Press Release
December 9, 2019

PRIVILEGE SPEECH OF AKBAYAN SENATOR RISA HONTIVEROS
December 09, 2019

Mr. President, kakatapos pa lang ng SEA Games. We are flush with victory. Our athletes have proven once more that the Filipino spirit is indomitable. Hinding hindi tayo papasakop. Hinding hindi tayo uurong.

However, Mr. President, beyond the unifying jubilation of athletic victories, there is another issue where our country needs to come together - and urgently. Isang mahalagang aspeto ng nasyonalismo ay ang pagtatanggol ng ating teritoryo kasama ang public utilities, ang pagtitiyak na ang ating mga kontrata ay nasa best interest ng Pinoy, at higit sa lahat, ang pangangalaga ng ating national security anuman ang mangyari.

Hindi humihinto na mapag-usapan ng ating mga kababayan ang usapin sa pagkontrol ng China sa ating mga transmission lines. Matatandaan noong November 19, during the budget deliberation of the Department of Energy (DOE) I posed the question: Is it possible for our power grid to be taken down remotely? The replies, as well as the exchanges that followed, were interesting, to say the least. Sa isang banda, sabi ng sarili nating mga government agency, ito ay possible. In fact, according DOE Secretary Alfonso Cusi, China can "potentially shut down the Philippines' power transmission" because of its digital nature. TRANSCO CEO and President Melvin Matibag also went on record as saying that our government through Transco and DOE do not have full access and have very limited control of our transmission grid. It was the National Grid Corporation of the Philippines, a private corporation with a concessionaire agreement with the government and 40% owned by China via its State Grid Corporation, that controls the grid. It was also during my interpellation that it was confirmed that a certain NARI group - a Chinese company - that provides the installed system software in the system control room.

Expectedly, ito ay pinabulaanan ng NGCP na nagsabi na and I quote "China is no Wile E. Coyote with a red button" to shut down our power grid. Malacanang has, it appears, decided not to listen to its own government officials, and President Duterte has been quoted as saying, "I trust China."

That is the threshold question that I would like to ask today, Mr. President. Can we really trust China? I want to further break it down into three questions. Firstly, to what extent does China control our transmission lines? Secondly, is there reason to fear? Thirdly, ano ang epekto nito sa pang-araw araw na buhay ng mga Pilipino?

First question: To what extent does China control our transmission lines?

According to NGCP, China's role via the State Grid Corporation is that of "technical adviser". Our information, however, suggests otherwise. First of all, isa sa diumanong unang mga ginawa pagkatapos ng takeover ng NGCP ay ang pagpasok ng "Nari" control system. Ang operating manuals ng control system na ito ay nakasulat sa wikang Mandarin, ayon na mismo sa ating local control engineers. Ang control system ay napaka-high tech at kailangan ng ICT o information and communication technology para sa remote at automatic monitoring ng power facilities. Pag may aberya, mga Chinese na engineers lang diumano ang maaring mag trouble shoot. Ang kaalaman ng mga local engineers ay limitado lang sa pagpapagana ng equipment.

Sa isang ginawang panayam sa DZMM ay binanggit ng NGCP Spokesperson sa katulad din na tanong kung mayroon bang mga Chinese engineers na nagmamando ay sinabi niyang "Ever since, Pilipino po yan" - taliwas sa pag-amin noong budget hearing na may Chinese engineers dati at nakasulat sa wikang Mandarin ang mga manual bago ito natranslate. Sa isa na naming panayam ay muling tahasang sinabi ng spokesperson ng NGCP na advisers at board members lamang ang role ng mga Chinese na nagtatrabaho sa NGCP dahil bilang may 40% share, entitled ang China sa four seats. Mawalang galang, ngunit ito ay pinabubulaanan ng mga dokumentong nakarating sa aking tanggapan. Itong mga dokumentong ito ay nagpapatunay na si Mr. Liu Zhaoquiang ay umuupong Assistant Chief Technical Officer for Operations and Maintenance. Correct me if I am wrong, but if your designation is operation and maintenance, you work in the nuts and bolts of the enterprise. This document is supported by a photo of Mr. Liu Zhaoquiang representing the NGCP with the Bureau of Fire Protection. Another document names another Chinese national, one Wen Bo, as the Chief Technical Officer. Ang malala pa, the current chairperson of the NGCP is Zhu Guangchao of the State Grid Corporation of China. According to the Business Mirror, on him "rests the corporation's operation, maintenance and development of our country's power supply and demand." With Chinese nationals at the helm, it is of little surprise that Filipino engineers are regularly sent to China to participate in training programs hosted by the State Grid Corporation of China.

