Press Release
December 4, 2019

SENATOR WIN GATCHALIAN'S ANC INTERVIEW ON NGCP & TRANSCO ISSUES

Q: When is the Senate investigation hearing expected to happen?

SEN WIN: We're targeting second or third week of December but we're in close coordination with National Security Council the most important stakeholder in giving us information about the national security concerns of this asset.

Q: NGCP already spoken claiming that they fear of the shutdown of the local power grid is not actually founded, do you find this particular assurance from the NGCP already reassuring?

SEN WIN: For me, there are two very important personalities who can shed light to this issue, number one, is the national security advisor and number two, is the Department of Energy because DOE has the technical know-how in giving us accurate information and accurate data about this issue and the Secretary of the Department of Energy has already made a statement that it is possible, the technology is available this technology is already being used in other grids, in other countries and with that possibility now the next issue will be the national security concern and I think the most appropriate person to discuss this issue is the national security advisor.

Q: When this franchise was granted how was the people behind it not foresee this particular possibility?

SEN WIN: Actually, there are safeguards in the concession agreement as well as in the franchise, in the concession agreement it is stipulated that PSALM and TRANSCO can inspect the transmission assets and can go into the assets and look at the performance as well as the technology being used in this transmission line. However, the conflict arose when members of TRANSCO, members of PSALM were not allowed to go into NGCP as well as inspect the transmission assets. During our hearing that was disclosed to us and that gave rise to a lot of concerns that there is no check and balance being exercised in so far as the national security aspect as well as the physical transmission lines.

Q: So, what is problem with the concession and franchise agreements? Or was it a problem in terms of actually implementing the provisions in those agreements?

SEN WIN: I think the one of the root causes of this issue is not allowing TRANSCO, not allowing government in particular to inspect the transmission assets as well the transmission lines, not allowing them to look deeper into the transmission assets as well as the software because this is a highly technical operation. Even though we are given the opportunity to inspect national grid, we will not know the national security issues because were not engineers we cannot go deeper into the system. Only Engineers and TRANSCO has that technical capability to look at this issue closely.

Q: is it stipulated in the agreement that TRANSCO can scrutinize the NGCP?

SEN WIN: Correct, it is clearly stipulated in the concession agreement that PSALM and TRANSCO should be allowed to go in and inspect the transmission assets. This safeguard was put in place to provide check and balance for both the operator and government and that should be exercised on a regular basis to have a common agreement.

Q: Why are they not being allowed to do that? Why was the access limited?

SEN WIN: The access was raised during the hearing and we were also quite surprised because we are under the impression that these types of inspections are regularly being met to fulfill the check and balance of government.

Q: How often or regular should the inspection should be?

SEN WIN: In my view this should be at least being conducted once a year, together with experts in transmission operations and also national security because national security is quite broad. Now you have the advent telecommunication, advent of information technology you should also bring experts who can understand and inspect this type of technology being implemented in the transmission line. Let me just point out that the transmission line is a very important, vital facility of the country, there is only one transmission line which transmits power to Luzon, Visayas and later on in Mindanao. So there is only one transmission line that operates in the entire country, meaning this is not only imbued with public interest but with national security.

Q: this is not the first time we've heard about this fear, how about the President's position? He said in an interview, China is spying through satellites but not through this what do you make of that?

SEN WIN: I respect the opinion of the President will have other information or other intelligence that will lead him to come up with this type of comments but this should be clarified, in the hearing, through the national security advisor, the advisor is the most competent person both technically and mandate-wise in the national security aspect. Let me just point out when the concession agreement and the franchise were being formulated, safeguards were put in place, one is the inspection the concession agreement that PSALM and TRANSCO should be able inspect the transmission assets and number two is the take-over powers of the President in times of public peril and other reasons. So, these types of safeguards were imbedded in the concession agreement as well the franchise, however, if you don't implement those safeguards then there are a lot of concerns that will be raised especially when it comes to national security.

Q: Which particular technical official would you like to appear before the Senate? One conern was instruction manuals were changed into Chinese which limited the comprehension of local engineers?

SEN WIN: If that were true major concern how can they incorporate the transmission line in a manual that is written in another language? It's clearly stipulated also in our constitution that the executive and management should be Filipino, meaning control and management should be under the hands of Filipino engineers and Filipino managers. If the Filipino engineers cannot operate the transmission line because of a simple language barrier then we have a big concern on this.

Q: From the hearing, what in particular improvements do you see?

SEN WIN: The are two things that we will exercise, number one, is the power of oversight, we will look at the operation, the performance of NGCP. Number two, the compliance of the franchise as well as the compliance to the concession agreement and number three, the future plans of NGCP because NGCP is such a critical infrastructure that a delay in rolling out of any infrastructure will have adverse impact to the delivery of electricity in our country. And number four we also want to have a close look on the national security aspect because national security is a concern of everyone, not only as consumers but also as Filipinos.

Q: Accountability, which personalities would you like to focus on?

