04 December 2007
The Freedom from Debt Coalition (FDC) today urged the members of Joint Congressional Power Committee (JCPC) to stop the Power Sector Assets and Liabilities Management (PSALM) Corporation from bidding the 25-year concession contract to operate the National Transmission Corporation (Transco), stressing that the government could lose a minimum of around P246 billion in potential earnings.
FDC vice president Father Ben Moraleda said that it is irrational on the part of the administration to privatize the operation of a vital and profitable government corporation that is earning more than P15 billion annually.
“Our legislators must intervene in this irrational and anti-people undertaking. Based on its own valuation of Transco, the government could only earn about $3 billion or P129 billion ($1 = P43) for 25 years if the bidding pushes through. Compare this to potential income of P375 billion, the government would lose P246 billion in earnings. Even if Transco could be bidded out at $6 billion based on the projected price of La Costa Corporation—the bidder that did not prequalify—the government would still earn more if it continues to operate Transco. Where is the rationality here?” asked Moraleda.
“It is appalling that the government is willing to lose this potentially huge amount of profit and consequently burden the consumers with inevitable electricity rate increases just to immediately earn $3 billion and pay its multi-billion peso debts arising from power sector projects and/or contracts, a number of which may be illegitimate or tainted with fraud. It is so myopic,” said the priest.
In the first half of this year, Transco profited almost P8 billion. The state-owned firm reported P15.7 billion and P16.2 billion of net income in 2006 and 2005, respectively.
FDC said that the privatization of Transco will merely transfer the monopoly in the power industry from public to private.
“As a natural monopoly and as the biggest public utility, Transco is imbued with public interest. Thus, it must remain in the public sphere and held by public hands. Its privatization must be stopped,” said Father Moraleda.
“The public interest is at stake with the privatization of Transco. We can be held hostage by the private interests/companies that will be operating this utility into agreeing to higher rates they will be imposing on us. Although the transmission sector is a regulated sector, the rate-setting methodology used here allows Transco to earn profits beyond the twelve per cent (12%) return-on-rate base (RORB) limit observed in public utilities,” said the FDC officer.
The FDC also echoed the concerns of some legislators that privatizing Transco poses a threat to national security. It explained that the future concessionaire would only be accountable to its owners and not the public. The winning bidder would virtually hold the entire switchboard of the country and has the power to turn on and off the electricity at its own will, it added.
“It is no wonder why many big businesses and influential families, including the family of Mrs. Gloria Macapagal-Arroyo, are interested to acquire this crown jewel of the government. Whoever operates Transco literally has the control and power,” stressed Moraleda.
The Transco sale is scheduled on December 12 with four prequalified bidders. These are: Monte Oro Grid Resources Corp. (MOGRC) and State Grid Corp. of China (SGCC); Two Rivers Pacific Holdings Corp. and Terna-Rete Electtrica Nazionale S.P.A.; San Miguel Energy Corp. and TPG Aurora BV; and consortium of Citadel Holdings Inc. and Power Grid Corp. of India Ltd. -30-