The Mindanao power grid has a ‘good problem’ with excess power supply over demand for the first time in over a decade.
However, unless a Wholesale Electricity Spot Market (WESM) starts operating and the grid operator commissions high capacity transmission lines to deliver that power where it’s most needed, consumers could still be bugged by high electricity rates and brownouts.
“High load generation especially in the southern corridor is constricted,” said Gabino Ramon G. Mejia, executive vice president of GNPower Kauswagan Ltd. Co. during his presentation on “Ensuring Power Supply Availability in Mindanao” during the 1st AMRECO Annual General Membership Assembly held 26 November 2016 at a local hotel.
The ‘Power Situation Outlook’ for the Evening in Mindanao Grid as posted in the National Grid Corporation of the Philippines (NGCP) website as of 4AM, Monday, 28 November 2016, shows Systems Capacity at 1,476MW, System Peak at 1,461, and a Reserve of 15 MW.
In NGCP’s Systems Operation presentation rendered during the Generator Conference last 10 November 2016, Total Dependable Capacity in Mindanao was pegged at 2,574.46 MW (76% of installed capacity) with an excess capacity of 770MW as of 2017, and an additional 540MW capacity from GNPower Kauswagan coming online by 2018.
“Even with bilateral contracts, generators are unable to fully deliver contracted capacities, due to grid constraints, with NGCP’s 230kV transmission line backbone project scheduled to come online by next year yet,” Mejia added.
However, even if NGCP’s grid upgrading works get delayed, Mejia is convinced a WESM could help facilitate the delivery of stranded Bilateral Contracted Quantities (BCQs).
“There are 4 key areas which are ‘must haves’ to ensure the availability of power supply in Mindanao and these are lessons from past experiences in Luzon and best practices, which most, if not all developed economies are adhering to as a gold standard,” he explained.
Mejia identified these four key areas as Market (establish and implement a sophisticated electricity market); Infrastructure (make a strong and reliable grid to support); Planning (Adopt a robust energy resource planning to continuously build additional capacity, and practice competitive procurement) and Policies (Create and enforce key policies and fulfill respective obligations in contracted/signed agreements).
“The long standing supply deficit problem in Mindanao has already been solved, but power supply availability connotes the need for competitive pricing and reliability, reliable plants and a robust grid,” Mejia stressed. “The current situation in Mindanao with excess power supply and no WESM, has power generation being dispatched based solely on purely technical considerations of power supply agreements.”
However, once a WESM is established in this scenario, trading of excess electricity becomes possible with generators and bulk power buyers vying for a share of the pool, giving them the power of choice, with full transparency and competition, and no power curtailment, he added.
“NGCP has to plan its infrastructure more creatively, effectively, and proactively in close coordination with the private sector to avoid delays and mismatches in specifications and requirements, and more importantly to deliver infrastructure in a timely manner,” Mejia said.
“NGCP’s Mindanao 230kVA Transmission Line Backbone transmission line projects in Baloi-Villanueva-Maramag, Bunawan-Toril-Matanao-Culaman when completed in 2018 will bring higher system reliability, stability, power reliability and higher transfer capacity between Maximum North and Maximum South Generation,” he said.
Planning –An Obligation
Even if the proper transmission infrastructure were already in place, Mejia said it is imperative that distribution and electric cooperatives comply with government mandates in power procurement such as Energy Regulation Commission (ERC) Resolution 21 Series of 2005 directing DUs and ECs to enter into Future Bilateral Supply Contracts with Generation Companies; and Section 4, Rule 7 of the EPIRA Implementing Rules and Regulations (IRR) to procure electricity supply contracts in the Least Cost Manner.
“DUs are obligated and mandated by law to provide least-cost service to all their customers to ensure the stability, reliability, and competitiveness of the power industry,” Mejia said.
Not the least, under ERC Resolution No. 13, Series of 2015, all DU’s are directed to conduct a Competitive Selection Process (CSP) in the procurement of their supply contracts for their captive markets with power supply contracts (PSAs) to be awarded only to the winning Genco following a successful transparent and competitive selection process.
This mandated process includes thorough market research and data analysis, high-level and logical demand forecasting, systematic bid/proposal evaluation that would require all potential bidders to submit their offers based on a set of applicable and verifiable parameters (i.e., not designed to favor a single supplier), independent validation of price offers through publicly available data such as ERC-approved applications, filings, etc.
“A properly implemented CSP promotes competition among industry players, drives the price down to the most competitive level, ensures transparency for end-users and protection for the DUs, and provides efficient and effective rate evaluation for the regulator,” Mejia said.
“A successful CSP is the obligation of all stakeholders. More importantly, compliance to CSP is not enough – the fulfillment of obligations under the signed Agreements is necessary to aid in the increase in capital inflow and for investors and multi-lateral agencies to upgrade their ratings of doing business in Mindanao,” he added.
Key takeaways
“We need to properly plan, act right and fast with stronger and firmer commitment and support for WESM implementation; more robust collaboration with the private sector in ensuring timeliness in the execution of critical transmission line projects; proper planning and execution based on best practice tools and technologies, and respect and adherence to policies and laws,” Mejia stressed.
“For its part, Government needs to fulfill its mandate/commitments by showing the political will to do what’s right, and the Executive Department should enforce our laws. All arms of government should feel and act on the urgency to make policy decisions,” he stressed.
“Not the least, key stakeholders should commit to actively participate and collaborate with DUs in planning the energy future of Mindanao, particularly member consumers of electric cooperatives and NGOs to be always vigilant against aberrations in this process.”
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