DOE maps out options to sustain NPC operation in off-grid areas

Energy rationing, additional budget, tariff applications, and government borrowings are some of the solutions drawn up by the government to sustain the operations and ensure the continued delivery of power supply by the National Power Corporation (NPC) in off-grid areas.

In a news briefing, the Department of Energy (DOE), NPC, and the National Electrification Administration (NEA) said Monday they are working on short- and medium-term measures as NPC faces this year a constraint in its Corporate Operating Budget (COB), which poses a major problem in sustaining its operations in off-grid areas.

As mandated by the Electric Power Industry Reform Act of 2001, NPC powers up far-flung islands and communities not connected to the main grid. Along with new power provider subsidies (NPPs) or qualified third-parties (QTPs) and with its 278 power plants and power barges and as operators of the transmission systems of six provinces, it provides electricity to around 1.3 million households in the countryside.

The NPC's approved and allocated funds for its fuel expenses and subsidies for NPPs and QTPs for 2023 are insufficient to cover the requirements for the entire year. This is attributed to the increased cost of fuel.

Fuel prices, which accounts for almost 70 percent of NPC's operational costs for both its Small Power Utilities Group (SPUG) plants and NPPs, are currently priced twice as much than the initially available funds.

As of January 26, 2023, the NPC's outstanding fuel payables for the operation of NPC-SPUG power plants and barges amount to P1.031 billion for billing months November-December 2022, while its payables to NPPs and QTPs amount to P5.508 billion, representing three to four months of unpaid billings, which are due and demandable.

The NPC Board and the DOE are working on effecting a P5 billion borrowing by the NPC with government financial institutions, which will require Special Authority from the President of the Philippines.

According to NPC Business and Strategic Planning head Odette Rivera, the sovereign guarantee could 'come in within the month and this would be part of our 2023 funding sources.'

The DOE and NPC are also working with the Development Budget Coordination Committee (DBCC) to program funds that would support NPC's funding deficit for this year, which amounts to P14.205 billion.

The NPC has secured last week the approval of the Department of Budget and Management (DBM) to use the prior year's national government (NG) subsidy which amounts to P1.112 billion to cover NPC's due and demandable fuel payables. The prior year's NG subsidy is a special provision in the General Appropriations Act (GAA) that authorizes the use of subsidy release for programs and projects to cover the additional funding requirements of activities or projects under the agency's program.

The NPC has also identified reimbursements for the advances it made for the maintenance of the Bataan Nuclear Power Plant (BNPP) from 2011 to 2023 in the amount of P367 million.

Other contingency measures being considered are immediate approval of tariff applications before the Energy Regulatory Commission (ERC).

The DOE anticipates that the ERC would act swiftly on the petition by the NPC on the Universal Charge for Missionary Electrification (UCME) of about P0.15/kWh.

The proposed UCME rate is the commitment of NPC to ensuring the required volume of fuel that would be timely paid to suppliers, payment to NPPs and QTPs, and ensuring the continued operation of existing units.

If approved by the ERC, the proposal will help NPC to deliver its commitment to provide a reliable and sufficient power of supply and efficient operation of its plants and associated power delivery systems consistent with the specific programs in the missionary areas that NPC is currently serving.

Under the Electric Power and Industry Reform Act or EPIRA, NPC can cover its missionary subsidies by charging the consumers in those areas a missionary generation rate passed on as the UCME.

NPC is also working on its long-term sustainability plan to mitigate the impact of high fuel prices on its operations. This includes the accelerated hybridization of SPUG power plants with renewable energy resources, preparations for 'UCME Graduation' through the interconnection of major island grids to the Main Grid, and preparations for 'UCME Rationalization' through customer classification in the missionary areas.

'We assure NPC customers that the government is undertaking remedies to ensure the delivery of its mandates despite several factors it cannot control,' said DOE Secretary Raphael Lotilla.

If there will be no additional funding and as a last resort, the NPC will implement a reduction in SPUG operating hours and delay in UCME payments to NPPs/QTPs. The NPC SPUG plants that previously operates 24 hours a day could be shortened to 15 hours, from 16 hours to 12 hours, and from less than 16 hours to just five hours.

The power-rationing proposal will reduce operations of 156 existing NPC-SPUG power plants that may affect about 450,000 households.

'To avoid rotating power interruptions in the islands and off-grid areas, we are taking steps to fund a sustainable solution to address the financial woes that are crippling the operations of the NPC,' Lotilla said.

The delayed payments to NPPs/QTPs may result in power outages affecting about 835,000 households. Also, there is a possible year-long, daily power interruptions affecting a total of about 1.3 million households in the islands and off-grid areas as among the possible impact of increase in fuel prices and funding deficit this year.

NPC, along with the private sector through the NPPs and QTPs, is responsible for the power generation function in around 169 off-grid areas in the country, while the electric cooperatives and some local government units assume the role of distribution utility.