SEN WIN: We will focus on the NGCP, which is the operator and the system operator of these lines. we will also invite experts in the national security council as well as the DOE. We would also like to hear from independent experts who are credible in terms of technical aspects such as engineers, such as IT experts. There are also talks about using the transmission lines for telecommunication and how it interacts with the operation of the transmission line. DICT will be very important personality that can shed light on this matter.

Q: How much of this problem is also affect or caused by this conflict between TRANSCO and NGCP?

SEN WIN: I think the most important aspect is the check and balance system. The government should be able to exercise its check and balance role considering that again, I have to repeat this so many times, that this is a vital infrastructure, one if its kind in our country, it's a natural monopoly and because of that it is imbued with national security aspects. That's why we need to focus on that aside from the commercial and performance issues, we also need to focus on the national security concerns that can adversely impact our country.

Q: Concerns in the delay on the IPO of the NGCP, what happens here? Possibility of stopping that agreement? January is the deadline for the 10-year agreement?

SEN WIN: One of the safeguards is the Initial Public Offering (IPO) because allowing the public to participate up to 20% equity of this company will improve the government's structure of this operator, meaning, public can participate in the governance as well as look at the books and operations closely, but this is really one of the most important feature of this franchise that the public should participate and I would strongly suggest that NGCP should pursue its initial public offering and I would like to strongly suggest also the government takes a share, a stake in this IPO so that government will be well represented in the board. The government should be able to regularly engage the decision makers of NGCP in so far as national security is concerned, in so far as public issue is concerned.

Q: But their deadline January this year so what happens?

SEN WIN: Right now, they are asking for an extension from ERC and my view on this, the IPO should be pursued, the market will factor in all of these issues surrounding the IPO. The market is well aware of the concerns and the arbitration happening surrounding NGCP, so let the market factor in and price all these through the IPO but for me the IPO will enable the government to participate, enable the public to participate and this participation will improve transparency and this is what we need in the management and also in the scrutiny of NGCP.

Q: If you focus on the concession and franchise agreement, do you seen any, onerous provisions?

SEN WIN: For me, the safeguards are already in place, we have to implement the safeguards, one of which is the IPO, I think the IPO is an important safeguard for government and the public to scrutinize closely NGCP and its operations, it also gives it a greater sense of transparency if they offer their shares to public. What's important now is to implement those safeguards because without implementing those safeguards, everything will be in futile.

Q: What is keeping the NGCP from that IPO that was supposed to take place early this year?

SEN WIN: One of the reasons that they put forth is there is a pending arbitration case between TRANSCO and NGCP, this is a commercial matter between them but my view here is national security takes precedence over commercial items, commercial matters and because of this national security issue the IPO should proceed.

Q: Moving forward, how will these issues affect the development plans of NGCP?

SEN WIN: I think what is important right now is government exercising its check and balance role. NGCP should allow government to go deeper into the inspection not only superficially inspect the facilities of NGCP but also allow it to go inside the facilities, look at the facilities at the SCADA system that is being used because the SCADA system is the system that can enable remote control and management of this facility. In other words, experts and technical experts from TRANSCO and PSALM should be allowed to inspect the transmission, this will allay the fears of the public and this will also fulfill very important safeguards in the concession agreement.

Q: Is our transmission development plan playing a catch-up role when it comes to energy requirements of the country? How's our TDP?

SEN WIN: The transmission development plan is a very important document, it lays out future plans of the transmission operator, meaning where the transmission lines are to be put up? what are the transmission lines that we need to upgrade? This is to improve the flow of electricity from the different islands of the country. It is important that we continuously maintain, upgrade and expand the transmission lines because this will enable efficient flow of electricity to our household and to our businesses. However, we also received documents that said that a lot of the investments were in fact delayed, in fact, 33 important projects were already delayed under the transmission development plan. A delay in the roll-out of this transmission facilities will also delay a lot of the power plants that will go into the system. Even though we have a lot of power plants going into the system but if we don't have enough capacity in the transmission lines or if the transmission lines will not be put up, then we will have problems with electricity shortage.

Q: What's causing those delays?

SEN WIN: Various reason and that is what we want to go deep into, we want to hear valid reasons not only reasons that are made up out of thin air but what we want to analyze is, how come the transmission development plan is not being carried out to its mandate? We want to also look at the penalties that should be put forth if ever the transmission development plan is in fact delayed.

Q: Possibility of revoking the franchise agreement, is that a good route to take?

SEN WIN: That is a possibility if we discover provisions of the franchise were in fact violated, of course Congress has the power to revoke those franchise, the franchise is a privilege being given to a certain juridical entity to operate the system of our transmission line but this franchise can also be revoked if the franchise has been violated. One of the violations now is the IPO as you mentioned earlier the IPO should have been conducted January of 2019 but there is now a delay, the public cannot participate, government cannot buy a stake in the transmission line, therefore transparency has been weakened by this delay. But we will all talk about that during the hearing and if it warrants, then that should be the direction that should be pursued.

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