DOE lauds House okay of Transco bill

Energy Secretary Vincent S. Perez hailed the House of Representatives for working overtime to pass the National Transmission Co. (Transco) franchise bill.

"We are pleased that our legislators saw the urgent need for the passage of this priority measure. We thank the lower House members for spending the whole evening deliberating on the issues surrounding the Transco bill," Perez said.

Transco is a spin-off company handling the operation and maintenance of the National Power Corp.’s (Napocor) transmission assets.

Perez said this is a positive step towards reforming the country’s power sector. "The Transco bill is an essential component in attracting serious, qualified and experienced bidders that will improve and expand the country’s transmission network," he said.

Following a marathon session that lasted until 6 a.m. yesterday, the House of Representatives by a vote of 112 to 25 approved the measure. The bill will now go up to the Senate.

Perez said the passage of the bill, which grants franchise rights to Transco, "is a major move towards alleviating the public sector deficit." He said the privatization of the transmission assets is expected to fetch some $4 billion to $5 billion in investments. The move will also help generate some $500 million in annual savings on financing charges.

The privatization also opens the door for the entry of the needed capital for the creation of a world-class transmission network in the country. A modern network, he said, is badly needed to support the country’s economic and industrial growth, and to ensure a consistently efficient supply of electricity throughout the country.

Perez also lauded the House version of the Transco bill, saying the version "allows the government to keep the ‘Crown Jewels’ – meaning our transmission assets – while optimizing investment and revenue opportunities leasing them to a private sector concessionaire".

"It is like the government having its cake and eating it too," he explained.

"What is good about this is that consumers also get to share in the cake," Perez added. He explained that this is because the privatization proceeds translate into 47.4 centavos per kilowatt-hour on all sales from 2003. The amount could serve as a buffer or hedge against any possible hike in electricity rates, he said.

Speedy action

Perez also cited the action by the House, saying the passage of the bill and its imminent approval by the Senate "will mean a lot of savings for the country."

The Napocor has been losing an estimated P25 billion each year, Perez said. This is why President Arroyo has been calling for the early passage of the Transco bill because for every year that the privatization is deferred, the Napocor incurs added costs of P50 billion, he added.

The P50 billion includes foregone savings of P25 billion in financing costs plus P25 billion in Napocor losses, he explained.

Perez also said the move by the House makes certain the success of President Arroyo’s privatization strategy for the transmission assets. "If this does not succeed, the government would have to scrounge for $5 billion," he added.

The energy chief took note of the existing power problems of the country due to lack of infrastructure development in this sector.

He cited a study made by the Japan Bank for International Cooperation (JBIC) which shows that the Philippines is one of the countries in Asia that experiences frequent power outages.

The JBIC study, he said, noted that the number of power outages and interruption in the Philippines is 10 times the rate in Thailand and 100 times the rate in Japan.

Although not all of these outages were attributed to transmission constraints, the study said a fully-operational and reliable transmission network could "localize" the problem and limit the power outage in certain areas.

"Foreign investment and domestic development would be negatively influenced by the loss economic activity caused by outages. Losses caused by the outages may slow the economic growth of the Philippines," the JBIC study said.