Pero hindi dito nagtatapos. Dahil pangatlo, the NGCP has also awarded various procurement contracts to different Chinese firms. Materials for the infrastructure of the transmission lines have been supplied by Chinese firms using Chinese designed technology. I am prepared to show you a list of Chinese corporations that won contracts with the NGCP. Makikita sa listahan na ito na 43 contracts have been awarded to Chinese corporations.

Bukod dito Mr. President, it leads me to believe that there are indeed issues of proprietary access. Ibig sabihin, mula ng pinalitan at inilagay ang software system called NARI ang mga sumunod na pangyayari ay nagbigay-daan na upang ang halos lahat, mula sa mga gamit at mismong mga tao dito, ay dapat ay compatible o akma sa inilagay na buong technology design inside the system control room which operates our nationwide transmission lines.

Mr. President, ang chairman Chinese, halos lahat ng contractors Chinese, ang systems software made in China, at ang training sa China, pero dapat magtiwala at maniwala tayo na ito ay "Filipino-run"? It is my duty as a legislator to sound this alarm. It is our duty as the legislature to ensure that the interests of Filipinos are adequately protected.

Second question: Is there reason to fear?

Mr. President, this is not the first time that the issue of national security has been raised in relation to Chinese involvement in the NGCP. In 2015, none other than our much beloved and much missed Senator Miriam Defensor Santiago said that a "national security virus" has infected the country's power sector. Even then-National Security Adviser Cesar Garcia expressed concern, saying that the country's power transmission grid should be kept solely in the hands of the Philippine government. In fact, then Energy Secretary Jericho Petilla revealed that the visas of the 18 Chinese citizens working in the NGCP would no longer be renewed.

Kung dati tayo ay may pangamba sa posibleng implikasyon ng dayuhang pwersa sa ating power sector, bakit ngayon tila hindi na dapat? Dahil ba kaibigan na natin ang China - ang China na naglubog ng barko na tangan ang ating mangingisda? Ang China na kailanman hindi ginalang ang naging pasya ng isang international tribunal? Ang China na patuloy ang militarization sa mga islang dapat ay sa atin?

Sabi pa ng spokesperson nang NGCP, it is not possible for China to remotely shut down our power supply because to shut down the 200 substations, China will need at least 200 substation managers to shut off several breakers in each of the substations, one by one. It has to be shut down manually. Not only has the Transco President laughingly called this system "Jurassic" and NGCP's statements an outright lie, but in 2014 the then United States National Security Agency director Michael S. Rogers, already conceded that China is capable of mounting cyberattacks that would paralyze power grids in the USA. US intelligence reports confirm the capacity of China to engage in cyber warfare on Critical National Infrastructure (CNI), including power grids.

Thus the need for a cybersecurity audit of the NGCP's operations, including a source code audit of the software and firmware used in the SCADA system installed by the State Grid Corp. of China, to determine whether backdoors or other vulnerabilities have been maliciously inserted into the code.

Worryingly, the NGCP spokesperson also did not deny that NGCP sources its technology from Huawei - only that proper bidding processes were followed. I find this worrisome because of a 2012 report by the US Permanent Select Committee on Intelligence that found clear ties between Huawei and the PRC military, and suggests that Huawei carries out Research and Development for Chinese intelligence.

It should also be known, Mr. President, that the issue of national security has been raised in this chamber before, during the Senate deliberations of now Republic Act 9511. This was raised by none other than the late and beloved Senator Nene Pimentel. May I quote from the records dated September 9, 2008, page 557: "Considering that the State Grid of Hong Kong Ltd. Is a wholly owned subsidiary of the National Grid of China, Senator Pimentel asked about its implication to the country's national security. Senator Enrile replied that he does not see any national security problem for the Philippines because the Chinese could not overhear anything and could not even probably feel or hear the passing of current in the wires." May mga telecommunication trucks na sa loob ng mga substations according to the Transco President.

Mr. President, we are talking about our national security here. We are talking about the critical exposure of our power grid to a foreign power. Paano tayo hindi kakabahan, gayong ayon sa mga opisyales ng DOE at Transco, hinahadlangan ng NGCP ang inspection and audit ng kanilang facilities, partikular ang cyber audit, kahit na dalawang dosenang beses na ito hiningi. Adding to our fears, the onerous concession agreement between NGCP and the government allows NGCP blanket control and authority over our power grids. Sila ang masusunod kung kailan at anong oras natin dapat gamitin ang atin kuryente, anong volume ng kuryente at saan lugar ito dapat pumunta. Ganito ang gusto mangyari ng NGCP at China, ang sumunod tayo sa kanilang kagustuhan dahil na rin nasa kanilang mga kamay ang pagpapatakbo at pangangasiwa na parang isang remote control sa kanilang mga palad.

