Senate OKs franchise for national transmission grid

MANILA, Philippines - The Senate on Tuesday approved on final reading the franchise of the National Grid Corp. of the Philippines (NGCP), paving the way for improvements in the country’s dilapidated transmission system. Voting 14-4, the Senate granted a 25-year concession to the NGCP, a consortium led by State Grid Corp. of China, Monte Oro Grid Resources Corp. and Calaca High Power. The Power Sector Assets and Liabilities Management Corp. awarded the contract in December 2007 for $3.95 billion, effectively privatizing the National Transmission Corp. (TransCo). Explaining his negative vote, Senator Aquilino Q. Pimentel, Jr. said the franchise goes against the national interest. He added that the government had privatized the TransCo even in the absence of proof that it would benefit the country. "I don’t think these [advantages] have been demonstrated beyond doubt." Under the franchise, the NGCP may not lease, transfer or sell the rights and privileges to third parties without first seeking congressional approval. The company is also barred from engaging in anti-competitive behavior such as price or market manipulation. The NGCP will pay the government a franchise tax of 3% of its gross receipts from operations. It must also submit to Congress an annual report on its operations and finances. But the Freedom from Debt Coalition said surrendering control of the national grid was biggest blunder the state had committed in liberalizing the power industry. "Because transmission is a natural monopoly, whoever gets hold of it is bestowed with monopolistic power. And monopoly in business means not only economic power but also political power," the group said in a statement Tuesday. Regulators approved the incorporation of the NGCP in February under a 60-40 ownership structure in favor of Filipinos. Chinese investors own 40% of the company in compliance with constitutional limits on foreign ownership of public utilities. House Speaker Prospero C. Nograles, one of the main authors of the bill, earlier said the measure had been prioritized given the need to develop the country’s power infrastructure. He cited the need to rehabilitate the country’s aging transmission system, adding that the government does not have the money to do that. He noted that under the franchise, the NGCP can start restoring the country’s transmission system by modernizing, repairing and expanding the TransCo’s dilapidated equipment. The House approved the franchise on Aug. 6. — Bernard U. Allauigan, BusinessWorld