Republic of the Philippines


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ERC Issues Show Cause Order to NGCP on Contracting of Ancillary Services

The Energy Regulatory Commission (ERC) ordered the system operator to explain its failure to comply with DOE Circulars on the contracting of ancillary services to ensure grid security and stability.
On 16 September 2022, the ERC issued Show Cause Orders (SCO), through ERC Case Nos. 129, 130 and 131 SC, to the National Grid Corporation of the Philippines (NGCP) for failure to comply with the policies issued by the DOE in October 2021.
The ERC cited three sections of DOE Department Circular No. 2021-10-0031 entitled, “Prescribing the Policy for the Transparent and Efficient Procurement of Ancillary Services by the System Operator”, with which the NGCP failed to comply:
1. Section 4.2 requiring NGCP to seek approval from the DOE on its Ancillary Service Agreement Procurement Plan;

2. Sections 7.4 and 7.5 mandating NGCP to seek the approval of the DOE on the Terms of Reference (TOR) of the Ancillary Service Competitive Selection Process (AS CSP); and

3. Sections 7.1 and 7.11 requiring NGCP to complete the AS CSP within six (6) months from the effectivity of the Circular.
Ancillary Services are necessary to support the transmission of capacity and energy from resources to loads, while maintaining reliable operation of the grid in accordance with good utility practice and existing rules. Meanwhile, the AS CSP is the process whereby ancillary service providers are awarded Ancillary Service contracts through transparent and competitive bidding in accordance with the rules and regulations set by government regulators.
While the ERC notes that NGCP has already issued the TOR and the schedule for the conduct of AS CSP, the latter has yet to comply with the abovecited provisions in existing policies adopted by the DOE pursuant to its mandate as a policy-making authority.

On the other hand, the issuance of the ERC’s SCOs is consistent with the mandate of the ERC to enforce the implementing rules and regulations of the EPIRA, including those formulated and adopted by the DOE.
The ERC directed NGCP to file within 15 days upon the receipt of the SCO (electronically) and another five days after (through personal service) their verified explanation as to why no administrative penalty should be imposed upon it on the possible violations cited. The submission shall also include necessary proof that will support all the allegations in its verified explanation.


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