary review was released in November 2023, around the time that Congress was deliberating the national budget.
“It’s budget season. They (ERC) had to show to Congress and the Senate that they were doing their jobs,” the energy official who spoke with PCIJ said.
The Senate approved an P888-million budget for the ERC, higher than the P611 million originally proposed by the Department of Budget and Management.
NGCP faced scrutiny amid heavy criticisms against its performance as the country’s grid operator.
NGCP officials have been called to many House and Senate hearings since parts of Luzon were subject to rotational brownouts in the Summer of 2021. It does not help that the Luzon grid suffers from yellow and red alerts every year, once the hot season comes, too.
NGCP is responsible for building more transmission lines, but many of its projects are delayed. Power producers have previously lamented delays in their connections to the grid.
President Ferdinand Marcos Jr. himself gave NGCP a reprimand during his second State of the Nation Address in July 2023 over these delays.
“We are conducting a performance review of our private concessionaire, the NGCP. We look to NGCP to complete all of its deliverables, starting with the vital Mindanao-Visayas and the Cebu-Negros-Panay interconnections,” Marcos said in his 2023 SONA speech.
In January 2024, Marcos again took a swipe at the NGCP for failing to prevent a massive power outage in Panay Island, which caused its residents to suffer from total blackout for three days.
“This incident emphasized the vital role of these interconnection projects. We cannot afford to have another round of this costly interruption, not only in Panay Island but anywhere in the country,” Marcos said in an NGCP event announcing the completion of the Mindanao-Visayas interconnection.
Marcos pushed for the completion of remaining critical interconnection lines, including the Cebu-Negros-Panay backbone project during the event.
“So, we look forward to your assurances in the promised completion of the 230 kV Cebu-Negros-Panay backbone project by March of this year,” he said.
The ownership structure of NGCP has also been a subject of security concern because it is 40% owned by the State Grid Corporation of China. Lawmakers have expressed fears that Beijing could use the NGCP for sabotage in case of a conflict over the disputed waters of the West Philippine Sea.
NGCP said this is not a concern because “only Filipinos are manning the (NGCP) substations.”
On the other hand, there are concerns that cutting NGCP’s profits could affect its ability to expand the country’s transmission lines.
The NGCP needs the financial muscle to develop the country’s transmission grid and prevent massive blackouts. The NGCP also needs to modernize the grid to support renewable energy suppliers, according to experts.
In a 2023 report, the Climate Analytics think tank estimated that the country would need transmission lines to accommodate 163 gigawatts (GW) of energy, taking into account the variable nature of proposed and committed renewable energy projects.
NGCP’s Ablanza said as much. She said transmission planning would be critical to the green energy push.
“So if they (the ERC) limit our ability to recover our bonafide expenses, then it would have an impact,” she said.
Non warned of the consequences if ERC’s preliminary review is upheld. He said the NGCP’s investors could be “forced to pull out” if the effects of the review put a dent in the company’s financial ability to operate.
“If I were NGCP, I would fight it out [in court], because the basis for you to continue is a going concern. And if the effect of the review is too significant, then I may pull out [of the concession agreement,” he said.
Whatever the outcome, ERC’s final review of NGCP’s rates will inevitably have consequences on the energy industry. It will also translate to real costs that Filipino consumers will bear. END
BY ELYSSA LOPEZ / Philippine Center for Investigative Journalism
First of two parts
The Supreme Court petition filed by the National Grid Corporation of the Philippines (NGCP) to halt a long-delayed review of its rates could keep power costs high and delay potential refunds to consumers.
NGCP is a private monopoly that operates the country’s power transmission lines — the grid — linking power generators to distribution utilities such as Meralco and electric cooperatives nationwide. Costs incurred by the NGCP are passed on to consumers as part of their electric bills, accounting for about 10% of the total bill based on estimates.
The NGCP suffered a setback in November last year when the Energy Regulatory Commission (ERC), in a preliminary review of its rates from 2016 to 2022, the fourth regulatory period (RP), cut its allowable expenditures by half.
The amount included disallowances worth P3.7 billion, which were spent for public relations and advertising costs, among others, that ERC said should not be charged to consumers.
Senators have been among the most vocal in calling for the ERC to order refunds to consumers.
But the NGCP questioned before the Supreme Court new rules adopted by the ERC when it reviewed the rates of the transmission operator. It sought a temporary restraining order (TRO) on the ERC proceedings.
NGCP lawyer Jerome Versoza announced this move in December 2023, as the ERC began proceedings for the fifth RP covering the years 2023 to 2027.
A TRO, if granted, would restrain “the honorable commission from continuing further proceedings with concern to the fourth RP application and the fifth RP application,” the NGCP lawyer said.
