There’s a big possibility that President Rodrigo Duterte will subject the National Grid Corporation of the Philippines (NGCP) to a regulatory audit by the Commission on Audit (CoA).
It’s to scrutinize the entertainment fund of NGCP, now ballooning to P4.4 B, that may have been shouldered by consumers over the past decade, Tribune sources claimed.
During the weekly digital show “Straight Talk” of Daily Tribune, Energy Assistant Secretary Gerardo D. Erguiza Jr. disclosed receiving a letter from National Association of Electricity Consumers for Reforms Inc. (Nasecore) president Petronilo Ilagan, requesting the president to command the Energy Regulatory Commission (ERC) and the CoA to look at the NGCP use of its revenues.
“Yes. I talked to Mr. Pete Ilagan about this and he confirmed that the letter was indeed sent to the Office of the President and we were advised on that letter also. He confirmed that there’s a request for an audit, requesting or to direct the ERC to do an audit. Historically, he told me that this has been done before,” Erguiza said.
Ilagan was pertaining to a Supreme Court (SC) decision ordering ERC to review the unbundled rates of Manila Electric Co. (Meralco) to ensure that consumers pay “in the least cost manner”.
Erguiza added that the DoE supports the regulatory review, as the mandate of the DoE is to see that the interest of the consumers is protected.
“So, anything that will protect (the consumers) and that is for the best interest of the consumers then DoE is behind it. We hope that it should happen because, as explained to us, it already happened in the past. It is acceptable as far as we’re concerned,” he said.
The request for audit was sought by Ilagan after Senator Risa Hontiveros disclosed that NGCP has shelled out P4.4 billion in “entertainment fund” that, according to Ilagan, is unacceptable.
He said it is not included in the allowable expenses (payroll, operation, and maintenance, debt servicing, or capital expenditures) of a regulated entity.
Even in the form of a donation, Ilagan claimed that this is not an allowed expense, unless the amount the NGCP donated comes from its profit. He said that it’s the right time that the NGCP is audited.
“This is one way to lessen the cost of energy paid by the consumers, should the NGCP be audited on over recoveries of profit. By means of a regulatory audit, we will establish a just and reasonable rate for the NGCP. And the best agency to do this to NGCP is CoA, not ERC,” Ilagan maintained.
Securing mandated IPO
Meanwhile, NGCP has started to secure its initial public offering (IPO) required by the government, 12 years after it gained its 25-year franchise as an electricity network operator in the country.
In an interview, Investment and Capital Corporation of the Philippines (ICCP) president and chief executive officer (CEO) Valentino S. Bagatsing, said NGCP is currently facilitating its application to participate through the IPO.
“As a natural monopoly with a government franchise, it is (a) great news that NGCP is finally pushing through with its IPO as required by the franchise-wide dispersion of its shares, especially to small Philippine investors. It will be a confidence boost towards deepening the capital markets,” Bagatsing told DAILY TRIBUNE through a Viber message.
The ICCP is a licensed investment house that provides investment banking advisory services to its clients.
Based on the ERC ruling, which oversees NGCP, Section 8 or the Dispersal of Ownership states mandates that grantee of the franchise “shall list, subject to the requirements of the Securities and Exchange Commission (SEC) and the PSE (Philippine Stock Exchange), and make a public offering of the shares representing at least 20 percent of its outstanding capital stock or a higher percentage that may hereafter be provided by law within 10 years from the commencement of its operations.”
Republic Act (RA) 9511, passed on 1 December 2008, had granted 25 years to NGCP in running the country’s electricity transmission backbone.
“As one of the oldest Independent Investment houses in the country, ICCP welcomes this development of allowing the public to participate through the IPO. We laud NGCP and its financial advisors in their efforts to democratize ownership in one of the country’s vital strategic assets,” Bagatsing noted.
Further, Bagatsing also explained that the sole grid operator has already appointed its advisers to finally heed its mandate to complete its IPO, although 12 years delayed.
“I think the ERC is already pressuring it. So likely it’s just timing it,” Bagatsing said.
Over the weekend, National Transmission Corporation (TransCo) president and CEO Atty. Melvin Matibag claimed that NGCP has no reason to continue delaying a mandated IPO.
“They were never penalized for the two years delay. TransCo has been constantly telling NGCP of its obligation to do IPO. Also, TransCo sent several letters to ERC to compel NGCP to do the IPO,” Matibag said in a phone message, adding that regular reporting to JCEC (Joint Congressional Power Commission) on the matter was done by TransCo and they have also intervened on the case involving another issue hounding NGCP.
We laud NGCP and its financial advisors in their efforts to democratize ownership in one of the country’s vital strategic assets.
Matibag, however, said efforts by TransCo to press NGCP were “denied” by ERC, saying that “TransCo has no personality to participate in the case”.
With over a decade-long preparation, Matibag said the NGCP should have done what was required of it, noting that the delay was a clear violation of its 25-year concession agreement.
‘Ilaw’ enlightens JCEC
On Monday, non-profit organization “Mothers for Peace,” through its “Ilaw sa Tahanan Campaign” has asked the intervention of Joint Congressional Energy Commission (JCEC) chairperson Senator Sherwin Gatchalian to compel NGCP to do an initial IPO.
“Under its franchise, Republic Act 9511, as implemented by the Energy Regulatory Commission, the National Grid Corporation of the Philippines is mandated to do an Initial Public Offering of at least 20 percent of its shares to disperse ownership of an undisputed monopoly in a nationally critical business as the transmission of electricity in the Philippines. Allowing the consuming public to have a significant stake in NGCP would improve transparency and corporate governance,” according to the letter of the group’s lead convener Irene M. Santiago.
“We urge your immediate action on this critical issue of concern to millions of Filipinos, including all the mothers united in this “Ilaw Sa Tahanan” campaign,” she added.
In an order dated 10 March, the ERC ordered the NGCP to complete the listing process for a $1-billion maiden offering within six months, which means NGCP should be trading shares at the PSE by September.
If by then NGCP still fails to comply, Matibag said “Congress may revoke (NGCP) franchise” for allegedly repeatedly violating the agreement.
“The Commission hereby requires NGCP to complete within six months from the date of receipt of this order its IPO requirement and ultimately make a public offering of its shares in compliance with… R.A. No. 9511 (or the act granting a franchise to the NGCP),” the ERC said.
