The frequent power outages experienced recently by the main Luzon island of Philippines have revived an old debate about the pitfalls of placing the power security of the country into Chinese hands. The National Grid Corporation of the Philippines (NGCP) which is the entity responsible for power transmission in the country seems vulnerable to Beijing’s dictates with a sizeable stake of 40 percent being held by a state owned Chinese corporation called State Grid Corporation of China (SGCC). For the past few months, popular opinion seems to be converging on the potential security threat of having such an ownership structure in the national grid.
Prior to the formation of NGCP, the transmission system in the country was maintained by Philippines government’s National Transmission Corporation (TransCo) which managed the power supply from plants to distribution utilities. The Philippines government changed the system in 2001 through the Electric Power Industry Reform Act (EPIRA). Subsequently, it came out with a public bidding process for rights of operation, maintenance, and expansion of the country’s power grid. After successful bidding, a consortium consisting of the SGCC and two Filipino companies bagged the rights in 2008 for 50 years. The deal valued at worth $3.95 billion was then hailed as one of the biggest privatization efforts. As a result, NGCP was established with a 40 per cent holding of SGCC, with the remaining 60 per cent resting with the Filipino companies.
Fourteen years into the functioning of NGCP as the sole in-charge of power transmission in the country, a lot has changed in Manila-Beijing relations with rising maritime tensions on the disputed South China Sea. There has been a growing realization of the repercussions of handing over the nation’s power life line into Chinese hands. Further, there are a lot of pointers which attest the validity of these concerns leading to statements from various political leaders flagging the risks. Recently, the issue gained prominence in the Senate of Philippines with its energy panel chairperson Sen. Raffy Tulfo grilling an executive of NGCP about the nature of its agreement and the power enjoyed by the consortium. Tulfo’s primary worry was the unquestioned control in the hands of NGCP which has started ignoring TransCo in its regular operations. There have been instances of NGCP management refusing entry to TransCo officials turning up for usual checks at the substations. The consortium however contends that the auditors of TransCo were barred as they are not allowed to inspect new projects. It is also feared that the transmission grid can be remotely accessed by China, opening the possibility of China holding the power supply to ransom, a concern also pointed out by Tulfo. He is now joined by some other politicians who are pushing for an investigation and kicking China out from the operations of the national grid. His fellow senator Risa Hontiveros demanded regaining full control of the grid as the energy department called on lawmakers to amend EPIRA to ban state-run foreign companies from owning a stake in the power sector.
Notably, this is not the first time that the working of NGCP has come under the scanner of lawmakers in Philippines. Earlier, in 2019, some senators had asked the government to check into the claims that engineers in China can execute large-scale blackouts in the Philippines using a remote monitoring and control system based in Nanjing. Responding to recent criticism of excessive Chinese influence, Philippine President Ferdinand Marcos Jnr assured that his government will consider the option of taking back control of the grid if violations are found. Another source of opposition to NGCP’s functioning relates to the indiscriminate repatriation of profit by the SGCC. According to NGCP’s financial statements, shareholders were able to recover the initial investment in just four years of operations and doubled their initial investments by 2015. During the Senate hearing, the company executive reportedly admitted to have paid out 75-99 per cent of its net income made in majority of recent years as dividends to shareholders. With the expansion or further development of grid operations seemingly a non-priority for the Chinese, the disquiet in Philippines over the NGCP is expected to accentuate only.
