Mounting violations

The National Grip Corporation of the Philippines (NGCP), the private consortium that holds the franchise and is responsible for bringing the electricity produced by power plants to distribution utilities, has a lot of explaining to do.

During the hearings on the controversial power rate hike, NGCP seemed to play the role of innocent bystander as the Supreme Court and the petitioners have trained their guns mostly at Meralco, and the regulators and other agencies and entities that were in a way connected to the record price surge, such as the Department of Energy, Energy Regulation Commission, Power Sector Assets and Liabilities Management Corp. or PSALM, Philippine Electricity Market Corp.,  Wholesale Electricity Spot Market or WESM, the EPIRA, ask the independent power producers, among others.

In fact, the NGCP had asked the SC to exclude them from the petition filed against the P4.15 per kilowatt-hour power rate increase, saying they were only “dragged” into the case by Meralco.

But is NGCP really that innocent?

SC Associate Justice Marvic Leonen had raised alarm bells on possible constitutional and statutory violations committed by NGCP, as the High Tribunal was about to wrap up its third and final session on the pros and cons of lifting its 60-day temporary restraining order (TRO) that is due to lapse on Feb. 21.

Leonen expressed concern that the chairman as well as the and chief technical officer running NGCP are Chinese as he noted that a foreign national is the one in-charge of monitoring the system, which is a violation of the Constitution and the Anti-Graft and Corrupt Practices Act.

Art 12 Section 11 of the 1987 Constitution provides that “the participation of foreign investors in the governing body of any public utility enterprise shall be limited to their proportionate share in its capital, and all the executive and managing officers of such corporation or association must be citizens of the Philippines.”

That an alien has supervision and control over this task of monitoring the system that is imbued with national-security interest does not seem far-fetched really, given that the 25-year franchise to operate the national power grid was awarded in 2008 to a consortium comprising Monte Oro Grid Resources, Calaca High Power Corp. and the State Grid Corp. of China (SGCC), which has several incumbent and former executives sitting on the NGCP Board.

According to the NGCP website, the Chinese nationals on its board of directors are Du Zhigang, who is director-general and vice president of the SGCC Department of International Cooperation of China; Wen Bo, who is NGCP’s chief technical officer and concurrent director-general of the Philippine Office of SGCC; Ma Ruoxin, who is NGCP chief executive adviser and assistant chief technical officer for system operations; and Lin Xinhua, who is chief administrative adviser and chairman of the Board Audit Committee of NGCP, and a former head of the SGCC Planning Division.

Leonen was probably referring to Wen Bo as the chief technical officer, whom he did not categorically identify in his remarks at the SC.

The SC justice failed to mention it but allowing foreign nationals to be employees of a fully as well as a partially nationalized company such as a public utility which is required to be at least 60 percent Filipino owned is also a violation of the Anti-Dummy Law which carries with it penal sanctions.

Leonen has reason to be concerned, considering the critical nature of NGCP’s job as spelled out in its 25-year franchise, and more so against the backdrop of the deepening tension between Manila and Beijing in the disputed territory in the West Philippine Sea.

Leonen’s line of questioning on price movements at WESM seems to demolish too NGCP’s official position in the SC hearings and in the investigations at the Senate and the House of Representatives that it had nothing to do with the price upsurge during the Malampaya shutdown period, let alone with the continued idling  of the state-owned Malaya thermal plant at that time when it could have boosted supply and tempered prices in the spot market.

Asked by the associate justice why ERC did not have “prima facie” suspicion that something was wrong at the WESM when generation prices started climbing in November, ERC executive director Francis Saturnino Juan replied that the agency had no reason to suspect any irregularity as “there was a reported sufficient supply” of electricity at the spot market.

But Leonen did not buy Juan’s explanation as he wondered aloud why the watchdog agency didn’t find it “strange” that electricity prices had become unusually high at that time.

This adequate-supply argument was the same one taken by NGCP before the Senate energy committee during its Jan. 23 hearing that it shouldn’t be blamed for the continued idling of the Malaya plant during the Nov. 11-Dec. 10 period of simultaneous shutdowns.

At the start, PSALM president Emmanuel Ledesma Jr. said the Malaya plant was not dispatched because it was not instructed to do so by NGCP, which is the system operator.

He said NGCP is the one which determines supply and NGCP never mentioned anything to PSALM regarding insufficiency of supply.

Ledesma told media people that Malaya was available to run during the Malampaya shutdown, but added that NGCP determines dispatch.

But NGCP executives said during the same Senate probe that the grid operator did not tell PSALM to put the Malaya plant online because there was no indication whatsoever of any supply situation at WESM back then.

In an apparent afterthought, NGCP later on issued a statement that it did not consider the Malaya plant for activation during the shutdown period because it was not on the PEMC-provided real-time dispatch (RTD) schedule of must-run units (MRUs), or power plants ready for dispatch in emergency situations.

NGCP likewise maintained its original position that there seemed no reason to harness the Malaya plant in the absence of any supply problem during the shutdown period.

But NGCP’s view that there was nothing wrong at WESM at that time raises the same question that Leonen had tossed to ERC’s Juan, and that is why regulators found nothing strange with the uptick in WESM prices amid an ostensibly adequate supply.

If it is NGCP that tells PSALM how much power to dispatch, then charges that NGCP may have colluded with the generation companies to artificially raise prices may be worth looking into.

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