Ancillary Services (AS)

Ancillary services (AS) are services necessary to support the transmission of capacity and energy from resources to loads while maintaining reliable operation of the transmission system in accordance with good utility practice and the Philippine Grid Code [DC2021-10-0031, §3.1, 2021]. The System Operator (SO) — NGCP — is responsible for procuring the required level and specifications of AS to maintain grid frequency, voltage stability, and fault recovery capability [DC2019-12-0018, §4, 2019].

AS Types

The Philippine grid recognizes five categories of ancillary service [DC2021-10-0031, Annex A §1.1, 2021]:

Note: “RPS” in this context denotes Reactive Power Support, not the Renewable Portfolio Standards program.

Required Reserve Levels

DC2019-12-0018 establishes per-grid AS quantity requirements per trading interval [DC2019-12-0018, §2.2, 2019]:

Capability testing thresholds: Mandatory AS capability testing applies to all generating units with Pmax at or above: Luzon ≥10 MW, Visayas ≥5 MW, Mindanao ≥5 MW [DC2019-12-0018, §3.1, 2019].

Ancillary Services Technical Working Group (AS-TWG)

DC2019-12-0018 created the AS-TWG to advise the DOE on AS policy development [DC2019-12-0018, §9, 2019].

Co-Chairs: DOE and ERC

Members (one representative each): ERC, DOE, NEA, NGCP, PEMC, IEMOP, Philippine Electric Power Operators Association (PEPOA), Manila Electric Company (MERALCO); plus three (3) representatives from the Philippine Independent Power Producers Association (PIPPA)

Secretariat: DOE Electric Power Industry Management Bureau (EPIMB)

The AS-TWG must convene within 30 days of the circular’s effectivity and submit its recommendations within 180 days, reviewed annually thereafter [DC2019-12-0018, §9.5, 2019]. The ERC must issue implementing rules within 60 days of receiving AS-TWG recommendations [DC2019-12-0018, §13, 2019].

Regulatory Framework

AS governance has evolved through a chain of department circulars:

See Reserve Market and Electricity Derivatives (WESM) for the co-optimized market channel. This page covers the contractual procurement channel governed by DC2021-10-0031.

Ancillary Service Agreement Procurement Plan (ASAPP)

The SO must submit an annual ASAPP to DOE by 31 March each year, and post it on its website by 30 April [DC2021-10-0031, §4.1–4.2, 2021]. The ASAPP contains [DC2021-10-0031, §4.3, 2021]:

• AS types to be procured per grid (Luzon, Visayas, Mindanao)
• Timing and monthly level of AS requirement per grid
• Inventory of existing ASPAs (location, expiration dates)
• 5-year historical hourly AS levels per type per grid
• 10-year forward projection of AS requirements

The ASAPP serves as the basis for each CSP’s Terms of Reference, making it the primary planning instrument for AS procurement.

Third Party Bids and Awards Committee (TPBAC)

The SO procures AS through an independent TPBAC established by the NGCP Board of Directors [DC2021-10-0031, §5.1.1, 2021]. The TPBAC manages all CSP activities and is accountable for its decisions independently of the SO’s commercial interests.

Composition (5 voting members) [DC2021-10-0031, §5.1.2, 2021]:

The NGCP Board of Directors serves as observer only — it has no vote in TPBAC proceedings [DC2021-10-0031, §5.1.4, 2021]. This structural independence is the principal anti-capture mechanism. A quorum is a simple majority of voting members; decisions require majority of members present [DC2021-10-0031, §5.1.6–5.1.7, 2021].

The TPBAC is supported by a Technical Working Group (TWG) (technical, legal, and financial SO staff for ASAPP/TOR preparation, eligibility review, and bid evaluation) and a Secretariat (administrative support and keeper of CSP records) [DC2021-10-0031, §5.2, 2021].

Observers at all CSP stages: DOE, ERC, and NEA — invited in writing at least 7 working days in advance. Their absence does not nullify proceedings [DC2021-10-0031, §6.3–6.7, 2021].

