Manila Bulletin
By Myrna M. Velasco
Published: August 4, 2013
Serious goals don’t come from imagination – they must be carefully planned and prudently implemented.
Plus, the government must come in to viably encourage much-needed investments.
Amid the company’s overwhelming to-do list, the management of the National Grid Corporation of the Philippines (NGCP) was straightforward in admitting that “all’s not well yet in the country’s electric transmission highway and much more have yet to be done” when it comes to projects and in improving processes of operations.
From an intrinsically antiquated and ‘still weak’ transmission network latched onto its lap four years ago, NGCP noted that it’s not only the infrastructure reinforcements that had to be worked on, but there are also operational parameters that must be reversed so everyone in the organization can keep pace with “a fresh start”.
Early detection of ‘defects’
According to Mr. Rico C. Vega, NGCP’s head of engineering design department, planning and engineering, major projects will be added in the company’s fourth regulatory reset under performance-based rate setting (PBR) to be filed with the Energy Regulatory Commission (ERC) next year.
The PBR is a forward-looking approach on electricity rates regulation which allows the regulated utility to forecast its project cost allocations and overall budget (based on prescribed building blocks) for the next five years. For NGCP, the calculated regulatory asset base will be divided across forecast volumes of power delivery to arrive at the per kilowatt-hour (kWh) cost that will eventually be passed on to the consumers.
Mr. Vega noted that while NGCP might be filing for higher capex allocation, this will not necessarily result in increase in the rates because the base of consumers has also been growing – with the company forecasting average 4.0-percent demand growth in their upcoming PBR reset.
Put simply, he stressed that “the company’s next batch of capital outlay for projects and other undertakings will not only ease the lingering ‘stresses’ in the country’s electricity system, but has also been intended to make cost more affordable for the consumers.”
NGCP President Henry T. Sy Jr. emphasizes the need “for early detection and mass correction of defects” for the company to abate occurrences of forced outages or brownouts triggered by equipment defects or line trippings.
And despite the two major power interruptions which happened in Luzon this year, the NGCP chief executive highlighted the “significant decrease in their forced outages caused by equipment and line defects, with the highest reduction occurring in the Visayas grid.”
Gridlocks in ancillary services procurement
Energy Secretary Carlos Jericho Petilla, in a statement to the media, made it well-known that NGCP still falls short on its contracting of required ancillary services. Manifestly, these are necessary power supply to be procured by the grid operator to address frequency imbalances in the system; as well as in providing buffer supply or reserves that it can immediately call for dispatch once there are forced outages of power plants.
Securing ample volume of reserves can help avert or prolong unwanted power interruptions and they also ensure reliable operations of the transmission system. Ultimately, it can serve as a yardstick in the quality of service that NGCP can deliver to customers.
Mr. Darryl Lon Ortiz, the company’s head for business strategy development and regulatory management, acknowledged that there had been some sort of struggle between NGCP and the power generators when it comes to the traditional bilateral nature of contracting for ancillary services.
Parties are disparately at both ends of the pole – with NGCP wanting to bring down the cost for its customers; while the power suppliers are understandably reluctant to offer or nominate their capacities for reserves at a loss or below-market costs.
Mr. Sy chiefly articulated that “NGCP is continuously finding ways to acquire the ancillary service at lower prices, which will contribute to lower rates, and thus help end-consumers.”
Part of the innovations embraced by the company on ancillary reserves contracting, according to Mr. Ortiz, had been its solicitation of offers (under Ancillary Services Procurement Agreements) for firm and non-firm reserves -- which are distinctly priced.
He expounded that the firm reserves are generally priced lower; while the tendered non-firm reserves come with a higher price tag. “Under the offered non-firm reserves, the power generator still has the option to offer its capacity as reserves or as regular energy supply depending on what will benefit it financially at that particular trading period,” Mr. Ortiz added.
Reserves market
To strike a middle ground, Mr. Petilla thus recommended an accelerated operation of the proposed reserves market – envisioned as an added trading layer at the Wholesale Electricity Spot Market (WESM).
But while the energy secretary wants it done within this year, some industry players tipped off that the timeline may take longer because WESM operator Philippine Electricity Market Corporation (PEMC) may still need to do some adjustments at its market management system.
The other major hurdle to this plan is the pending decision of the ERC on the reserves market’s implementation.
As far as the market design is concerned, other industry players opined that “the present MDOM (market design optimization model) has the reserve co-optimization built-in and it is just a tick on an input box that could make this run.”
Currently, the various types of reserves required to be procured by NGCP are regulating reserve (also called load following and frequency regulating reserve); contingency reserve, dispatchable reserve, as well as those for reactive power support and black start services.
With the anticipated reserves market, two additions have been recommended: must-run capacity which is necessary for the system operator (NGCP) to run at certain power output levels for technical or others reasons; and constrained off-capacity which is anchored on the ability of certain generating units to reduce their power output for system security reasons.
The commercial and technical terms for these new categories of reserves have yet to be established and filed for the industry regulator’s approval. These shall include the metrics, qualifying test and monitoring procedures, as well as the corresponding payment and cost recovery methodologies.
Protection systems
Debates are still intensifying as to which factor really triggered the 10-hour long rotating brownouts on May 8. Speculations went wild that some quarters even suspected it to be a ‘cheating ploy’ for the recently-concluded elections.
Technical probes established that a DC (direct current) supply at one end of the Calaca-Binan line did not work. Because of that, system operator NGCP was not able to isolate the part of the network affected by the line tripping which had been linked to a fire-induced incident. What happened next was cascade of power plant shutdowns leading to a capacity loss of 3,700 in the system, thus, the prolonged and massive brownouts.
“We still consider that an isolated case,” Mr. Venusto Hamoy, NGCP head of operation and maintenance (O&M) department said. He qualified though that such has not precluded the company from exploring ways on how to prevent the same precarious event into throwing the entire power system into breaking point once again.
For the lightning strikes which also strained transmission lines and which triggered the 30-minute brownout last month, the company emphasized that it already engaged the help of the weather bureau Philippine Atmospheric, Geophysical and Astronomical Services Administration (PAGASA) to help them identify the areas vulnerable to severe strikes of thunderstorms.
This will then aid NGCP on its plan of installing protection systems to withstand “isokeraunic phenomena” or the hit of great intensity lightning or thunderstorms.
“There are alternatives to overhead transmission lines like installing them underground,” Mr. Hamoy said, but he realistically pointed out worries over consumer complaints if the rates will rise from these investments.
The stretch of transmission lines that NGCP has yet to install would still be vast and needed expansions are still massive throughout the duration of its 25-year concession deal, but Mr. Sy sets out reassuring words that when their contract with government expires, they will turn over a ‘highly-modernized asset” and with consumers reaping the benefits of an improved system. (MMV) source
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