Does ERC have the right to extend it? Because the law says it’s 10 years. It’s a franchise and it should be Congress that should be asked for an extension.

The House of Representatives warned yesterday it can cancel the franchise granted to electricity network concessionaire National Grid Corp. of the Philippines (NGCP) as the chamber’s committee on energy said “it cannot turn a blind eye on possible violations in the franchise agreement by any player in the energy sector.”

House panel chairman Marinduque Rep. Lord Allan Velasco said Congress has the power to revoke the franchise of any player in the energy sector amid the refusal of NGCP to comply with its mandate to hold an initial public offering (IPO).

Sen. Sherwin Gatchalian, Senate Energy Committee chairman, for his part, estimated the dividends accumulated by the grid operator had reached more than P160 billion in the past 10 years.

He explained the spirit of NGCP’s franchise is to go public.

“When the IPO is delayed, all income goes to NGCP. The public gets nothing,” he said.

“Under the law, the House panel has the power to grant, review or revoke any franchise agreement,” Velasco told the Daily Tribune.

“We share their vision of providing adequate, quality and reliable electricity supply to consumers in an environment that allows market players to participate on a level playing field fair and square,” Velasco noted.

According to Velasco, the House energy panel will again invite officials of the NGCP in a hearing to address the concerns raised by members of the committee in relation to commitments specified under its franchise.

“In the exercise of their mandate, members of the Committee on Energy are also willing to discuss with industry players issues confronting them to help them address complaints impending the full implementation of the terms of the franchise agreement,” Velasco explained.

I don’t think it’s an acceptable reason and the question is if they did something as preparation, but there’s none.

“Hopefully, this time, NGCP will be able send officials who are in a position to respond to the questions of committee members,” he said.

The House Committee on Energy Secretariat indicated the hearing on the matter will be held in the fourth week of November.

State-owned operator of the electricity grid National Transmission Corp. (Transco) has rejected NGCP’s justifications for its failure to abide by the law to conduct an initial public offering (IPO) after 10 years of operation.

In an interview with Daily Tribune, Transco president and chief executive officer Melvin Matibag said NGCP’s reasons in seeking further delay in its IPO were unacceptable.

The company only filed its petition November 2018 or two months before the supposed IPO.

The NGCP, in filing a petition before the Energy Regulatory Commission (ERC) to extend the grace period for its IPO plan, cited the arbitration case against another government firm, Power Sector Assets and Liabilities Management (PSALM) Corp. that caused a delay in the regulatory reset or the determination of their profit by ERC. It also pointed to section 8 of Republic Act 9511, or the law that granted NCGP’s franchise, as not having implementing rules and the timing of the IPO is at the sole discretion of the NGCP board based on sound business judgment.

“No, it’s not. Because if you will make a reason for delayed regulatory reset, they have weighted average cost of capital (WACC) at 15.04 percent which makes the IPO favorable, because you can value this at a higher rate,” Matibag said when asked by Daily Tribune if NGCP gave a rational explanation on their non-compliance with the mandated IPO.

“So, I don’t think it’s an acceptable reason and the question is if they did something as preparation, but there’s none,” he added.

Earlier, he said Transco already expressed opposition to NGCP’s attempt to further delay the IPO, but ERC junked the petition. A motion for reconsideration is now pending.

Under RA 9511, NGCP is mandated to follow the concession agreement, which stated that it should offer at least 20 percent of its outstanding capital stock to the public 10 years after it started operations on 15 January 2009.

The House Committee on Energy threatened in September to revoke the legislative franchise granted to NGCP for its failure to implement the IPO.

House panel vice chairman PBA partylist Rep. Jericho Nograles said the delayed mandatory IPO is a major concern since the concession was awarded some 10 years ago.

“There are issues raised against officials that could be plunderous,” Nograles noted.

NGCP should have launched its IPO last January. Matibag said the public and the government were to be deprived of P4 billion every year if NGCP continued to delay its IPO.

Matibag stressed that NGCP did not prepare for the IPO — noting that the company only filed its petition in November 2018 or two months before the supposed IPO.

“They have no preparation. They did not put anything or any reason in their application for extension,” Matibag explained.

“Another issue: my question is, does ERC have the right to extend it? Because the law says it’s 10 years. It’s a franchise and it should be Congress that should be asked for an extension,” he added.

“My position is that ERC has no authority to extend it… It should be Congress,” Matibag said.

The Transco chief maintained that apart from the deprivation of the public and the government to invest at NGCP, the delayed IPO also dispossesses transparency.

“More than that (deprivation to invest) is the ability of the government to know what is happening. Right now, there is no public or government representation,” he lamented.