State-run National Transmission Corp. (TransCo), owner of the country’s power transmission assets, said on Thursday that system operator National Grid Corporation of the Philippines (NGCP) has violated the concession agreement by installing telecommunication facilities along the grid without the consent of TransCo.
“When we took over the administration of TransCo we got hold of information that telecommunication sites using government transmission facilities [i.e. Substations, High Voltage Towers/Poles and Transmission Lines] have been installed around the country as telecommunications backbone,” TransCo President and CEO Melvin A. Matibag said in press briefing on Thursday.
“We are not saying that is not allowed, but they need a consent. We must know first. That is our mandate. That is for the protection of the Filipino consumer. Why? Because any related business, according to the EPIRA law, should go to the savings,” he said.
“These telecoms facilities were constructed under the name of NGCP with building permits acquired for the purpose of “construction, installation of equipment shelter and maintenance of communication facilities. The government was never informed of these installations by NGCP,” Matibag said.
“The telecommunications facilities that were put up have been tested for a full-blown 4G operations costing billions,” he added.
Under the EPIRA law, NGCP should not earn from any related business, and that 50 percent of the earnings should go to the consumer, and 50 percent goes to the owner which is TransCo.
“There is a violation of the EPIRA law, violation of the concession agreement, and deprivation of the government and the public of a fiber optic network that could have delivered connectivity if government agencies facilitated disaster response and advanced government information system,” Matibag noted.
Matibag said the government planned to use the existing national fiber optic facility embedded in the grid, but the NGCP has taken an adverse stance on the matter.
In 2011, The Department of Science and Technology (DoST) project in using the transmission assets for its “iGovernment Philippines” was supposed to set up a secured government-shared network for the (1) deployment of government information systems, (2) facilitation of disaster response and (3) provide government agencies with connectivity.
NGCP, after ignoring for months several request letters from then TransCo President Rolando Bacani, relaying the said government project, rejected the proposed government shared network claiming that they must maintain exclusive use of the existing fiber optic network of the grid under concession,” Matibag said.
It took NGCP five months to answer the government’s multiple requests, only to eventually reject the idea, Matibag said. Since then nothing was heard of the government’s or the DOST’s fiber optic network.
“However, we received reports that decommissioning and dismantling activities have been ordered and targeted to be completed by May 2017. All materials to be retrieved at the sites are said to be for the contractors’ own disposal,” he said.
A project of this nature and magnitude requires a contract between the owner and NGCP. However, this was implemented without the Power Sector Assets and Liabilities Management Corp.’s (PSALM) and TransCo’s knowledge or consent. There was also not application or petition with the Energy Regulatory Commission (ERC), in patent violation of the provisions of EPIRA Law and the concession agreement, TransCo claimed.
In Section 26 of the EPIRA Law provides three requisites for any related business to be validly engaged in by an energy utility: There must be a petition to ERC; A portion of the net income from the undertaking must be used to reduce wheeling charges (to be determined by ERC); And maintenance of separate accounts for the undertaking.
“To our knowledge, none of these requisites were satisfied. TransCo could have been afforded the right to intervene as Asset-Owner, if ever such Petition was filed with the ERC,” Matibag said.
“It is very clear that without the consent of ERC, PSALM and Transco this project was undertaken void of legality. More importantly, the concealment deprived the public of its share (in the form of reduction in transmission charges) from the consideration NGCP realized, and probably still realizing from the contract,” Matibag said.
“This explains their rejection of government requests for a broadband system from the outset,” he added.
TransCo has ordered an inventory and audit of the telecom facilities as these are in danger of being junked based on documents obtained by the government.
“But we were rebuffed by NGCP and denied access to these sites,” Matibag said. “We now demand for NGCP to come clean and open these facilities for inspection and audit by government to protect these from being scrapped and instead be utilized for the government’s National Broadband System.”
“As experts tell us, with these present facilities the government will be able to fulfill its promise of free internet to public schools, public sites and government facilities in six months to one year,” he added.
TransCo said it intends to courses of action against NGCP.
“Right now we are preparing several complaints and to file a petition. I have forwarded this report also to the Office of the President, to the Senate, to the Congress for proper disposition and to file with ERC,” Matibag noted.
He noted that in other countries, the system operator and the market operator are one. “Only here is it separated because of the EPIRA law.”
“What is the problem? The problem is with the law. We cannot violate the law. What I recommend is for Congress to take a second look. If that’s what it takes to correct that mistake then so be it. But if that is the only way to correct the wrong that is being done then we must go through that process. However, we want to level things … if we can review the terms of the concession agreement to make it responsive … putting in mind the interest of the public,” Matibag said.
“If you’re asking me personally, I think that is the real resolution on our part, because I don’t want to go through the process of arbitration. Of course, as the government you also have to honor contracts. But it’s not only on the government side that should honor the contracts. There are always two parties to the contract and both should honor it,” he said.
“The Congress can look into NGCP franchise because a franchise is just a prerogative and is a condition. For them to continue having a concession, they must have a franchise,” he added.
“Since NGCP took over power transmission services in 2009, it has always been transparent with its operations. It is unfortunate that the issue on the use of the fiber optic network for the national broadband program has been brought to the attention by TransCo,” NGCP Chief Administrative Officer Anthony Almeda said.
“NGCP reiterates that it does not earn anything from existing fiber optic facilities. The main purpose of the network is for the delivery of efficient power transmission services. However, NGCP remains open to transactions with any entity who is interested to develop the national broadband network, with the national government as our priority,” Almeda said.
“NGCP remains committed to its mandate as transmission service provider with the full awareness of its nature as a public utility, and in full compliance with the rules and regulations of the regulator, and existing laws governing its transmission operations,” he added.