TransCo privatization worries

China’s largest power transmission and distribution company, State Grid Corp. of China, finally consolidated its foothold in the country’s power industry following the signing of the Transco Franchise Bill into law the other week.

One of the country’s “crown jewels”, the nation-wide high voltage transmission backbone, will now be relinquished by the National Transmission Corp. (TransCo) to the National Grid Corp. of the Philippines (NGCP), a consortium where the Chinese business behemoth is joined by the Ricky Razon-Walter Brown-led Monte Oro Grid Resources and the Coyiuto-led Calaca High Power Corp.

This latest development has been met with mixed reactions. It appears to be a welcome move as far as the finance sector is concerned as it looks forward to the down payment that the consortium is set to pay for its 50-year franchise.

There is, however, a worried look on quarters who are concerned not only with the overwhelming presence of Chinese business interest in the country’s only power transmission network, but also by the fact that NGCP is a private firm that will have to recover its investments and register a “reasonable” profit from its operation of the country’s power grid.

The Energy Regulatory Commission (ERC) now determines power transmission rates using the a new formula called “Performance-based Regulation” (PBR) rates. This is the same formula used in the most recent rate hikes now being enjoyed by distribution utilities in Visayas and Mindanao.

NGCP, the new Transco, is no longer different from the privately-owned distribution utilities like, for example, VECO of Cebu, CEPALCO of Cagayan de Oro, Davao and Light, and Metro Manila’s Meralco. NGCP is a private business interest and has responsibilities towards its shareholders – which include China’s State Grid Corp.

This piece of news is not yet confirmed but former National Power Corp. president Guido Delgado is reportedly set to assume the presidency of NGCP soonest, taking over from Walter Brown of W. Brown direct marketing fame.

Delgado has been serving as Transco adviser even while he was playing an important role in the circle of close advisers of fellow Cebuano GSIS president Winston Garcia in the recent aborted Meralco take-over bid.

Delgado was Napocor president during the term of former President Fidel Ramos. There is no argument that he is knowledgeable in the fields of power generation and transmission having worked on major power projects in the mid to the late 90s.

The rumored entry of Delgado to NGCP is, of course, creating a lot of expectations for better power transmission services. There are doubts, however, if a Delgado presidency would buoy hopes for lower power transmission rates which account for about 11 percent of our monthly electricity bill from Meralco.

If the rumors are true, Delgado would still have to go to the ERC to ask for his PBR-based transmission rates which are definitely shouldered by power consumers all over the country regardless of who distributes electricity to them.

But Delgado, it is presumed, would have an easier time getting those transmission rate increases. The former Napocor president has always been identified with the head of a self-proclaimed consumer group called “Nasecore”. The group usually opposes power rate hikes.

But there are doubts that its president, a certain Pete Ilagan, would make life hard for his friend Guido Delgado.

We have to wait till the reported entry of Delgado to the NGCP is finally confirmed.

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