Burden of fixing the NGCP

After a massive blackout hit Panay Island in January 2024, House Speaker Martin Romualdez suggested that the Maharlika Investment Fund (MIF) buy into the National Grid Corp. of the Philippines (NGCP), which operates the country’s lone transmission network. “Such involvement could lead to improved efficiency, economic growth, enhanced energy security, support for renewable energy integration, and increased accountability in NGCP’s operations,” Romualdez noted.

A year later, his proposal came to fruition. The Maharlika Investment Corp. (MIC), which manages the MIF, signed last week a P20-billion investment agreement that will give it a 20-percent stake in Synergy Grid and Development Philippines Inc. (SGP), which owns 40 percent of NGCP.

Lawmakers probing NGCP’s operations, specifically China’s role in the energy sector, were elated but not satisfied. They said the government should have instead bought the 40-percent stake held by the State Grid Corp. of China (SGCC) for “security reasons,” given the rising tension between Manila and Beijing in the West Philippine Sea. MIC president and chief executive officer Rafael Consing Jr. said they would also be interested in buying the 40-percent NGCP stake owned by the Chinese firm once the opportunity arises, but “we only saw this opportunity at the SGP level.”

Delayed projects

He also emphasized that the objective of MIC’s entry into NGCP was not to take control, “but rather just to be able to achieve some level of influence, and you achieve that by way of your board seats.” The MIC official expressed optimism that buying into NGCP would allow the government to access information on the grid operator’s affairs and enable it to make informed decisions.

Such oversight is needed because of NGCP’s poor track record in finishing transmission projects on schedule, while at the same lining the pockets of its investors with billions of pesos in dividends. In a previous congressional hearing, NGCP assistant corporate secretary Ronald Dylan Concepcion reported that in 2019, the firm declared dividends totalling P15 billion. These were in addition to the P19 billion given to shareholders in 2017 and a much bigger P24-billion payout in 2014.

The delayed projects were already the subject of a congressional investigation. On May 17, 2023, Gatchalian filed Senate Resolution No. 6161 seeking an inquiry into the delays in 16 NGCP undertakings considered to be energy projects of national significance.

Significant setbacks

In a congressional hearing, NGCP said the delay in the construction of the transmission projectevwas caused by right-of-way issues, long permit process and approval delays by the ERC.

The lawmaker expressed his dismay that only six of these, or 37.5 percent, were completed as of March 2023. Worse, out of 168 projects – excluding 56 projects under pre-construction stage in 2023– only 30 were completed while 138 were delayed by about five years, he added.

From 2024 to 2050, NGCP has allotted some P600 billion to finance more than 100 transmission projects across the archipelago. NGCP spokesperson Cynthia Alabanza noted in a press briefing in November last year that most of the projects covered by the funding are “ready for implementation.” These include major grid developments in Luzon such as the second phase of the Western Luzon backbone and the Batangas-Mindoro interconnection project. Seven projects are also in the pipeline for the Visayas and two in Mindanao.

This makes the government’s presence in NGCP all the more critical, to ensure that its projects will not go the way of past important ones that got delayed. In short, the government’s presence is crucial in ensuring that transmission projects are built on time.

Failing in this will have many repercussions. As Gatchalian said of the delayed projects, the failure to complete these on time caused significant setbacks in the development and operation of generation facilities which, in turn, affected the total electricity supply in the country.

Affordable electricity

The delays also caused a multilayered impact, he added, noting that when talking about attracting investments into the country, the power supply is always a fundamental consideration. “How can we attract investors if we don’t have adequate supply and if it’s too costly?” he stressed.

Given MIC’s entry in the grid operator, the burden of ensuring that NGCP performs the task is now for the government to shoulder. It has to prove to the people what critics of the grid operator have been claiming: that the government’s presence can make NGCP fulfill its duty of efficiently serving generation companies, distribution utilities, and other companies requiring transmission and related services through the power grid. It must therefore see to it that efforts toward competent management and accountability are prioritized and transmission projects are built on time to provide enough and affordable electricity to consumers. And if the opportunity comes, it will also be to the country’s best interest if MIC pursues a buyout of the 40-percent stake held by SGCC. Only such a move will cast away all fears of China posing a security threat to the energy sector.