MANILA, Philippines — Without an approved regulatory reset process, the National Grid Corp. of the Philippines (NGCP) maintained that it adhered to the regulations in place at the time by requesting an interim revenue scheme from the Energy Regulatory Commission (ERC) to ensure the continuity of its operations.
“During the time that NGCP continued working despite the lack of a regulatory reset process, we followed the latest approved rules, since we had no choice as new rules had not yet been put in place,” Cynthia Alabanza, NGCP assistant vice president and head of the Public Relations Department, told the House committee on legislative franchises.
“That’s why we used the old rules and asked for an interim revenue scheme, so the work of NGCP could continue,” she said.
With the regulatory reset process delayed by almost 10 years, Alabanza stressed that NGCP had no choice but to follow the previous rules to keep its business running.
Based on the rules in place at the time, there were particular rules that allowed NGCP to use that regulatory framework wherein consumers would be charged on a staggered
basis so they wouldn’t be overwhelmed, Alabanza explained.
“For every project, we apply with the ERC with that kind of framework,” she added.
For its part, the ERC agreed with the NGCP’s position, admitting there was an absence of rules following its failure to approve the 4th regulatory reset application in time.
“The regulatory reset rules apply for a particular regulatory period. When that regulatory period lapses, there really is a vacuum in the law,” Dimalanta said.
Based on the original timeline, NGCP’s 4th and 5th regulatory reset applications should have covered the years 2016 to 2020 and 2021 to 2025, respectively.
The ERC, however, modified the regulatory reset periods to 2016 to 2022 and 2023 to 2027.
While NGCP filed its issues paper to demonstrate its desire for a reset, Dimalanta stressed that “it doesn’t cure the fact that there were no rules at that time.”
“In 2020, NGCP applied for an interim rate. It’s a recognition that there were no valid issued, approved rates from 2016 all the way to 2020, that’s why they applied for interim,” Dimalanta explained.
She added that when the ERC issued a decision on the interim maximum allowable revenue, its temporary nature was explicitly stated, and a full regulatory reset remained necessary to establish the correct rates.
“That’s why the Commission only passed the interim, because it’s all subject to a full reset,” she explained.
When asked by committee chairman Gus Tambunting what rules NGCP must follow, Dimalanta admitted that the ERC should have resolved the 4th regulatory reset instead of relying on interim arrangements.
“It’s clear that the ERC should have released it. I think it was also recognized that the interim that they’ve applied for in 2020 was only an interim arrangement, not the final rules. It’s all subject to the final action in a reset,” Dimalanta maintained.
NGCP maintains compliance with existing regulations amid regulatory reset delay
Without an approved regulatory reset process, NGCP maintained that it adhered to the regulations in place at the time by requesting an interim revenue scheme from the Energy Regulatory Commission (ERC) to ensure the continuity of its operations.
“During the time that NGCP continued working despite the lack of a regulatory reset process, we followed the latest approved rules, since we had no choice as new rules had not yet been put in place,” Cynthia Alabanza, NGCP assistant vice president and head of the Public Relations Department, speaking in Filipino and English, told the House committee on legislative franchises.
“That’s why we used the old rules and asked for an interim revenue scheme so the work of NGCP could continue,” she added.
With the regulatory reset process delayed by almost 10 years, Alabanza stressed that NGCP had no choice but to follow the previous rules to keep its business running.
Based on regulations in place at that time, there were particular rules which allowed NGCP to use that regulatory framework where consumers would be charged on a staggered basis so they wouldn’t be overwhelmed, Alabanza explained.
“For every project, we apply with the ERC with that kind of framework,” she added. For its part, the ERC agreed with the NGCP’s position, admitting there was an absence of rules following its failure to approve the 4th regulatory reset application in time.