The fourth RP, covering the years 2016 to 2022, is the subject of the November preliminary review, whose final determination is expected in the first quarter of 2024. The fifth RP covers the current period, from 2023 to 2027.
Pete Ilagan, a consumer affairs advocate and former energy official, warned that a Supreme Court intervention would “delay the reset process, definitely.”
“But the bigger issue is the application for the fourth regulatory process is still pending, and it’s already past the period,” he said. “[It is] a clear case of regulatory failure.”
During the December 2023 hearing, ERC presiding officer, Maria Corazon Gines, took note of Versoza’s manifestation, but proceeded with the pre-trial for the fifth review as the Supreme Court had yet to act on the NGCP’s plea.
“As there is still no TRO or preliminary injunction, then we will continue with the proceedings,” she said.
NGCP’s counsels stayed in the room but did not comment during the two-hour proceedings.
The details of the NGCP petition remain under wraps. News organizations including the Philippine Center for Investigative Journalism (PCIJ) have repeatedly sought a copy from NGCP, but were denied.
The PCIJ has also requested a copy from the ERC, but was refused. The regulator argued that the PCIJ was “not a party to the said case.”
“The ERC is enjoined to observe the sub judice rule (which restricts comments and disclosures pertaining to judicial proceedings), consequently, [we are] constrained to deny your FOI (freedom of information) request,” it wrote in a letter to the PCIJ.
NGCP has publicly questioned ERC’s preliminary review of its rates because the ERC — hobbled by internal issues and later on, the Covid-19 pandemic — changed the rules governing the review process.
The ERC review, called the “rate reset,” is normally forward-looking and akin to a budget process. The ERC approves NGCP’s annual revenue requirement or ARR from which it can charge its expenditures.
The original timeframe of the fourth regulatory period covered five years – from 2016 to 2020. The rate reset should have been done in 2015. However, a series of leadership changes in the ERC delayed the process.
ERC only started the review process in December 2022. ERC decided to look at NGCP’s actual expenses and added two more years to the fourth review period – 2016-2022 from the original 2016-2020 – to clear the backlog in time for the fifth review covering 2023 to 2027.
Critics have found NGCP’s transmission rates, set in 2009, to be “excessive.”
The ERC’s preliminary review of NGCP’s rates from 2016 to 2022 cut NGCP’s revenue requirement, essentially, the transmission operator’s allowable expenses, to more than half.
In its application, NGCP sought a revenue requirement worth P387.80 billion for 2016 to 2020, which meant an annual average of P129 billion. But the ERC, based on its initial review, found that allowable revenue should only be at P183 billion for the period, or about P36.67 billion a year.
The NGCP, from 2016 to 2020, operated on an interim maximum annual revenue (iMAR), approved by the ERC under a different leadership.
This iMAR, said NGCP Assistant Vice President Cynthia Alabanza, was only an estimate but was approved by the ERC as there was no regulatory review at that time.
“Just like when Congress hasn’t approved a government budget, the government would spend based on what was previously allowed. So that’s what we were doing… we were spending based on what was allowed [in the third regulatory period],” Alabanza said in Filipino in a news conference in November 2023.
But the iMAR could be subject to review and may be revised, based on ERC rules.
Majority of the ERC’s cuts in the preliminary review came from three major items:
• net efficiency adjustment
• revenue under-recoveries
• net performance incentive
These three items were worth P104 billion during the five-year review period.
The net efficiency adjustment is the incentive given to the NGCP for achieving “cost reductions in controllable costs,” while revenue under-recoveries are expense items not recovered during the previous regulatory period.
ERC said a decision on both items would be made in the final determination of the review due this quarter.
It is not, however, keen on granting a net performance incentive to the transmission operator.
This incentive is based on a performance incentive scheme (PIS), a set of service and operational performance criteria, which is supposedly set before the beginning of every regulatory period.
If the NGCP meets these criteria, it is rewarded with an incentive. Otherwise, penalties may be imposed.
In its application for the fourth rate reset, the NGCP adopted the PIS set during the third regulatory period. But the ERC said it was “constrained from upholding this position.”
“Considering that the PIS and its factors have not been established prior to the commencement of the fourth regulatory period, it follows that NGCP does not have the basis to enforce the incentives. Conversely, there appears to be no grounds for the imposition of penalties,” the November ERC order read.
Former ERC commissioner Alfredo Non said the ERC position was debatable because the NGCP should be recognized for meeting the criteria for incentives in the previous regulatory period.
“It is not NGCP’s fault that ERC failed to provide parameters for the fourth regulatory period,” said Non, who was ERC commissioner from 2012 to 2018.
