The Energy Regulatory Commission (ERC) will be cutting further the maximum allowable revenue (MAR), which is the basis of its profitability, if the National Grid Corporation of the Philippines (NGCP) will not improve on its technical performance on easing congestion in the transmission system.

It was seen in the latest prices at the Wholesale Electricity Spot Market (WESM) the cost up-ticks triggered by NGCP’s constrained lines, with it single-handedly blamed for the recent P0.44 per kilowatt hour (kWh) increase in the generation charge of the Manila Electric Company.

If NGCP’s allowable revenue under performance-based regulation (PBR) will be lowered due to operational lapses, ERC executive director Francis Saturnino Juan pointed out that this will serve as some form of penalty against the company; while the consumers will benefit of ‘indirect refunds’ through lower transmission charges that will be incorporated in the electric bills.

The ERC official emphasized that “NGCP has to implement capex (capital expenditures) as the PBR approval already provided funding for that. If not implemented, we will be re-opening MAR wherein we will claw-back capex which have not been implemented.”

Even prior to the scheduled repair of the San Jose substation, there have already been proposals for both NGCP and market operator Philippine Electricity Market Corporation (PEMC) to do an impact study on price separation arising from network congestion, due to fears that such will exert upward pressure on prices at the Wholesale Electricity Spot Market (WESM). The repairs at transformer 2 of the substation were just completed August 5, according to NGCP.

In a related development, Energy Secretary Rene D. Almendras indicated that he will push for a review of the NGCP concession agreement to pore over some areas where the company must improve on its technical capabilities, especially in providing quality power to end-users.

“I’ve been monitoring the performance of NGCP, that’s why I would like to understand the concession (deal)… to look for opportunities to make it more efficient, to work better for the customers. I don’t mean the end-users alone, but also the gencos (generation companies) and the distribution companies,” he said; further stressing that he was overwhelmed with complaints about NGCP’s operational weaknesses on his recent discussion with stakeholders in Mindanao.

“When I went to Davao… some of the distribution utilities were complaining because of the quality of power that’s being transmitted – their meters were not running, that’s why they’re incurring losses… the meters were not measuring efficiently,” he explained.

In the intent of reviewing the NGCP concession deal, the energy chief is also being called upon to look at provisions which may have been causing losses for the government, such as on the fixed foreign exchange rate which became the reference price for the concession fees. While there was a general provision in the concession agreement for that, it was noted that the closing forex rate must be traced to the time of turnover which was January 15, 2009.