In a Senate Committee on Energy hearing on 3 February 2020, former Energy Regulatory Commission chairperson Agnes Devanadera revealed that the weighted average cost of capital or WACC allowed to National Grid Corp. of the Philippines was 15.04 percent which, Senator Risa Hontiveros rightly noted was “almost double the global average of eight percent” for utility firms.

WACC is the extent to which the government allows public service providers can earn profit considering that they have a captured market.

A higher WACC thus permits NGCP a higher profit margin that is collected from electricity users.

On questioning from senators, ex-Energy Secretary Alfonso Cusi recounted issues facing NGCP that had persisted up to now.

Cusi’s key revelation was that 42 percent of NGCP’s huge revenues yearly are retained as dividends to the concessionaire’s shareholders. Thus, NGCP recovered many times over the concession fee through dividends.

He said the long-sought audit would have resolved the concerns on NGCP, particularly the financial and security issues.

“And unfortunately, we were not able to do so. So, if we were asked how vulnerable is the system, we won’t be able to answer that. And that question, as we have said, Mr. Chairman, is a question that lingers in our mind and hopefully answered,” Cusi had indicated.

The profit of the power grid operator reached a stunning P205.928 billion in 10 years which sadly were not reinvested enough on capital expense and debt servicing, thus the power problems.

It was then that ERC has always been made NGCP’s multi-purpose excuse for evading accountability.

A regulatory capture was alleged since the agency under the previous leadership had provided the shield for NGCP amid calls for transparency.

ERC, for instance, should have undertaken periodic reviews on the profit determinant but it sat on its mandate and instead allowed a so-called interim measure on profitability.

ERC Chairman and CEO Agnes VST Devanadera reasoned then the agency was short of experts and needed a third-party auditor while grid owner National Transmission Corp. or Transco had offered to provide the technicians or even to hold the audit for ERC.

Instead, ERC went along with the apparent NGCP scheme for an online check.

The audit would have also addressed issues of vulnerability of the transmission grid and redundancy that NGCP often claims exist but had failed during critical periods when the demand peaks.

Energy officials said the audit would have allowed the government to see the real situation in the transmission network.

The audit will determine the kind of protection that the nation has in its electricity system.

Energy officials said the audit has been sought almost yearly since 2017 but has never happened despite NGCP claiming it is open to audit.

Lately, NGCP again issued a statement saying that it is open to audit but “within the regulatory framework” amid fresh efforts of the Department of Energy to undertake an assessment.

Previously, the energy team of President Rodrigo Duterte had questioned NGCP’s decision to allow the National Security Adviser to undertake an audit of the transmission grid while denying the same to the Department of Energy and the National Transmission Corp.

NGCP even resorted to seeking a court order just to block an audit which the energy officials questioned since the company operates through a franchise that Congress grants that should have made it available for public scrutiny.

The officials resented a situation where a franchise is issued and the one enjoying the franchise will flaunt the authority of the government.

Among the suggestions raised during the inquiry was that the franchise granted to utility firms will have a provision that specifies that the court will not intervene mainly through the issuance of a temporary restraining order.

The previous leadership of the ERC under Devanadera had committed to commission a third party that will hold an independent audit.