DOE taps PNOC fuel for off-grid power

The Department of Energy has directed state-run Philippine National Oil Co. to provide cheaper diesel to National Power Corp. power plants in off-grid areas to prevent supply disruptions and possible rotational brownouts amid rising global fuel prices.

Energy Secretary Sharon Garin said the intervention seeks to stabilize electricity supply and cushion power costs in missionary areas that rely on diesel-fired generation.

“We are also now focused on making sure that all our islands, especially Napocor power plants, that these areas do not suffer any interruptions due to the crisis,” Garin said.

The DOE is coordinating with NPC, the National Electrification Administration, and PNOC to address higher diesel prices affecting the Small Power Utilities Group, or SPUG, which serves areas not connected to the main grid.

Garin said off-grid islands are highly exposed to fuel price volatility linked to geopolitical tensions in the Middle East because about 97% of their power plants run on diesel.

“In our islands, right, almost all of them are using diesel, 97%. So we issued directives to NAPOCOR and PNOC. To NAPOCOR, check all your power plants if they have a need for diesel,” she said.

Garin said President Ferdinand Marcos Jr. has ordered agencies to ensure stable supply and prevent electricity cost spikes for consumers.

Under the arrangement, PNOC will sell diesel at preferential rates to SPUG power plants, allowing operators to manage costs while maintaining generation.

“We’re working with PNOC to help their generation companies there to get preferential rates because of the discounted rates. They will buy PNOC oil to use in their power plants so that the price of electricity won’t go up and they won’t run out. So that’s what we are doing,” Garin said.

Garin said the DOE also told power plant operators they may source cheaper fuel from PNOC to avoid disruptions.

“We told them that they can get fuel from PNOC, it is cheaper and it is only available for power plants so they will not be affected. Garin told GMA News’ “Unang Balita.”

“Because when the price of diesel increases, their payment will also increase. So PNOC or the government will just help them get cheap fuel,” she added.

She said the same approach could be replicated in other off-grid areas served by NPC.

The move comes as NPC faces mounting financial pressure from elevated diesel prices, with NPC President Jericho Nograles earlier warning of a possible PHP 10 billion budget shortfall for the rest of the year if fuel prices stay above PHP 127 per liter.

NPC’s budget assumed diesel prices at PHP 60 per liter, significantly below current purchase prices.

“That’s part of our forward-thinking,” Nograles said. “We had prepared prior to the war an allowance for fuel to reach PHP 92. Currently, Napocor is purchasing fuel at PHP 127 per liter. If it stays the same, we will have a budget shortfall.”

Nograles said the projected deficit would amount to about PHP 1.4 billion per month.

“We have been operating in this very intense situation since March,” he said. “But the full effects of the war are going to be felt financially by Napocor this coming May.”

Despite the financial strain, NPC has kept SPUG operations running through cost-management measures, including austerity and budget realignment.

“That is the least we can do to keep the lights on,” Nograles said. “When the war broke out, I sought guidance from my board, and my board told me that brownouts are prohibited.”

NPC is also seeking additional funding support from Congress and exploring loan facilities to cover the expected shortfall.

“In a high-cost fuel scenario, there are really only two situations,” he said. “Either we have cash to cover the unbudgeted costs, or we find cheaper fuel.”

Garin said rotational brownouts are unlikely in Metro Manila, adding that outages in the capital region would more likely be caused by plant maintenance or technical issues rather than fuel shortages.

NPC is mandated under the Electric Power Industry Reform Act of 2001 to provide electricity to missionary or off-grid areas, making fuel security critical to power access in remote communities.