Privatization of Transmitting Firm of NAPOCOR

In Philippine context, privatization is employed to make reference to the policy that allows the government to disengage in activities which are not area of the government's inherent function. This may be in many varieties, like the complete turnover of general public businesses to the private sector and contracting services to private businesses who has the necessary resources to manage it, or the federal government would just turnover certain services to the private sector but it would be under some administration regulatory steps and incentives. This privatization usually occurs within the platform of monetary globalization. By monetary globalization, this means that privatization is utilized as a measure to go after the globalist restructuring of their state and also to further develop the marketplace access which mostly benefits the business enterprise elites of a state and of course, the transnational corporations (TNCs) (UP and Stiftung 91-93).

Privatization, along with liberalization and deregulation, is also a part of neoliberal globalization which seeks to create surplus products within the market and also huge capital for creation. Along the way, private sector continues to have a large role over the public sector activities, permitted by direct copy of ownership and management and by the removal of the laws and regulations that promotes the general public interest (deregulation), and through the reduced amount of budget for the basic services, that subsequently leads to the graver degradation on the gain access to on general public services of individuals. For instance, in privatizing open public utilities like this and electric power sector of the Philippines, many damaging factors are experienced by the people, particularly the federal workers under the corporation because they were displaced as private companies turned to control those areas. The poorest sector of culture also was hugely afflicted since those private companies seek to get high profits which causes high prices at the people's price (IBON xi-4).

During the Marcos regime, a decree on creation of federal owned and handled businesses (GOCCs) was made through Presidential Decree (PD 2029) and later on through PD 2030, a policy was made which promulgates privatization. By enough time of Cory Aquino's routine, this decree was initially implemented through Presidential Proclamation 50 on the 9th of December in 1986 (TransCo).

In 1990, Aquino also signed 6957 or what we call as the Build-Operate-Transfer (BOT) law which includes let and approved the intervention of the private sector in the financing, contracting, procedure and also maintenance of infrastructure assignments. But in 1993, when Ramos assumed the presidency, he agreed upon RA 7718 amending the BOT legislation and further allowed the entire engagement of private sector in crucial government development projects. Through this take action, various types of privatization strategies have changed (TransCo).

Many reasons were shown by the federal government regarding the privatization of the GOCCs. To enumerate some, they said that through transferring these possessions to the private sector, it would yield a much better efficiency in its procedures. Furthermore, it was also mentioned that the government needed to accumulate more profits for federal spending to increase the economy, and this can only be achieved with such move. Also explained as reasons by the federal government is that first, it would lead to upsurge in investments which will boost up the current economic climate and will also help to develop market segments for capital generations. Through lessening the cover public services in GOCCs, and retailing those that are poorly performing and money-wasting, the federal government expected to lower our budget deficit and also to recover its expenditures (PSALM).


When the National Power Corporation (NAPOCOR) was made in 1936, our government has mandated it to create and transmit sources of energy while making the private sector to be in demand of its syndication. But it 1980s, the federal government has began to gradually entrust the complete electricity sector to private companies. From ex - Pres. Aquino's Professional Order (EO) No. 215 released in 1987, the power generation sector of NAPOCOR was started to be deregulated. By the energy of build-operate-transfer system, EO No. 215 also offered way to private organizations to determine and manage ability plants in the country. This situation was further strengthened when Ramos overran the presidency. RA 7648, the Power Crisis Work of 1993 was transferred and inspired more private companies to partake in the energy era sector of NAPOCOR. Later in 1984, Broadened BOT regulation was also transferred and got given Ramos to have "emergency power" which allowed him to make agreements, most of which were foreign corporations, about the structure, repair and other technological maintenance of NAPOCOR with no need to undergo it through a public bidding (IBON 82-83).

Due to the deals of generally 10 to 25 years made with the international companies, NAPOCOR was obliged to pay the power contracted to them whether they experienced actually produced or used electricity or not. This is what is referred to as the "take or pay" provision.

According to the provision, NAPOCOR needs to buy 75-80 percent of an firms' vitality capacity though it didn't really produced or used it. This in turn made NAPOCOR to go away the responsibility to the neighborhood consumers even though they really hadn't used even a small part from it, which is very a great burden since it takes about 60 percent of the total power available at the economy. Of course, this is evidently seen when vitality distributors such as Meralco get wholesale ability from NAPOCOR and shell out the dough which is the Purchased Ability Cost Adjustment (PPCA) that corresponds it (IBON 83-84).

Aside out of this Purchased Ability Cost Adjustment or PPCA, NAPOCOR in addition has passed the Petrol Cost Modification (FCA) fees to the energy distributors due to the should do its obligation to supply enough gas to the organizations or power vegetation where it experienced its long-term agreement with, regardless of the fluctuations in the price of oil or gasoline in the global market or even in the domestic domain. These two costs of NAPOCOR and inexpensive costumers further make up the Energy and Purchased Ability Costs Modifications or FPCA (IBON 84-85).