Competitive Selection Process (AS-CSP)

Key CSP timelines [DC2021-10-0031, §7, 2021]:

Prior to ITB publication, the SO must submit the TOR and draft Instruction to Bidders to DOE for approval [DC2021-10-0031, §7.4, 2021].

Bidder qualification rules [DC2021-10-0031, Annex A §13, 2021]:

• ≤30% of installed generating capacity of any grid, and ≤25% of national installed generating capacity (EPIRA §45(a) caps)
• SO affiliates are explicitly disqualified from participating
• Affiliated bidders are not disqualified from competing against each other solely on that basis
• For new ASPs: qualification based on personnel competence and operational management plan

Minimum unit size [DC2021-10-0031, Annex A §2.3, 2021]:

• Luzon: 10 MW per AS unit (or aggregation)
• Visayas: 5 MW
• Mindanao: 5 MW

Reviewed annually; an AS unit may be a single generator or an aggregation.

Failed CSP: After two consecutive failed CSPs with no outstanding dispute, the SO may proceed to direct negotiation [DC2021-10-0031, §8.1, 2021]. A CSP is failed if: (a) no proposal is received; (b) only one bidder submits an offer (for RR, CR, or DR types); or (c) competitive offers do not meet TOR requirements [DC2021-10-0031, §8.2, 2021].

Payment Structure (ASPA Template)

AS contracts use a two-part payment structure [DC2021-10-0031, Annex A §3, 2021]:

1. Capacity Payment (PhP/kW/h) — paid for contracted capacity made available, regardless of dispatch. Compensates the provider for holding capacity on reserve.

2. Incidental Energy Payment (IE) — paid for energy actually dispatched, composed of:

• Fixed Energy Fee (PhP/kWh)
• Indexed Energy Fee (PhP/kWh, based on indices such as CPI or fuel prices)
• Gross pumping/charging costs (for Energy Storage Systems)

AS dispatch is recovered primarily from WESM revenue. An IE surplus/shortfall mechanism adjusts the final payment [DC2021-10-0031, Annex A §3.2, 2021]:

IE surplus/shortfall = Σ G × ([IE payment offer + Capacity payment offer] − Actual WESM Price)

• If positive (WESM price below AS payment offer): SO pays the shortfall to the AS provider
• If negative (WESM price above AS payment offer): surplus offsets the IE payment to the provider in the next billing period

For Mindanao (pre-WESM establishment): Full AS Payment is paid directly by the SO to the AS provider monthly [DC2021-10-0031, Annex A §3.3, 2021].

Outage allowances [DC2021-10-0031, Annex A §6, 2021]:

• Scheduled outage: 30 equivalent days per year
• Forced outage: 15 equivalent days per year
• No carry-over of unused allowance between years

For forced outages beyond allowance, the AS provider must procure replacement reserves from the Reserve Market or from other certified ASPs at ERC-approved rates; failure to do so triggers a penalty of half the Capacity Payment for the missed obligation period [DC2021-10-0031, Annex A §7.1(b), 2021].

Relationship to Reserve Market

The Philippines uses two parallel channels for AS procurement:

DC2021-03-0009 (2021) directed the SO to use a combination of both channels. The AS-CSP contract channel provides baseline certainty; the Reserve Market handles residual and real-time requirements. See Reserve Market and Electricity Derivatives (WESM) .

Protest Mechanism

Decisions of the TPBAC at any stage may be challenged in a two-step process [DC2021-10-0031, §10, 2021]:

1. Reconsideration request to TPBAC — filed within 3 calendar days of notice; TPBAC resolves within 7 calendar days
2. Protest to NGCP BOD — filed within 7 calendar days of reconsideration denial; BOD resolves within 7 calendar days; BOD decision is final

Court action (Rule 65) is available only after BOD finality. No protest stays the CSP proceedings; protests must be resolved before award [DC2021-10-0031, §10.4, 2021].

First AS-CSP Results

Under DC2021-10-0031, the SO conducted its first AS-CSP within the 6-month transitional period. 38 bidders received Notices of Award; 36 ASPAs were executed (2 bidders declined) [PDP 2023-2050, Ch.3 Sec.2.6, pp.107–108, 2025].