Apart from having to refund prospectively billions of pesos worth of revenue claims, the National Grid Corporation of the Philippines (NGCP) also face the indignity of reclassifying an undetermined amount of expenses merely because its regulator, the Energy Regulator Commission (ERC), failed to do its mandate.
NGCP on Thursday complained of an unfair ERC decision disallowing an undetermined amount of expenses the concession has booked from 2016 to 2020 because the ERC did not conduct a so-called regulatory reset as was proper during the period.
Today, long after the accounts have been allowed to muster years of audit, the ERC tells the business that those long recognized expenses were in fact illegally booked and therefore had to be disallowed.
Cynthia Alabanza, NCGP assistant vice president, told journalists this relates to the ERC failure to address requests in the past for a regulatory reset, one that is done every five years.
Previous leaders at the ERC did not conduct a rate-reset on NGCP’s charge structure since the lapse of the third regulatory period covering the years 2011 through 2015.
The ERC decision disallowing particular NGCP expenses will impact not only on the business but on consumers and other businesses as well, the franchise holder said.
“Before you play, you should know the rules, so to apply this retroactively, we think a decision like that lacks fairness,” Alabanza said. According to her, rules should be forward looking to achieve its goal of fairness.
“At the end of the day, what must be balanced here are the consumers’ concerns and their right to a good service at the right price… It is also necessary to weigh the concerns of businessmen/investors to generate proper return on their investment,” Alabanza said.
NGCP also defended its expenses mentioned by the ERC, saying these are legitimate business costs under the same rules applied to the National Transmission Corporation (TransCo), the government entity that used to operate the country’s transmission services.
NGCP recalled taking over the operations and management of the national transmission system from TransCo in 2009 as power grid operations and maintenance were privatized.
“When you say it was passed on to the people but it is a legitimate business expense, that should not be bad, especially if that is contained in the policy that was laid down when we entered the business,” Alabanza said.
NGCP also asserted its employee bonuses are legitimate business expenses and part of operational expenses imputed in the cost of a product being charged by a business for a particular service or product. This practice was observed by TransCo but questioned in the case of NGCP.
As for public relations and advertising expenses, Alabanza said these are not marketing initiatives but cover information campaigns, including safety and right-of-way clearance. The conduct of corporate social responsibility programs aim to give back to the communities affected by the transmission lines and towers as also crucial.
Monalisa Dimalanta, ERC chairperson, in a separate briefing, said that since the determination of NGCP’s maximum allowable revenue for years 2016 to 2020 is still preliminary, then a refund is not a foregone conclusion.
She also said it is still “too early to tell” if NGCP has committed a violation and that stakeholders are entitled to air their views on the matter before the entire exercise is wrapped before the end of the year.
The ERC has determined a lower maximum allowable revenue (MAR) of only P183.49 billion or 52.7 percent lower compared to the applied P387.8 billion revenue granted the NGCP from 2016 to 2020.
MAR is the maximum amount that NGCP is allowed to earn to recover its operational expense and capital expenditures, as approved by the ERC.