“The regulatory reset rules apply for a particular regulatory period. When that regulatory period lapses, there really is a vacuum in the law,” Dimalanta said. Based on the original timeline, NGCP’s 4th and 5th regulatory reset applications should have covered the years 2016 to 2020 and 2021 to 2025, respectively. The ERC, however, modified the regulatory reset periods to 2016 to 2022 and 2023 to 2027.
While NGCP filed its issues paper to demonstrate its desire for a reset, Dimalanta stressed that “it doesn’t cure the fact that there were no rules at that time.”
“In 2020, NGCP applied for an interim rate. It’s a recognition that there were no valid issued, approved rates from 2016 all the way to 2020, that’s why they applied for interim,” Dimalanta explained.
She added that when the ERC issued a decision on the interim maximum allowable revenue, its temporary nature was explicitly stated, and a full regulatory reset remained necessary to establish the correct rates.
“That’s why the Commission only passed the interim, because it’s all subject to a full reset,” she explained. When asked by committee chairman Rep. Gus Tambunting what rules NGCP must follow, Dimalanta admitted that the ERC should have resolved the 4th regulatory reset instead of relying on interim arrangements. “It’s clear that the ERC should have released it. I think it was also recognized that the interim that they’ve applied for in 2020 was only an interim arrangement, not the final rules. It’s all subject to the final action in a reset,” Dimalanta maintained.
At the hearing, Rep. Rufus Rodriguez of Cagayan de Oro City’s second district told his colleagues that there is no more need to investigate the NGCP, as the latter has always been compliant with the country’s laws.
He cited NGCP’s religiously paying franchise taxes, as confirmed by the Bureau of Internal Revenue as well as by the ERC.
“The BIR (in the House ways and means committee hearing) clearly stated that NGCP has been paying all the tax liabilities of the company, and this was confirmed by BIR chief,” he said, referring to the BIR Commissioner Romeo Lumagui Jr.
Rodriguez, chairman of the House committee on constitutional amendments, also highlighted NGCP’s being “compliant” with its responsibilities under its franchise, as stated by Dimalanta.
“At another hearing, I confirm that what we have seen from our record is that it has been compliant with the three percent franchise tax,” Dimalanta told Rodriguez, referring to the franchise tax granted to NGCP under Republic Act 9511.
“Precisely, that was the issue. NGCP has complied; BIR said NGCP has complied, then why are we here? Are we trying to dissolve the 50-year franchise of NGCP? Is that the reason, Mr. Chairman?” Rodriguez asked Tambunting.
“We have to look at the reasons. In fact, if we see the reasons for delays in the right of way that can never be secured, it stops the project,” Rodriguez told the other panel members as he defended the NGCP from further inquiry into alleged violations of franchise laws.
Rodriguez expressed gratitude to NGCP for completing the MVIP (Mindanao-Visayas Interconnection Project), saying more companies are putting up power generation plants in Mindanao because they can now sell it to Luzon and the Visayas if they have excess capacity.
“Mindanao has been connected to the Visayas in January of 2024; my constituents in Cagayan de Oro, second district would like to thank the NGCP for finally connecting Mindanao to the Visayas and to Luzon,” he explained.
“Why? Because if we need more power from Visayas and Luzon, they can give it to us and if they have excess capacity in Mindanao, we can help the Visayas and Luzon,” Rodriguez added.
The Department of Energy also admitted before the Tambunting committee that delays in transmission projects cannot solely be blamed on NGCP.
“We have problems about right of way. There are cases that have pending ERC approval also. It’s a culmination of everything, like in Panay, there’s an issue with the owner and the DENR,” Energy Undersecretary Sharon Garin pointed out.
Rep. Presley de Jesus of party-list Philreca welcomed Garin’s pronouncements, emphasizing that it is unfair to place all the blame on NGCP for the project delays.
“In short, this is not just solely the fault of NGCP, we just want to make it clear. The problem here is that – we’re not trying to defend NGCP – we’re trying to level the playing field. Because it seems to us all the blame is heaped on NGCP, that is why there are many delays,” he said.