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Govt takeover of NGCP is not a solution

FOLLOWING an unexpected “red alert” for the Luzon grid on May 8, there have been a chorus of calls in the Philippines — primarily led by several senators — for the national government to “take back control” of the National Grid Corp. of the Philippines (NGCP). Two reasons for this have been given: first, because the 40-percent stake of the national grid operator owned by the State Grid Corp. of China “presents a security risk”; and second, because the number of perceived failings in NGCP’s performance violate the terms of its 25-year legislative franchise.

Renationalizing the NGCP is not a solution to any of the real problems the current situation presents, and the warnings of a “security risk” from China’s ownership stake, in the absence of evidence, is a populist red herring.

NGCP has held the franchise to operate and develop the national transmission grid since November 2008, or until 2034, and it can be renewed for an additional 25 years. NGCP is owned by a consortium comprising Monte Oro Grid Resources Corp., Calaca High Power Corp. and the Chinese state-owned State Grid Corp., the world’s largest utility company. Each of the Filipino partners hold a 30-percent stake, giving the company the legally required 60-percent Filipino ownership.

The May 8 incident that triggered the latest round of annoyance with NGCP occurred due to the unexpected shutdown of five power plants supplying the Luzon grid as well as reduced output from three others, leaving a temporary supply shortage of approximately 1,364 megawatts and causing rolling brownouts in some areas. Other problems attributed to NGCP over the past couple of years include delays in completing the Mindanao-Visayas connection, which closes the last remaining gap in the national grid; it was supposed to be fully operational by the end of the March, but is currently only operating at between 5 and 15 percent of its capacity. Two interisland connections in the Visayas have also been delayed, drawing criticism from some officials there, most recently Iloilo Mayor Jerry Treñas. A third-party audit of NGCP operations ordered by the Energy Regulatory Commission (ERC) in 2018 has not yet been carried out, drawing threats of possible regulatory penalties. And finally, NGCP’s reluctance to provide grid connections to new renewable energy facilities has angered many, particularly officials within the Department of Energy (DoE).

The connection between NGCP’s “poor performance” and its Chinese ownership stake has been made most stridently by muckraking journalist-turned-senator Raffy Tulfo. On May 17, following a meeting with Tulfo in which the latter reportedly emphasized that “it is possible for China to remotely access the country’s national grid to sabotage it,” President Ferdinand Marcos Jr. issued a statement saying that the government “was prepared to take back control” of NGCP “if necessary.”

The DoE has also weighed in on the issue to connect NGCP’s current shortcomings to its Chinese ownership in a hearing of the House Committee on Energy last May 16. The DoE presented a proposed amendment to the Electric Power Industry Reform Act of 2001 that would bar “firms controlled or acting on behalf of foreign governments from doing electric transmission business in the Philippines,” and compel those already established to divest their interests within 10 years of the enactment of the law.

These accusatory statements and proposals only address NGCP’s makeup, and do not in any sense whatsoever address the actual problems NGCP’s shortcomings may be causing. The reason for NGCP’s existence in the first place is the government’s failure to competently manage the national transmission grid, and there is no evidence to suggest that it has developed the ability to do so in the years since. Besides the catastrophic effect renationalizing NGCP would have on the nation’s energy supply, it would be a crushing blow to any efforts to attract much-needed investment for development in energy, or in any other sector.

NGCP certainly does need to frankly and transparently address the apparent problems, but the real failure in the issue becoming a public controversy is the poor performance of the DoE and ERC in properly monitoring, and regulating the maintenance of one of the country’s most critical pieces of infrastructure. We would strongly suggest they remind themselves of their actual responsibilities, and put their efforts into meeting them.

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