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ERC Penalizes NGCP for Violating the AS-CSP Policy

4 November 2022 /ERC-Planning and Public Information Service

PASIG CITY – The Energy Regulatory Commission (ERC) directed the National Grid Corporation of the Philippines (NGCP) to pay a penalty of Five Million One Hundred Thousand Pesos (PhP5,100,000.00) for not complying with the circular of the Department of Energy (DOE) requiring procurement of reserves.

In 2021, DOE issued Department Circular No. DC2021-10-0031, entitled “Prescribing the Policy for the Transparent and Efficient Procurement of Ancillary Services by the System Operator” (AS-CSP Policy). The AS-CSP Policy requires all ancillary services or reserves required by the Grid to be procured pursuant to an open and competitive process under a firm contracting agreement. This aims to improve transparency, competitiveness, and wide dissemination of bid opportunities among qualified facilities. For energy security, it is crucial for NGCP to meet and maintain the required reserve levels.

Section 7.4 of the policy requires NGCP, as System Operator (SO), prior to the publication of the Invitation to Bid (ITB) to submit for the DOE’s approval the Terms of Reference (TOR) to determine if consistent with the CSP Policy and the Draft Instruction to Bidders. In its explanation filed with the ERC, NGCP admitted that it did not comply with Section 7.4 of the AS-CSP since the said provision is allegedly not valid.  Given this admission and its unmeritorious defense, the ERC finds that the NGCP violated its obligations under Section 7.4.

On the other hand, Section 7.5 of the AS-CSP policy requires the Third-Party Bids and Awards Committee (TPBAC) to publish and post the Invitation to Bid in accordance with the periods specified in the DOE Circular. The ERC finds that when NGCP proceeded to publish and post the ITB without the prior approval of the DOE, it committed a violation of said provision of the AS-CSP Policy.

In its Decision, dated 24 October 2022, the ERC considered NGCP’s failure to submit to the DOE its TOR and ITB as one violation and its failure to publish and maintain on its website the Invitation to Bid without the prior DOE approval of the TOR and ITB, another violation.

According further to the Decision, the ERC underscores the fact that no amount of monetary penalty can sufficiently equate to or compensate for the willful disregard by NGCP of validly issued regulations of the Philippine Government and its administrative agencies. The ERC issues a stern warning to NGCP that its non-compliance with laws, rules, orders, and regulations issued by authorities may result to the cancellation of its Certificate of Public Convenience and Necessity (CPCN) and the endorsement by the ERC to the Philippine Congress of the revocation of its legislative franchise.


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