Philippine President Gloria Macapagal-Arroyo signed on Dec 1 the TransCo Franchise Bill into law that would transfer the operations of the national power grid under a private group, the National Grid Corporation of the Philippines (NGCP), which won the bidding for the rights earlier.
The franchise bill is officially known as Republic Act No. 9511 or "An Act Granting the National Grid Corp. of the Philippines (NGCP) a Franchise to Engage in the Business of Conveying or Transmitting Electricity through High Voltage Back-Bone System of Interconnected Transmission Lines, Substations and Related Facilities, and for Other Purposes."
The signing of the bill culminated years of attempts by the government to privatize the national electricity transmission grid as mandated by the Electric Power Reform Act (EPIRA) of 2001 amidst opposition by nationalist groups and well-meaning individuals to the sale.
The NGCP is composed of Calaca High Power Corp., the Monte Oro Grid Resources Corp., and the State Grid Corp. of China.
The NGCP was granted the franchise "to operate, manage and maintain, and in connection therewith, to engage in the business of conveying or transmitting electricity through high-voltage back-bone system of interconnected transmission lines, substations and related facilities, system operations, and other activities that are necessary to support the safe and reliable operation of a transmission system, to construct, install, finance, manage, improve, expand, operate, maintain, rehabilitate, repair and refurbish the present nationwide transmission system of the Republic of the Philippines."
The franchise is good for 50 years but may be repealed or amended by Congress "when the common good so requires," the law said.
What is significant in the signing is that operating the transmission grid, which is traditionally viewed as a natural monopoly of the state, is now in the hands of the private sector. The grid operations will now be subject to more to economic forces than the previous setup. This is why traditional nationalists, who usually view big business with jaundiced eyes, see danger to security and higher prices for end users due to added profit motives of the new operators. Some of them have gone to the extent of trying to reverse the privatization process.
But this is a short-sighted view.
Grids around the world are increasingly operated by the private sector with better results than the previous state operation. This is to be expected since electricity transmission is not just about connecting power from generators to retail distribution facilities. It is also about efficient and cost effective operation. Increasingly, it is relying more on new technologies and materials.
A state monopoly does not have the nimbleness or savvy to operate in this competitive new world.
Take for example the traditional view that the flow of electrons is just one way: from the generators to the grid lines, to the distribution companies and finally to the user. No longer.
Advanced countries are now moving towards a two-way transmission and distribution systems wherein users who have excess capacity can actually sell it back to the grid. This is made possible by deploying so-called smart meters which could regulate which way electricity is flowing.
Fans of the successful transfer of operations to the private sector see more improved services. For example, they hope that the gridlock (pardon the pun) in transmission which occurred recently as a result of a breakdown in a critical transmission node would no longer recur.
But can the new operator hurdle inconveniences such as the recent court ruling dismantling a major transmission line as a result of a vanity complaint by residents of a plush village in Makati?
The bottom line is, the new grid operator has been given a great responsibility to improve the electricity transmission system of the country. It should not view the franchise awarded as a license to mint money quickly at the expense of the population.
Everybody will be watching you, the new grid operator.
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