During the 80s and 90s, the Philippines suffered from insufficient power supply and poor power transmission. Power outages were daily during that period. Congress enacted RA 9136, or the “Electric Power Industry Reform Act of 2001,” also known as the Epira. The law intended to remove monopolies in the power industry through the privatization of the National Power Corp.’s assets, which was intended to provide more efficient services and competitive prices.
Through the Epira, different components of the power sector were restructured. Generation was privatized. The ownership of transmission assets was retained by the government-owned National Transmission Company. The operation, maintenance, and expansion of the grid was privatized through a concession. The 25-year concession to operate the country’s power transmission system was awarded in 2007 to the consortium comprising the Monte Oro Grid Resources Corp., Calaca High Power Corp., and the State Grid Corporation of China, through a public bidding process. This consortium is the privately-owned, National Grid Corporation of the Philippines, which was also granted by the Congress a 50-year franchise to operate, maintain, and develop the state-owned power grid. NGCP’s nationwide operations include 21,000 circuit kilometers of lines, 20,000 transmission towers, and 140 substations.
One of my concerns is that SGCC has the highest stake in the consortium, owning 40 percent of the company, while CHPC and MOGR own 30 percent each. This means that the NGCP is majorly owned by the Chinese, which I see as a threat to national security. This prompted me in August 2016 to file House Resolution No. 280, which reviewed the participation of foreigners in the ownership and operations of the NGCP. Despite several deliberations, of the House Committee on Energy, nothing concrete was implemented. I believe that this matter, being a threat to national security, should be given utmost attention. Therefore, I filed House Bill No. 5209, or “An Act Limiting the Ownership and Operation of the NGCP.” This bill is pending in the Committee on Energy, and I am quite disappointed that it has not progressed.
Another concern is that, most Filipino consumers and businesses are complaining of high power rates these days. One of the reasons why we have high power rates is that most of the fuel used for power generation are imported, meaning, these are subject to global market forces and are impacted by foreign exchange movements. Furthermore, power demand is less relative to those of comparable countries.
There is lack of economies of scale in the construction of our power plants and we have smaller power plants, which implies lower efficiency. The efficiency of power plants impacts power rates because fuel consumption pegs at 40 to 60 percent of power generation cost.
Another cause of high power rates is the value-added tax on system loss. System loss pertains to the electricity bought but is not paid due to technical and non-technical reasons. This means deduction in value, so why pay for VAT? The recently implemented first tax reform, also known as the “Tax Reform for Acceleration and Inclusion [TRAIN],” has increased and will further increase power rates due to the higher excise tax on oil and coal. Lastly, transmission costs are exorbitant due to overcharging by the NGCP.
In 2009, TransCo awarded the NGCP the concession to operate its transmission assets. The concession fee was 3.95 billion dollars, with a downpayment of 25 percent, and 20 equal annual installments. The rate that NGCP is charging now includes the value of TransCo’s assets, which is roughly around P175 billion. In effect, NGCP is earning more than it should. By some estimates, this excess recovery could be in excess worth Php 110 billion between 2011 and 2015. Dividends paid over nine years amounted to more than Php 130 billion, which is a return of almost 120 percent.
I call on the NGCP to take urgent and significant actions to address these concerns on national security and high power rates. As a legislator, it is my duty to protect our country and our people. Expect that I will be vigilant in monitoring these concerns.
