Reforming the grid

In the vast and complex world of energy management, the National Grid Corp. of the Philippines (NGCP) plays a pivotal role in powering the nation. Yet, recent scrutiny reveals a disconnect between profit distributions and infrastructure investment that merits a closer examination, particularly in light of the urgent need for grid reliability and energy security.

Since its inception in 2009, the NGCP has amassed P286 billion in earnings, allocating a substantial portion—P208 billion—as dividends to shareholders. While rewarding investors is standard corporate practice, the Senate’s concern suggests a disproportionate focus on profits over the pressing requirements of the grid's expansion and modernization.

The NGCP's response, citing the use of retained earnings for dividends, does little to address the underlying issue: the prioritization of reinvestment in infrastructure over shareholder payouts, especially given the delay of 72 key projects.

The Senate’s apprehension is amplified by the NGCP’s practice of charging consumers for unfinished projects. This practice, spotlighted during a Senate hearing, underscores the need for a financial mechanism that better aligns the timing of consumer charges with project completions. Such a revision would serve dual purposes: protecting consumers from premature costs and incentivizing the NGCP to expedite project rollouts.

The regulatory landscape, as it stands, appears to have limited teeth. The Department of Energy (DOE) and the Energy Regulatory Commission (ERC) seem constrained by current statutes, with the DOE pointing to concession agreements that limit its ability to directly intervene. The ERC, facing a cap on penalties, can only impose a P50-million fine per infraction—a sum that may not effectively deter delays or non-compliance.

Indeed, the financial health of the NGCP is paramount to the grid's stability and growth. However, it is essential to balance this with the interests of the consumers and the national need for an up-to-date and secure energy infrastructure. Therefore, a reevaluation of the “pass-through” provisions and the interim maximum annual revenue structure is necessary to safeguard consumer