ERC Review Signals Deeper Scrutiny Of NGCP

The partial results of the Energy Regulatory Commission’s (ERC) ongoing review of the National Grid Corporation of the Philippines (NGCP) for the regulatory period 2016-2022 have come to light.

NGCP’s 40% ownership by China’s State Grid Corporation raises concerns over national security, with calls for stricter oversight echoing in Congress. | Illustrator: ASK

The preliminary findings reveal a significant reduction in NGCP’s proposed allowable revenue—a move seen as a crucial step in holding the company accountable for its performance.

However, the release of these results has also re-energized calls for closer scrutiny of NGCP, particularly concerning its 40% ownership by the State Grid Corporation of China (SGCC), raising alarm over the implications for national security.

ERC’s Partial Review: A Breakdown of the Findings

Central to the argument against NGCP is the proposition that its overstated revenue claims are leading to higher electricity rates. NGCP's monopoly over the transmission grid allows it to dictate the prices of electricity transmission services.

Critics argue that the company has been inflating its revenue expectations by projecting exaggerated costs for operations and infrastructure development, which are then passed on to consumers.

The company has consistently cited capital expenditures and infrastructure maintenance as the basis for its revenue needs. However, energy advocates are skeptical about these claims, citing delays and unfulfilled promises of grid improvement.

The ERC’s draft Partial Initial Determination may in fact confirm such skepticism, placing NGCP’s total allowable revenue for 2016-2020 at PhP183.49 billion, or an annual average of PhP36.7 billion—a far cry from NGCP's requested PhP387.80 billion.

The significant discrepancy raises questions about the prudence of the grid operator’s claims and underscores the importance of regulatory oversight.

The ERC’s review, part of the long-overdue Fourth Regulatory Period reset, evaluated NGCP’s expenses against actual performance, disallowing a wide range of unsupported or inefficient costs that even included public relations (PR) and ad expenditures.

Additionally, payroll and operational expenses deemed excessive or unrelated to consumer benefits were excluded.

The commission also made downward adjustments to NGCP’s claims for taxes and capital expenditures, ensuring only substantiated amounts were included in the allowable revenue.

The National Security Question

Beyond the technicalities of rate-setting and revenue adjustments, the ERC’s review has intensified a broader discussion about NGCP’s ownership structure. 

NGCP is 60% Filipino-owned through Synergy Grid, but 40% of the company is controlled by the State Grid Corporation of China (SGCC)—a state-owned enterprise overseen by the Chinese Communist Party (CCP).

This connection has raised alarms, particularly in light of the ongoing territorial disputes between the Philippines and China over the West Philippine Sea (WPS).

Last year, Senator Raffy Tulfo warned President Ferdinand “Bongbong” Marcos Jr. of the potential risks posed by Chinese involvement in the country’s critical infrastructure.

He pointed out that NGCP’s operations—particularly its slow progress on grid development and its apparent violations of franchise obligations—could be compromising both the reliability of the Philippine power grid and the nation’s security.

President Marcos acknowledged the senator’s concerns, stating that the government might consider reclaiming control over NGCP if needed. A comprehensive study, likely through Legislative hearings, will examine not only the performance of NGCP but also its security implications, particularly its ties to China.

The Looming Threat

SGCC, the world's most valuable energy and utilities company, plays a significant role in NGCP’s operations. Given its state-owned status, SGCC is directly accountable to the CCP through the State-owned Assets Supervision and Administration Commission (SASAC).

This tight connection between a foreign power and a key piece of Philippine infrastructure has led to heightened concerns about sovereignty and control.

Should tensions escalate between the Philippines and China, many fear that Beijing could exert undue influence over the power grid, potentially leading to disruptions in energy supply or even espionage.

Such concerns are not unfounded, as grid systems are critical to national defense and economic stability. The West Philippine Sea conflict further complicates this relationship, with China’s assertiveness in the region clashing with Philippine territorial claims.

Renewed Calls for Decoupling and Closer Scrutiny

With the release of the ERC’s preliminary review, calls for decoupling NGCP from Chinese ownership have grown louder. Critics argue that the Philippine government should prioritize the security of its energy infrastructure, given the strategic importance of the grid.

This sentiment is echoed by many in both the energy sector and the defense community, who see Chinese ownership of NGCP as a threat to national sovereignty. NGCP has consistently maintained that it operates independently from its foreign stakeholders, and that its management remains predominantly Filipino.

However, the 40% ownership stake held by SGCC continues to be a source of discomfort for many, especially in the context of China’s increasingly abrasive foreign policy.

A Path Forward for National Security and Energy Stability

As the ERC moves forward with its review of NGCP, the conversation about ownership and control over critical infrastructure is likely to intensify. The regulatory scrutiny, combined with rising national security concerns, may prompt the government to take decisive action regarding NGCP’s future ownership structure.

President Marcos’ willingness to consider reclaiming control of NGCP is a significant development, and the coming months may determine whether the Philippines can safeguard its energy grid from external influence.

For now, the ERC’s findings serve as a reminder that regulatory oversight is essential not only for ensuring efficient and cost-effective grid management but also for protecting the country’s sovereignty in an increasingly volatile geopolitical landscape.