Because at the heart of this matter, Mr. President, ang puno't dulo ng usaping ito ay ang isang onerous na concession agreement.

Financial data shows luging-lugi ang gubyerno at pambihirang ganansya naman ang kinikita at napupunta sa China at NGCP. Government is losing money while the NGCP as a natural monopoly is raking in the profits. As of 2018, nabawi na ng NGCP ang mahigit kumulang na 180 billion na investment nito, just from the profits of the electricity transmission business, eh may 15 years pa na natitira sa kabuuang 25 years na lifespan ng Concession Agreement. Renewable pa ang kontrata ng another 25 years. Aside from these, NGCP enjoys tax exemption privileges granted by its franchise. The government has foregone tax revenues of around PhP7.4 billion annually because of this exemption. Kung dati ay 20.75 billion ang government revenues from operations, ngayon ay 6.75 billion ang yearly average in revenues for the government ng NGCP. Kung dati ay 9.5 billion ang binabayaran na buwis ng Transco bago na-privatize ang transmission business, ngayon ay 2.2 billion nalang binabayaran na buwis ng NGCP. Kaya naman hindi pa nila natapos bayaran ang Concession Fee na ayon sa Concession Agreement ay installment ang bayaran, nabawi na nila ang puhunan.

Third question: Ano ang epekto sa pang-araw araw na buhay ng mga Pilipino?

One cannot help but wonder if the high prices of electricity in this country are the result of this unconscionable contract. One cannot help but wonder how much of what the ordinary Juana de la Cruz pays for electricity every month goes to a Chinese corporation in far-off mainland China.

Let me give an example. Batay sa dokumento na isinumite ng Transco entitled "Regulatory Reset for the Transmission Business" dated April 3, 2019 presented to the Senate Committee on Energy ay pinakikita dito na mayroong delays sa rate setting schedule ng ERC at makikita din dito na dahil na rin sa pagkaantala ng nabanggit na rate setting ay patuloy na umiiral ang "unusual" na 15 % rate approval ng Energy Regulatory Commission para sa tinatawag na WACC o Weighted Average Cost of Capital ng NGCP. Batay sa isang eksperto na aking nakausap ang global average na umiiral ay 8% lamang. Kailangang maintindihan natin ang puno't dulo nito, para sa ating mga kababayan na buwan buwan ay binubuno ang mataas na presyo ng kuryente.

At kung sakaling ma-establish ng husto na may kinalaman ang mataas na presyo ng kuryente sa sinisingil sa atin ng NGCP, ay nararapat lamang na managot hindi lang ang NGCP, kundi ang mga ahensya ng pamahalaan na nagbigay daan sa pang-aabuso ng NGCP - kagaya ng ERC.

Mataas na nga ang presyo natin sa kuryente, exposed pa ang pambansang seguridad. Para naman tayong ginigisa sa sarili nating mantika niyan. At parang nagbigay tayo ng all-access pass sa mga dayuhan.

I look forward to the commitment of Senator Sherwin to conduct a hearing to audit the NGCP and investigate these issues that weigh heavily on us. There are many and multi-pronged issues but the primary issue is national security. We need to assert our sovereignty and protect the welfare of our people.

I am asking specifically for three things: Una, there should be immediate inspection and cyber-security audit of the NGCP facilities, including a source code audit of the software and firmware running on the SCADA system, by government officials and independent experts, with a view towards looking at national security implications. Second, we should investigate ERC approval for NGCP's transmission charge in relation to unusual Weighted Average Cost of Capital (WACC) of 15.04 % instead of the standard global average of 8 %. At kung mapatunayan na labis ang singil ng NGCP, ay simulan ang proseso ng reimbursement sa mga mamamayan. Third and most importantly, let us review the concession agreement and the legislative franchise of NGCP.

The Senate, in the exercise of its oversight powers, should exact accountability from all those involved in, and continue to profit from, this unconscionable contract.

When a private corporation can stonewall lawful and reasonable requests for inspection and audit by duly-appointed authorities of the Philippine government while raking in billions in profit, one must ask: saan sila kumukuha ng lakas ng loob?

In reflecting on these, I think we can find answers to the question: Can we really trust China? Salamat po.

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