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Profit or public service

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During a recent senate investigation into the country’s energy problems, the National Grid Corporation of the Philippines admitted that majority of its income for the years of 2014, 2015, 2017 and 2019 went to dividends for its shareholders.

NGCP is a privately owned corporation created in 2009, through RA 9511. As the franchise holder and transmission service provider, that one company is basically in charge of operating, maintaining, and developing the country’s state-owned power grid.

Going back into history, the country’s power grid was initially managed by the National Power Corporation, created under Commonwealth Act No. 120 in 1936. NPC, or Napocor for the boomers, wholly owned, centrally controlled and managed the generation of power and its transmission in the Philippines from its creation up to the late 1980s.

In June 2001, Republic Act 9136, otherwise known as the Electric Power Industry Reform Act (EPIRA), was enacted to institute reforms in the industry. Major reforms included the restructuring of the entire power industry to introduce competition in the generation sector, change from government to private ownership, and the introduction of a stable regulatory framework for the electricity sector.

EPIRA organized the industry into four sectors: generation, transmission, distribution and supply. It was from this that the National Transmission Corporation (TransCo) was born, created to take over the electric transmission function of NPC and the responsibility for planning construction and centralized operation and maintenance of high voltage transmission facilities including grid interconnections and ancillary services. NPC was retained as a government owned and controlled corporation.

In October 2022, then president Gloria Macapagal Arroyo approved a plan to privatize TransCo through a 25-year Operation and Management Concession Agreement. In the meantime, it served as power grid operator, while its contract was being bidded out. The bidding for the license to run the Philippine power grid was won by the NGCP in 2007, Congress approved the bicameral resolution granting its franchise in 2008, and PGMA signed RA8511 into law, granting NGCP their franchise. On January 15, 2009, TransCo turned over the management of the country’s power grid to NGCP.

That is a sweet privatization fairy tale come true, and if we are to believe those pushing for even more privatization in the power sector, the rise of NGCP would be their idea of a happy ending and everyone would live happily ever after.

Is it still a happy ending we the consumers find out that NGCP, as a private business that was won in a bidding for P3.95 billion in 2007, and started operating in 2009, has shelled out more or less P100B in dividends over the past 10 years?

In the Senate inquiry this week, the NGCP said its net income was P20.3 billion in 2019, of which P15B, or around 74 percent, went to dividends. In 2017, around 90 percent of its P20.6B net income went to dividends. For 2015, the NGCP distributed around 93 percent of its P22.5B net income as dividends. Astonishingly, in 2014, the NGCP reported that its dividends exceeded its net income with P24B being handed to shareholders even if it only earned P22B for the year. That’s a lot of dividend for a P3.95B bid in 2007.

It seems like the happiest ending in this story has been for the businessmen who snagged the deal. As for the consumers, well maybe we might have gotten better service than it would have been, had the national grid stayed non-profit and/or government owned, so I guess that’s ok. We can just console ourselves with the thought that perhaps the power interruptions would be worse, and electricity would be more expensive, had we not sold our national grid to “savior” businessmen who supposedly know better. Them making a boatload of profit for running what is essentially a monopoly at our expense is just part of the deal.

To be fair to the NGCP, it was found in the inquiry that while their dividends are mind-blowingly humongous, their capital outlay was bigger, being P39B in 2019 and 22.8B in 2017, which meant it wasn’t just being milked, but it was spending more on improvements than dividends.

However, the nature of the organization, where the primary focus is profit instead of public service, makes one wonder where all those dividends could’ve been spent on if profit was not a factor. Maybe we’d get an even better power grid, and their projects would’ve been completed expeditiously, instead of being terribly delayed. After all, P100B did go into the bank accounts of investors instead of being plowed back into making our power sector world class. 

Our lack of trust in the capabilities and qualifications of government run organizations is one of the worst side effects of the widespread graft, corruption, incompetence, and nepotism in this country. We can’t trust government, or even our own cooperatives, to run things properly because of all the bad choices previous leaders and managers have made in the past, so we look to businessmen to save us, trusting that they know better, and willing to trade their legal share of the profits for the losses that we have been enduring due to corruption, inefficiency, and mismanagement.

If only there was a way to put the right people in charge of our critical infrastructure, utilities, and government, everything could be so much better. Instead, all we have to choose from at this point is incompetence and corruption, versus legal but hideous profiteering, which is all at our expense, either as taxpayers or captive customers.

Based on the NGCP experience, we will need to choose our poison wisely.*

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