How should NGCP carry out its franchise obligations?
ILOILO City – The National Grid Corporation of the Philippines (NGCP) has come under scrutiny following a fourday blackout in Panay Island and parts of Western Visayas.
What law exactly governs the NGCP’s franchise? How should it carry out its service to the franchise coverage? And how did NGCP secure its franchise?
The NGCP’s authority to transmit electricity to power plants, substations, and other power utilities was fulfilled with the passage of Republic Act (RA) 9511, or An Act Granting the NGCP a franchise to engage in the business of transferring power through high-voltage backbone systems, in 2008.
Under its terms and conditions, the franchise is good for 50 years, unless Congress repeals, amends, or alters it “when the common good so requires.”
During the period of operation of its granted franchise, at least 60 percent of the capital of NGCP shall be owned by Filipinos.
The NGCP is also mandated to comply with the Constitution and existing laws on foreign ownership and management of public utilities.
Under the manner of operation of its system, NGCP is mandated to ensure that its transmission system, grid, and other facilities are maintained “at all times under industry standards.”
Under RA 9511, t he President can temporarily take over and operate the transmission system or its subtransmission systems operated and maintained by the NGCP.
The President can even temporarily suspend the facility’s operation “in the interest of public safety, security and public welfare.” He is also authorized for the temporary use and operation by any government agency for the use of the said transmission system and sub-transmission systems for a certain period.
Before it became NGCP, the controversial transmission system was operated and maintained by the National Transmission Corporation (Trans Co ), which is a government- owned and controlled corporation. TransCo was then responsible for the transmission of electricity from power plants to distribution utilities nationwide.
In 2001, Congress enacted the Electric Power Industry Reform Act (EPIRA) or Republic Act No. 9136, which aimed at restructuring the country’s power sector and promoting competition, efficiency, and private sector participation.
During the administration of former president Gloria Macapaga l - Arroyo, t he government initiated the privatization of TransCo. It eventually issued a concession for the operation, maintenance, and expansion of the country’s power grid through a public bidding process. The Philippine Constitution limits foreign ownership to at most 40 percent.
The consortium composed of the State Grid Corporation of China (SGCC), Monte Oro Grid Resources Corporation, and Calaca High Power Corporation emerged as the winning bidder.
Monte Oro, which has a 30 percent stake, was a company formerly owned by Enrique Razon. It was eventually acquired by OneTaipan Holdings of Henry Sy Jr. Calaca High Power is a company owned by Robert Coyiuto Jr.
In January 2009, NGCP was officially established as a result of the bid by the consortium. SGCC holds a 40 percent stake in NGCP, while the remaining 60 percent is owned by the two Filipino companies.
The concession deal, which was considered the biggest privatization effort in the country, was worth $ 3.95 billion./