TransCo bid winner needs to secure franchise

The winning bidder for the 25-year concession of the National Transmission Corp. (TransCo) will be required to obtain a congressional franchise to operate the transmission company, which is considered a public utility, the Power Sector Assets and Liabilities Management Corp. (PSALM) said yesterday.

PSALM president Nieves Osorio said securing a franchise will be one of the prior conditions to complete the TransCo lease-contract transaction.

The asset management firm is already preparing all the necessary procedures and requirements as it is set to bid out the TransCo concession in September this year.

This as the Energy Regulatory Commission (ERC) released yesterday the decision on the final determination on the so-called smoothed maximum allowable revenue (SMAR) for five years, or for the period 2006-2010.

The approved SMAR, however, was far lower than what TransCo has applied at least for the next four years.

On the first year or in 2006, ERC approved P35.611 billion as against TransCo’s application of P34.9 billion, an increase of P642 million.

But in the succeeding years, or from 2007 to 2010, ERC approved a much lower SMAR for TransCo. The final determination on MAR, however, is better than the draft determination earlier approved by ERC which was set at a flat revenue of P27 billion for the five-year period.

For the five-year period, the difference of the MAR approved by the ERC as against the MAR applied by TransCo is P120.74 billion.

TransCo manager for strategic planning Ed Orencia said they would present the ERC decision to management next week.

"We will decide what to do with the decision, whether to file a motion for reconsideration or accept the decision next week," he said.

The SMAR is one of the areas being looked at by interested investors in bidding for the TransCo lease contract. So far, three prospective investors from Canada, Australia and Thailand that have expressed keen interest in participating in the bidding for TransCo’s concession.

On the franchise, Osorio said under the concession agreement between TransCo and the concessionaire, the transmission company will retain the legal title to all the transmission assets, sell sub-transmission assets to distribution utilities, and take over the business if the concessionaire defaults.