Regulating the regulators

Planned and conceived way back in 1984, the Mindanao-Visayas Inter-Connection Project (MVIP) finally comes on full stream by the end of this year. The ambitious project to connect Luzon with the two other major islands of the country was first started by the former government-owned National Power Corp. (Napocor) during the term of the late President Ferdinand Marcos Sr. To mark this milestone event, a ceremonial switch-on will be led by his namesake son, President Ferdinand “Bongbong” Marcos Jr. (PBBM).

Fourteen years after being granted franchise to operate the country’s power transmission backbone, the National Grid Corporation of the Philippines (NGCP) fulfills this Marcos’ dream. NGCP assistant vice president and concurrent official spokesperson Atty. Cynthia Alabanza announced in our Kapihan sa Manila Bay news forum last Wednesday the ceremonial switch-on will take place at Malacanang Palace most probably next week.

The P52-billion MVIP is comprised of a 184 circuit-kilometer high-voltage direct current submarine transmission line connecting the power grids of Mindanao and Visayas.

The project benefits consumers by providing a more reliable and sustainable power transmission service that lessens the instances of power interruptions. This also enables energy resource sharing where excess power generated in one region will be transmitted through submarine cable to the other connected region having electricity supply gap.

It took NGCP, a privately owned corporation, to undertake this massive inter-connection project that the debt-stricken Napocor failed to undertake. So when Republic Act (RA) No. 9136, otherwise known as the Electric Power Industry Reform Act (EPIRA) took effect in 2001, it authorized the national government to privatize or sell to the private sector all previously owned and operated assets of Napocor from the generation power plants to transmission, distribution, and supply of the power sector.

But it was only in 2009 when RA 9511 granted the NGCP the congressional franchise to operate, maintain, and develop the country’s state-owned power grid. The NGCP is currently owned by mall chain giant and real property giant SM Group, headed by Henry Sy Jr., in joint venture with the State Grid Corp. of China that owns the 40% of the total shareholdings.

In 2021, Alabanza disclosed, the NGCP undertook the initial public offering (IPO) as part of its franchise commitment to the national government to further strengthen its operations. The NGCP became a publicly listed private corporation, with 30 percent of the shareholdings held by the Synergy Grid of the Philippines (SGPT).

Corporate-wise, Alabanza noted, six Filipinos comprise the ten-man Board of Directors of the NGCP. “We are a Filipino company. 60 percent Filipino-owned. It’s a partnership that works. It’s not perfect but it’s improving,” Alabanza asserted.

Operations-wise, all the stations and sub-stations of the NGCP are being manned and run also by all Filipino engineers and technical crew all over the country, Engineer Redi Allan Remoroza, assistant vice president and head of transmission planning department at NGCP told us at the same Kapihan sa Manila Bay news forum.

Remoroza bared more critical projects aimed at boosting the country’s transmission backbone will be completed by the company this year. In the pipeline, according to Remoroza, include the Cebu-Bohol 230-kilovolts (kV) interconnection, additional new substations and the 500-kV backbone in Batangas. “And many more. Nationwide, every area, we have ongoing projects,” Remoroza cited.

Todate, Alabanza reported, the NGCP has poured in as much as P300 billion worth of total investments of completed projects from 2009 to 2022. The latest of which is the MVIP that targets to double the transfer capacity of the NGCP now reaching 122.5 megawatts (MW), Alabanza cited.

Senators are pressing the Energy Regulatory Commission (ERC) to penalize the NGCP for the reported delayed transmission projects that adversely impact the country’s electricity supply.

“We’re highly regulated. We don’t decide what to build and when to build. We recommend what the system means but at the end of the day is the ERC who tells us what we can,” Alabanza pointed out. She admitted the NGCP projects suffered delays but all other projects of both the government and the private sector also got delayed after the outbreak in 2020 of the COVID-19 pandemic.

Even while awaiting for the completion of the ongoing review of ERC on the fourth and fifth regulatory rate reset of their franchised corporation, the NGCP poured in these capital expenditures projects, Alabanza explained.

The rate reset is a regulatory exercise to check whether the allowed revenues of NGCP, which were approved seven years ago based on which NGCP has been charging to the customers, are still valid and reflective of the current costs. During the reset, the ERC scrutinizes the expenditure items of NGCP and other parameters to make sure that only eligible and reasonable costs are being passed on to the consumers.

Alabanza touted the NGCP’s average transmission rate has gone down to 3.5 percent as of April this year compared to its pre-privatization levels. Thus, the NGCP executive assuaged the public the rate reset on transmission charges would not cause “price shock” to consumers.

By the way, the ERC was also created by the EPIRA to regulate all these privatized and remaining state-run power assets.

ERC chairperson Monalisa Dimalanta earlier bared the commission targets to issue by August its decision on the review of NGCP’s fourth regulatory rate reset, covering the years 2016 to 2021. The last transmission reset completed by the ERC was for the five-year regulatory period covering 2010 to 2015.

The NGCP is apparently having the same dilemma on delayed toll rate “periodic adjustments” of the North Luzon Expressway (NLEX) with its own regulator, the Toll Regulatory Board (TRB).

Obviously, our State regulator agencies need to be regulated to decide with dispatch what is best for public interest and business survival.