PIPPA urges NGCP to create contingency funds for transmission lines

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Power developers still face difficulties in putting up transmission lines for new power plants, the Philippine Independent Power Producers Association Inc. (PIPPA) said.

The group is urging the National Grid Corp. of the Philippines to form a contingency fund to address these costs in their five-year plan that will be subject to approval by the Energy Regulatory Commission.

PIPPA Board of Trustees member Luiz Miguel Aboitiz said during a recent Senate hearing that power developers shoulder the upfront costs of these projects.

“Generators have to spend money for upgrading the transmission system of NGCP because the upgrade is not part of the five-year plan that has been approved by the energy regulator. These generators have to front the money and pay for the build of the transmission line until such time that the ERC allows NGCP to collect money in their rates to pay for those upgrades,” he said.

Aboitiz said power developers receive repayment over six to seven years with no interest when paying the upfront cash for the projects once the NGCP’s emergency fund is cleared by the ERC.

Power generators absorb 30 to 40 percent of the cost of the transmission line.

“We’re not allowed to pass it on to consumers,” he said.

PIPPA is working with the NGCP to give a “regulatory suggestion” to the power regulator to have a contingency fund for unplanned transmission projects in the regulator’s Performance Based Regulation (PBR) reset, he added.

The PBR is the rate setting methodology set by the regulator to determine distribution and transmission rates and capital expenditures of private transmission and distribution utilities.

“You have to look at average cost of new transmission upgrades for power plants over a five-year period and looking ahead. It has to be a certain amount, and if that is depleted by a certain time before the five-year period, they have to apply for another contingency fund,” Aboitiz said.

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