In a recent session at the House of Representatives, the chair of the Ways and Means Committee, Albay Representative Joey Salceda, advocated for new laws to ensure that the National Grid Corporation of the Philippines (NGCP) returns an estimated PHP204.3 billion in excess profits to its consumers. Salceda argued that any profits exceeding the permitted threshold should be redistributed to the public, emphasizing the need for a system to reclaim these funds.
He pointed out that the Energy Regulatory Commission (ERC) had set NGCP’s revenue at PHP183.5 billion for the period from 2016 to 2020, yet the company’s actual earnings reached PHP387.8 billion, leading to the significant surplus. Salceda criticized the absence of legal mechanisms to handle such overages, particularly under the Weighted Average Cost of Capital (WACC) framework.
Salceda also drew attention to NGCP’s favorable tax situation, noting it pays only a 3% franchise tax, much less than other utilities like PAGCOR and Cebu Pacific, which pay 5%, or horse racing companies at 8.5%. He suggested that NGCP’s franchise could be revised to include a more equitable tax and profit structure.
To address the issue, Salceda proposed lowering NGCP’s WACC from 15.04% to around 10.3% to meet international benchmarks and ease the burden on consumers. He also floated the idea of a windfall tax on NGCP’s excess profits, which could fund consumer subsidies. He referenced the Electric Power Industry Reform Act (EPIRA) as a basis for reclaiming these profits.
Further reforms suggested by Salceda include aligning NGCP’s cost of equity with its compliance to listing rules, conducting a national security review, transitioning NGCP to a standard tax regime, and setting a fixed rate of return.
Additionally, Salceda raised concerns about potential violations of the Anti-Dummy Law by NGCP, focusing on the issue of foreign control over public utilities. He noted that NGCP, which operates the Philippine power transmission grid, is required to have at least 60% Filipino ownership. However, the company’s ownership structure, with 60% held by Synergy Grid and Development Philippines (SGP) and 40% by China’s State Grid Corp. (SGCC), raised questions about foreign influence.
Salceda highlighted the complex ownership layers of NGCP, suggesting a need for a deeper investigation into the nationality of those with beneficial ownership and control. He also pointed out the presence of Chinese nationals in key positions on NGCP’s board and SGCC’s claim of managing the Philippine grid, which could lead to the forfeiture of NGCP’s franchise if found in violation of the Anti-Dummy Law.
The Anti-Dummy Law prohibits foreigners from managing or controlling entities involved in nationalized activities, and violations could result in severe penalties, including the loss of business rights and assets. Lawmakers have previously expressed worries about foreign control of NGCP, citing risks to national security and energy stability.