THE House of Representatives may revoke the 50-year franchise granted to the National Grid Corporation of the Philippines (NGCP) if it will not upgrade its system and spend part of its earnings on interconnecting the power grid of the country’s major islands, an administration lawmaker warned yesterday.
Camarines Sur Rep. Villafuerte said Congress needs to decide on whether to alter or amend the NGCP’s franchise agreement “or to revoke its franchise altogether and award it to a much better concessionaire.”
Villafuerte said the result of the comprehensive performance review of the NGCP being conducted by the Department of Energy (DOE) would help enlighten lawmakers “on what legislative action to take to address the subpar performance of the country’s sole power grid operator.”
Villafuerte made the call as he underscored the need to meet government’s target of achieving 100 percent household electrification by 2028 and its goal to deliver cheaper and more stable and accessible electricity to consumers.
He said the DOE’s ongoing performance review of NGCP is important in light of the crippling power outages believed caused by the NGCP’s “failure to fully expand as committed its nationwide transmission system on which gencos (generation companies) and DUs (distribution utilities) depend on to deliver electricity to our people.”
“We need answers to these questions: Will reforming or amending the over two-decade-old EPIRA be enough to, for example, prevent regulatory capture that has apparently allowed the NGCP to funnel most of its corporate profits into dividends for its owners instead of into capex (capital expenditure) to expand and upgrade its physical or fixed assets and worse, collect higher electricity charges even for its still-unfinished transmission projects?”
“Or will the Congress have to amend the exclusive concession agreement that the NGCP acquired from the government in 2009 to require it to pay a higher franchise fee or corporate income tax? Or to compel it to meet its warranted deliverables, if not revoke this deal altogether for its apparent contract violations?”
The lawmaker urged the DOE to quickly complete its NGCP performance audit to allow Congress to decide which actions to take “to reverse the below par performance of our lone power grid operator in terms of preventing major power disruptions, compel it to complete its transmission projects as scheduled and spend bigger on interconnecting our major islands.”
“Otherwise, if we do not find such a makeover possible in the NGCP franchise or if there is resistance from the operator to these pro-consumer reforms, then the Congress may have to consider revoking its 50-year franchise and awarding it to a new concessionaire that can deliver much better services to our people,” he said.
Villafuerte said industry experts believe that NGCP had secured a concession deal that was skewed in its favor because it was able to bag this highly profitable exclusive contract for just a reported $3.95 billion or about P172 billion (at the then dollar-peso exchange rate of P43.75), with NGCP coughing up a down payment in dollars equivalent to P46 billion.
The balance of about P127 billion was to be paid in installments, with interest, over a 20-year period.
He said NGCP bagged that concession deal for just that amount ostensibly because the agreement had committed the firm to upgrade and expand the national transmission backbone or interconnect the major Philippine islands.
A consortium owned 60 percent by the Sy-controlled Monte Oro Grid Resources Corp. and the Coyiuto-led Calaca High Power Corp. and 40 percent by the State Grid Corp. of China (SGCC), was able to obtain the 50-year franchise from Congress and a concession agreement for 25 years and renewable for extension of another 25 years.
Last May, Energy Undersecretary Sharon Garin urged her former colleagues in Congress to review the NGCP’s franchise to operate and manage the country’s power transmission lines, saying it is responsible for “80 percent of the country’s electricity problems.”
Garin, a former party-list representative, said the NGCP’s December 1, 2008 franchise could be the “most generous” one granted to a private entity, noting that the concession agreement “is very much in favor of the franchisee.”
The DOE is proposing to amend the Electric Power Industry Reform Act (EPIRA) of 2001, saying 80 percent of the country’s electricity will be resolved once it is done.
Villafuerte said the Executive department and Congress “must give paramount attention to accelerating the interconnection of our islands from north to south via the national power grid, so as not to put off track the President’s lofty target of attaining 100 percent household electrification by the time he leaves office in 2028.”
He said the NGCP’s alleged failure to keep up with its transmission development and interconnectivity program for the country is standing in the way of the President’s full-electrification target, given that the President, himself, revealed in his second State of the Nation Address (SONA) the undue delay in the concessionaire’s 68 transmission projects, including those in the vital Mindanao-Visayas and Cebu-Negros-Panay grids.
Government data show that the 68 delayed transmission projects mentioned by the President in his July 24 SONA covered 36 projects in Luzon, another 21 in the Visayas and 11 more in Mindanao – with a combined P231 billion-worth of supposed investments by NGCP between 2009 and 2019.
It showed that 31 of these delayed projects worth P22.705 billion in total were listed under those approved in the third regulatory period (TRP) or rate reset period, while the 37 others totaling P208.34 billion in supposed investments were listed outside of the TRP.
One of the 37 delayed transmission projects is the Pagbilao EHV Substation Project, which is the southern portion of the 500-kiloVolt (kV) transmission backbone from Tayabas, Quezon to Naga, Camarines Sur.
