Not a turf war

This is in response to the column “Grid knows no bounds” by Conrado R. Banal III (Business, 9/18/17).

Allow us to discuss the assertions of Banal in sequence:

The National Transmission Corp. (TransCo) used to be a major problematic part of Napocor. Before it was privatized, TransCo was netting profits for the government and the national transmission system was regarded as the “crown jewel” of the energy sector. In fact, TransCo was paying considerable taxes then than after the business was turned over to the National Grid Corporation of the Philippines (NGCP). In 2007 and 2008 when TransCo operated the grid, it paid a total of P19 billion in national and local taxes while NGCP in comparison contributed only P4.46 billion in taxes in 2010 and 2011. A difference of about P7.3 billion annually in taxes.

TransCo wanted to snatch the P52-billion Visayas-Mindanao Interconnection Project (VMIP) of the NGCP. To be clear, Banal’s assertions stand on nothing but conjectures, surmises and guesses done in bad faith imputing ill motives instead of asking for beneficial discourse of the issues. TransCo’s actions on VMIP are merely to ensure that the public and consumers are protected. TransCo is duty-bound to look into the reasonableness of the project as it still retains ownership of the transmission assets including new projects. TransCo is merely looking at all options to best serve the power consumers. The tapping of the Malampaya Fund to develop an energy asset is an option that we have explored because this is the first opportunity where the Malampaya Fund will be utilized for “actual” energy development, when in the past it was used in nonenergy related expenditures such as the Disbursement Acceleration Program declared as unconstitutional by the Supreme Court in the case of Belgica vs Executive Secretary, et al. The Supreme Court ruled that natural energy resources should benefit only energy development.

Verily, NGCP’s money does not come cheap. NGCP currently enjoys a rate of return on capital of 15.04 percent which to our own computation should have been lowered to 11-12 percent. This
is why we have been pushing for the regulatory reset with the Energy Regulatory Commission (ERC) which should have been made in 2016. With that rate of return on capital, NGCP stands to earn a total of P132.5 billion in profit out of its investments or a total of P189.4 billion will be recovered from consumers in 30 years.

Moreover, there have been recurring reports in the past that projects of NGCP have not been implemented in the least cost manner as required by law. NGCP is a natural monopoly being regulated only by ERC through a rate-setting method. Since it is a private entity not subject to government procurement laws, Commission on Audit and/or Ombudsman scrutiny, and that everything it invests is passed on to the consumers, NGCP has no incentive in implementing its projects in the least cost manner. Because the higher it spends, the higher it profits. From 2009-2016, NGCP had already realized a net income of P163.79 billion (most of which already declared as cash dividends). This has already approximated its original investment of P168 billion with more than 16 years left to its concession contract with guaranteed gross revenues of more than P45 billion annually.

Banal and the other opinion writers before him want to reduce the issue to a turf war between a government agency and a private enterprise. It is not. National and public interests are at stake here. After all, NGCP as a franchise holder, its true major stockholders should be the public that grants its franchise. It must be subjected to great scrutiny to prevent market abuse. This is why we plod on.

We are resigned to the fact that we will not be able to match NGCP’s media exposure noting that this has become a property right—“no money, no voice.” NGCP spends more than P300 million in yearly advertising expense, and representation and entertainment expense combined—recouped as operational expenses charged to the consumers, although, as a monopoly, it does not need to advertise and entertain to get customers to choose its service. The customers have simply no choice but to accept and pay for the quality of service that NGCP provides.

MELVIN A. MATIBAG, president and CEO, National Transmission Corp.