ERC said the disallowances were intended to protect consumers. (CONTINUED)
By Elmer Nev C. Valenzuela
PAKIL, Laguna — Residents of this small Southern Tagalog town oppose a hydropower plant project they fear may endanger the supply of clean spring water that has always nurtured their community.
Pakileños have formed an organization to oppose the $1.1 billion Ahunan Hydropower Project they say poses a great threat to their community by potentially altering their water supply of natural spring water from the Sierra Madre or may totally stop their flow.
Calling itself the Mamamayan Nagmamahal sa Pakil (MANAPAK), the group demands a stop to all fieldworks on their mountains, particularly near Mt. Ping-as, traditionally regarded as sacred by Pakileños.
A joint venture of billionaire Enrique Razon’s Prime Metro Power Holdings Corp. and JBD Water Power Inc., the Ahunan project aims to generate 1400 megawatts of electricity for the Luzon grid.
Estimated to affect 299 hectares in four Pakil barangays—Baño, Burgos, Rizal and Taft—the project requires the construction of an upper basin to serve as reservoir for power generation.
Town of healing water
Located at the mountainous part of Laguna province, Pakil and its neighboring towns on the east bank of Laguna de Bay are blessed with free-flowing spring water residents have enjoyed as drinking water and for irrigation for as long as they remember.
In the town’s famous public bathing pools, such as the old Turumba Spring, the waters are appreciated for their reputed healing properties and have become pilgrimage sites of sorts.
Resident Melquiades de Cadiz said they are starting to see signs of water disruption since Ahunan hydropower project pre-construction activities have started upstream.
He said further degradation of water quality is imminent should the earthworks continue.
Cadiz added the project’s other socio-cultural and environmental impacts may include the destruction of the town’s mountain, displacement of affected families, desiccation of spring water, as well as damage to cultural and religious sites and heritage.
MANAPAK member Nora Macapanpan said they are concerned that the Ahunan dam is to be built along a stretch of four active fault lines in the area that are characterized by authorities to have moderate to high seismicity.
Macapanpan’s group also warned of agricultural impacts, floods, landslides as other potential risks posed by the project.
“Marami pa ang mga panganib na kaakibat ng proyekto, tulad ng pagbaha at pagguho ng lupa. Maapektuhan din ang mga magsasaka at mangingisda, ang Turumba sa Birhen, at ang ating tubig inumin,” MANAPAK official Teresa ‘Ka Tessie’ Sanchez added.
(There are more dangers connected with the project, such as flooding and landslide. The farmers and the fisher folk, the spring pool, and our drinking water.)
Ka Tessie appealed to the Department of Environment and Natural Resources for support and to deny the permits the project proponents seek to be able to move on to the next phases of the project.
Initial victory
Pakil’s Municipal Council has issued a “No Objection Resolution” to the Ahunan project last September 14, however, a vital first step leading to the issuance of the prerequisite Environmental Compliance Certificate.
Ka Tessie says they were unaware the resolution was being discussed. She said they were shocked to learn of it only last March, five months after its approval.
“Talagang parang, ano na pala ito, tuloy na! Sabi ko, ay kailangan na eh tumayo,” she said.
(It seems the project is really to be implemented. I said, it is time to stand up.)
MANAPAK has since gathered six thousand signatures from fellow Pakileños and engaged the Municipal Council in a series of dialogues.
Citing the dam proponents’ poor consultation with the town’s various stakeholders, the Council has revoked its No Objection Resolution last August 9.
Salamat naman sa Diyos at pagka tumayo ka sa isang bagay na ang paniwala mo ay mabuti, talagang laging may sumusunod, tumatayo din kasama mo,” Ka Tessie said.
(Thanks to God. When one stands up for something she believes is good, others will follow.) #
In a picket protest June 11, consumers and activists held a protest action before Meralco’s office to slam Meralco’s planned rate hike.
The protesters said a rate hike amid inflationary times would drive poor families into more economic hardships.
They also blamed President Rodrigo Duterte for his government’s failure to alleviate the poor and moderate oligarchs’ greed as he promised.
Consumer group Alyansa para sa Bagong Pilipinas with its counsel Neri Colmenares filed a petition at the Supreme Court against the government’s Energy Regulatory Commission’s (ERC) awarding of 20-year power contracts to seven private generation companies without bidding, among them are those owned by Meralco.
The petition was filed on November 8, 2016.
A week after, massive power outages struck several Meralco franchise areas that lead some to speculate that the power firm may be creating an “emergency” situation to justify the contracts. (Featured photo by Alyansa para sa Bagong Pilipinas Facebook page.)