House okays TransCo operator’s franchise

The House of Representatives has approved on second reading the franchise application of the operator of the assets of state-owned National Transmission Corp. (TransCo).

TransCo is the entity that inherited the transmission lines and stations of National Power Corp. (Napocor). The transmission monopoly makes between P18 billion and P20 billion in net profits ($450 million to $500 million) annually.

The transmission charges that electricity users pay go to TransCo. There have been proposals to reduce such charges - and the firm’s profits - to bring down the cost of electricity.

The franchise application of National Grid Corp. of the Philippines (NGCP) is contained in a bill authored principally by Speaker Prospero Nograles

The committee on legislative franchises, chaired by Iloilo Rep. Ferjenel Biron, endorsed the application after three hearings.

A consortium composed of National Grid Corp. of China and two local companies – Monte Oro Resources and Calaca High Power – won the privilege to run TransCo’s assets for 25 years with a $3.9-billion offer.

The consortium has formed NGCP to operate TransCo’s facilities. During the hearings, congressmen noted that the winning bidder could recover its investments in just four to five years of operation.

Under the bidding terms, the winning bidder would pay 25 percent of its offer upon the approval of its franchise. It would amortize the remaining 75 percent.

This means the bidder would use TransCo’s earnings to pay for its offer for the transmission monopoly, congressmen said.

During the hearings, opposition Rep. Roilo Golez of Parañaque expressed apprehension that the country’s electricity transmission lines “might end up in Chinese hands in violation of our Constitution.”

“We in Congress have to make sure TransCo, which operates our power transmission lines and main stations, does not end up in the hands of Chinese investors,” he said.

“This would be in violation of our Constitution. It would also be a big security problem,” he said.

Golez said he is alarmed over the “veto power” of the Chinese on technical operations and plans of NGCP.

He pointed out that NGCP president Walter Brown admitted in one hearing that the Chinese officers led by a certain Dr. Ruan, chief technical consultant, could veto anything on the technical side.

“That was admitted by Mr. Brown, although he was later reversed by (Camarines Sur) Rep. Luis Villafuerte, one of the authors of the bill seeking the franchise for NGCP, who claimed Brown did not understand the legal meaning of veto,” he said.

He said Villafuerte should not be speaking for NGCP or any of its officers.

He stressed that a veto power “is a management function, which no foreign officer in a public utility should exercise.”

“Management should be in the hands of Filipinos, as required by the Constitution,” he added.

Golez also said no Filipino officer in NGCP “has had experience in the power industry.”

“Mr. Brown was into mining, not power generation or transmission. In contrast, the Chinese officers have doctorate degree. Mr. Ruan holds a doctorate degree in power transmission. They will have technical dominance over the Filipino officers,” Golez said.

Agusan del Sur Rep. Rodolfo Plaza expressed similar concerns on the ownership of the applicant company when he examined its capitalization.

    He discovered that the two local partners are capitalized at only P10 million (Monte Oro) and P1 million (Calaca High Power), while the Chinese investors have authorized capitalization equivalent to P14 billion.

    “I can understand that you will soon try to increase your capitalization. How will you do that, by borrowing from your Chinese partners?” Plaza asked.