MANILA – The chairperson of the House of Representatives Ways and Means Committee on Tuesday pushed for legislative reforms to ensure PHP204.3 billion in alleged excess revenues of the National Grid Corp. of the Philippines (NGCP) are refunded to consumers.
During the committee hearing, Albay Rep. Joey Salceda said profits beyond the allowed level should be directed back to the consumers.
“If it’s a franchise that deals with the consumers, then the excess revenues belong to the consumers. And, there should be a process of disgorgement, of repayment,” Salceda said.
He said the Energy Regulatory Commission (ERC) approved revenues of PHP183.5 billion for NGCP from 2016 to 2020, while actual revenues reached PHP387.8 billion, resulting in an excess of PHP204.3 billion.
“There is a PHP204.3 billion that has been computed by the ERC as being in excess of each WACC (Weighted Average Cost of Capital). And, there is no provision in law. That’s the problem,” he said.
Salceda highlighted the NGCP’s unique tax structure, noting that it pays only a 3 percent franchise tax, significantly lower than other utilities, such as the Philippine Amusement and Gaming Corp. (PAGCOR) and Cebu Pacific, which pay 5 percent, or horse racing entities at 8.5 percent.
He also pointed out the lack of an explicit reasonable rate of return mechanism for NGCP, which operates without a legal cap on its profits.
Instead, the ERC regulates its revenues under the Electric Power Industry Reform Act, using the Performance-Based Regulation (PBR) system, which depends heavily on an accurate WACC.
Salceda said Congress has the authority to amend NGCP’s franchise to make its tax and profit structures fairer.
He recommended reducing NGCP’s current WACC from 15.04 percent to about 10.3 percent to align with international standards and provide significant consumer relief.
Salceda also called for a windfall tax on NGCP’s excessive profits, which could be earmarked for consumer subsidies.
He cited EPIRA provisions allowing the disgorgement of excess profits as justification.
Other reforms, he said, include using NGCP’s compliance with listing rules as a benchmark for cost of equity, subjecting it to a national security review, shifting NGCP from a franchise tax regime to a regular tax regime, and establishing a fixed reasonable rate of return.
Foreign control and Anti-Dummy Law violations
Salceda, meanwhile, recommended looking into the alleged violations of the Anti-Dummy Law by NGCP, citing concerns over foreign control of public utilities.
The NGCP, which manages the Philippine power transmission grid, must maintain at least 60 percent Filipino ownership as mandated by law.
It is currently 60 percent owned by Synergy Grid and Development Philippines (SGP) and 40 percent by China’s State Grid Corp. (SGCC).
However, Salceda raised concerns about NGCP’s multi-layered ownership structure that points to substantial foreign influence.
SGP holds 60 percent voting rights in NGCP, acquired through a share-swap deal that gave it 67 percent stakes each in OneTaipan Holdings, Inc. and Pacifica2 Holdings.
OneTaipan owns Monte Oro Grid Resources Corp., which holds a 30 percent stake in NGCP, while Pacifica2 owns Calaca High Power Corp., which also holds 30 percent.
“While the NGCP has denied that it is controlled by the (SGCC) and that it has no executives that are Chinese nationals, its chairman is Chinese, a top official of the SGCC, despite (SGP) supposedly being a larger shareholder than the (SGCC),” Salceda said.
He emphasized the need to apply the Supreme Court’s “grandfather rule,” which examines the beneficial ownership and control of layered corporate structures to ensure compliance with constitutional restrictions.
“A further investigation as to the nationality of the personalities with the beneficial ownership and control of the corporate shareholders in both the investing and investee corporations is necessary,” he said.
Salceda also flagged NGCP’s board composition, which includes Chinese nationals in key positions, and pointed out SGCC’s public claim of having secured the “right to run” the Philippine grid.
He said violations of the Anti-Dummy Law could lead to forfeiture of NGCP’s franchise.
The Anti-Dummy Law (Commonwealth Act 108, as amended) prohibits non-Filipino nationals from participating in the management, operation, administration, or control of an entity engaged in a nationalized or partially nationalized activity.
“For violations of the Anti-Dummy Law, the penalty of forfeiture of such right, franchise, privilege, and the property or business enjoyed or acquired in violation of the provisions of this Act may be imposed,” Salceda said.
Lawmakers have previously raised concerns over foreign control of NGCP, warning of potential risks to national security and energy stability. (PNA)