NGCP faces investigation over ownership, revenues

A COMMITTEE at the House of Representatives on Tuesday recommended a full-blown investigation to determine if the National Grid Corp. of the Philippines (NGCP) has violated the anti-dummy law and to refund more than P204.3 billion in alleged excess revenues due to possible regulatory lapses and tax exemptions.

During the hearing of the House Committee on Ways and Means, panel chairman and Albay 2nd District Rep. Joey Salceda said the NGCP had excess revenues and cited the need for reforms to address issues unique to the corporation and to protect Filipino consumers from excessive costs.

In a presentation, Salceda revealed that while the NGCP’s approved revenues by the ERC were only P183.5 million, the grid’s actual revenue is P367.8 billion, or an excess of each Weighted Average Cost of Capital (WACC) of P204.3 billion, with no provision for a refund.

“Ever since I became a congressman, almost every law I pass that pertains to regulated industries, I always make sure that anything above WACC belongs to the people or belongs to the state. If it’s PPP (public-private partnership), it belongs to the state because they’re actors on behalf of the state. If it’s a franchise that deals with the consumers, then the excess revenues belong to the consumers, and there should be a process of disgorgement, of repayment,” Salceda said.

He also pointed out that NGCP is the only major player in the power sector that does not pay corporate income tax, value-added tax, and real property tax and instead pays only a 3 percent franchise tax, the lowest among utilities with legislatively imposed rates.

Unlike its predecessors — the National Power Corp. and the National Transmission Corp. — the NGCP’s income tax exemption does not come with conditions, as Napocor was mandated to reinvest its returns for expansion, while TransCo was required to remit net profits to the Power Sector Assets and Liabilities Management (Psalm) Corp.

NGCP, according to Salceda, is exempt from income tax without any stipulation for reinvestment or public benefit, while its revenues are regulated by the Energy Regulatory Commission under the Electric Power Industry Reform Act or Epira using a Performance-based regulation system.

“Can Congress still amend the NGCP franchise to make its tax and profit structure fair? Yes. Section 2, terms and conditions. This franchise shall be for a term of 50 years from date of effectivity. It is granted and unconditionally shall be subject to amendment, alteration or repeal by Congress when the common good so requires,” Salceda said.

He also raised NGCP’s ownership structure and governance during the hearing, suggesting that the grid has “foreign influence” despite it being 60 percent owned by Filipino firms and 40 percent owned by the State Grid Corporation of China.

According to regulatory disclosures, while NGCP is 60 percent owned by Synergy Grid of the Philippines (SGP) and 40 percent owned by the State Grid Corporation of China, it has two additional layers of subsidiaries for its indirect ownership of NGCP.