MANILA, Philippines – The privatization of the National Transmission Corporation is not only wrong in principle; it also has serious practical repercussions and ominous developmental and security ramifications, according to the Freedom from Debt Coalition.

In a protest rally today at the Senate, the debt watchdog urged lawmakers to deny the National Grid Corporation of the Philippines (NGCP) a franchise to operate the country’s electrical industry backbones, and to reverse the plan to put in private hands “the Filipino’s last line of defense against the onslaught of privatization in the electric power industry.”

Losses to the Government

In a position paper, FDC argued that the government could potentially lose revenues of some P123 billion to P249 billion if it relinquishes the operation of Transco to the private sector.

“As a monopoly and with operations covering the entire country, Transco surely rakes in handsome revenues for the government. It can earn P375 billion for 25 years with its annual income of P15 billion while it will only earn P126 billion ($1=P42) if the concession contract is bidded at $3 billion or P252 billion if bidded at $6 billion,” the group said.

Consumer Woes

As the Philippine electricity rates continue to be one of the highest in Asia next to Japan, electricity rates are also expected to rise as a consequence of privatization as investors would try to recover their investments the soonest time possible, the group said.

FDC trustee Maitet Diokno-Pascual said that high electricity prices are being used to lure in investors. She said that the situation is due as well to the overpriced excess capacity from the contracts with independent power producers (IPPs) that the Ramos administration entered into during the energy crisis in the early 1990s.   

The group also echoed an observation of the University of the Philippines College of Engineering professors on the contradiction between the EPIRA’s goal to make electricity affordable, with the intention to maximize non-tax revenues through privatization.

“Placing priority on the latter will result in higher electricity prices, when the goal of affordable electricity must take precedence over the latter,” according to the UP professors.    

There is also the lurking danger that consumers are bound to shoulder a large part of Transco’s $1.5 billion liabilities, FDC said.

“Using the Performance Rate Based Methodology (PBR), the NGCP can actually recover its 25-year $3.95 billion investments within a short 7 to 10 years time PBR means that the NGCP can collect their investments in advance from consumers,” the group claimed.

Workers’ Bane

There is also the labor issue, where the job security of 6,000 employees is imperiled, FDC said.

In a coordination meeting between Transco’s workers union, Mintrea, and the NGCP last 22 July 2008 in Davao City, it was discussed that the employees will start working under NGCP, starting November 3, 2008, but their positions and salaries will stay as it were until the end of the 165-day transition period.

At the start of the 166th day, employees are considered NGCP personnel and will undergo 6-month provisionary period.

“NGCP said that its hiring plan is based on what it needs. However, as of the date of the said meeting, the company has no existing table of organization. This means that the job security of its soon-to-be employees is imperiled,” FDC said.

Security Concern

The debt watchdog also said that the issue is not just simply transferring the monopoly or control of the strategic utility from the government to private; placing the 21,319 circuit kilometers transmission lines nationwide with broadband capacity under a private operator is a national security concern.

“Worse, these transmission lines will not just be run by private sector — but that a foreign government, China, will practically co-manage it, virtually transferring the control of the switchboard from the Philippine government to the foreign government via a foreign company – the State Grid Corporation of China, which is owned by the People’s Republic of China,” explained FDC.

Malacañang Connection

It is only after three failed bidding attempts had there been a successful Transco bid. In the December 12, 2007 auction conducted by the PSALM, the consortium of the State Grid Corp. of China, Monte Oro Grid Resources Corporation (MOGRC) and Calaca High Power offered $3.95 billion and won the bid to operate the country’s electric distribution system for 25 years.

State Grid Corp. is China’s largest electricity provider. It ranks 29th in the Fortune Global 500 list of the world’s largest companies by revenue this year. MOGRC is 100-percent owned by Monte Oro Resources and Energy Inc., wherein A. Brown Company Inc. (ABCI) has an 18.47-percent interest. Monte Oro has been associated with businessman Ricky Razon, who runs key ports in Manila and abroad and is a key supporter of President Gloria Macapagal-Arroyo.

The President and CEO of NGCP is Walter Brown, who reportedly has close ties with Diosdado “Buboy” Macapagal, the brother of Mrs. Arroyo.

“Last Line of Defense”

“The issue has spilled onto the political plane, beyond Senate technical legalese. We can only hope that Senators who are opposed to Transco privatization uncover the whole truth behind the controversial bidding of Transco and reverse the privatization process,” the group said.

Marred with inefficient regulation, weak provisions on the anti-monopoly and pro-competition of EPIRA, unabated power rates increase, national security concern and the ugly state of power play we have been witnessing as a product of privatization – letting go of the very “heart” of the whole power system should not only be a question of legal obligation, simply because it is one of the major requirements of the power sector reform program of the government, the group said.

“More than anything else, it is our moral responsibility to protect the interest of the Filipino against the continuing ill effects of private investors drive for profit in the electricity industry,” FDC stressed.

“We believe that the ownership, control and management of the transmission lines should remain in public hands. This is our last line of defense against the onslaught of privatization as we continue to work for a genuine power reform law that can provide us with an affordable, clean, sustainable and renewable energy,” the group said. -30-

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