[ANALYSIS] The sad paradox of our grid operation with NGCP

The performance of the National Grid Corporation of the Philippines continues to disappoint. It has actually brought results that are far from the claimed benefits envisioned by the EPIRA.

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The decision was also reached after three of the five commissioners of the ERC, namely Alexis Lumbatan, Floresinda Baldo-Digal and Marko Romeo Fuentes, okayed the maximum allowable revenue of P335.78 billion for NGCP from 2016 to 2022 using the “As Spent” approach and adopting a weighted average cost of capital of 11.33%.

MAR is the maximum amount of revenue that NGCP is allowed to collect annually from transmission charges, while “Rate Reset” is about the comprehensive review of NGCP’s past performance, its operational and capital expenditures, and its projected investments for the upcoming regulatory period.Deregulation challenges

Moreover, there are observed inherent fallacies and persistent criticisms attributed to hound the privatization school of thought like the Washington consensus promoted in developing countries during the 1980s and 1990s. As such, profit-driven models are like double blade swords. They have incentivized cost-cutting measures or led to financial instability to private operators that in the end compromised grid resilience.

The organizational composition of the regulatory body is also a matter of concern. If it is composed of a few staff with relatively little expertise, armed with scarce resources to regulate, and managed by a decision-making body that possibly has only one or two professionally trained expert in the effective regulation of a private monopoly in electricity transmission such as the NGCP, there is trouble.

Early this year, lawmakers were alarmed to find out potential threats on national security posed by NGCP’s heavy reliance on Chinese technology in the operation of the grid and equally alarmed with the limited oversight powers the Philippine government over the facilities. They were especially alarmed over NGCP’s use of the SCADA system supplied by the NARI Group Corporation, a Chinese IT infrastructure provider .

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