Furthermore, the contracts created by NAPOCOR to the indie power plants (IPPs) are in money rates. This only means that charges between the two entities are afflicted by the foreign exchange rates or peso-dollar rates to pay the change in payout because of the carrying on weakness of peso currency as against us dollars.

Due to the actual fact that these IPPs are managed by foreign companies, they are selling their capacity to NAPOCOR by almost $20 per megawatt hour (mWh) greater than the power sold to them by their own electricity generators. Obviously, these high rate would convert and echo to the additional fees priced to the end-consumers of electricity through the purchased electricity adjustments (PPA) without their power to refuse against it even though in 2002, a review made by the federal government showed that the majority of these IPPs has either legal or financial issues and are disadvantageous for the government itself.

During the Arroyo administration, this PPA was still not halted in functions of NAPOCOR since it was a great income source for the federal government, although we realize that the neighborhood consumers are the ones who intensely suffer from it; and also of course never to jeopardize the privatization of NAPOCOR and also to continue attracting international corporations to invest and take part in such options of the government.

Among other transnational corporations (TNCs), NAPOCOR's IPPs incorporate energy sector's giants such as Marubeni, Kawasaki, Mitsui, Chevron, and Enron (IBON 85).

According to Meralco, PPA is just one cost modification mechanism that is passed on to the local consumers, since addititionally there is the CERA which is supposed so that Meralco will be able to recuperate the changes in working costs and repayment of principal debt mainly brought about by the changes in foreign exchange rates where the contracts are bound.

Due to this, Meralco remarks that only little of the consumer charges go to them, since it generally would go to NAPOCOR as PPA and also to the federal government as franchise duty. But, apparently as it happens that these might consist experiences or complains since Meralco as a vitality distributor was also allowed to have its IPPs by virtue of past Pres. Aquino's EO 215. Meralco has indeed three IPPs which can be among the list of country's greatest companies which supply almost 1 / 2 of its ability requirements. This only means that Meralco, having its own IPPs actually makes big money from the PPA. It has also made use of it to produce a way to avoid it of the controversy arising from the fact it has monopoly control over electric power syndication. By this, it was also in a position to control and manipulate the computations regarding the IPPs that are extremely its sister companies. For instance, First Gas which is one of its IPPs and partly owned by Meralco itself, was used to make anomalous orders in PPA since Meralco can actually protect and cover the resource cost from the said IPP even though the truth is it generally does not even shipped one kilowatt of power to Meralco (IBON 86-89).

Meanwhile, we can evidently notice that the results of allowing private corporations take part in the power industry is unlike the explanation behind its authorization, which amongst others is to relieve the federal government from its burden on financing the establishing of power generating plant life (UP and Stiftung 115-116). Instead of it taking place, the reverse experienced occurred. NAPOCOR has remaining in charge of paying the debt commitments of the IPPs reassured by state warranties which were made to further attract buyers. Through those incentives, including long-term power contracts, IPPs were assured that they will have go back on ventures whatever happens.

Electric Electricity Industry Reform Action (EPIRA)

Through the Electric Power Industry Reform Action or EPIRA which is RA 9136, repayment for stranded costs of NAPOCOR or the expenses scheduled to stranded debts and contracts, were offered to consumers as a common fee along with the cost of restructuring the energy industry. This was implemented during the Arroyo supervision when she declared that the federal government should never shoulder this charge but must be recuperated by having a universal demand.

To further clarify some previously mentioned terms, stranded obligations within the stranded cost is the responsibilities that will be overlooked by NAPOCOR once it comes to private individuals, as the other one, the stranded deal cost is the difference from the price of electricity from the general market to be set by EPIRA itself and the price from IPPs. Due to this very large cost of NAPOCOR's responsibilities which are partially paid by the government through debt from foreign resources, very high listed bonds were sold by the federal government to finance its principal obligations mainly due to those long-term agreements. So it is obvious that it has only made the government and the folks suffer from paying them rather than getting from funding great deal for electric power generators, as the private sector like the transnational businesses (TNCs) and other local elites were getting more and more income from it each year so that it is as its "milking cow". And yes it is apparent that PPA has only intensified the dependence of federal to private sector to pay its overseas debts and its own grave situation of national bankruptcy which obviously impacts detrimental result to the poor Filipino people (IBON 89-91).

Actually, in 2001, the Arroyo administration had pushed EPIRA to be approved for a great loan to be released, the $900 M ADB Ability Sector Restructuring loan that was submitted since 1998. IMF acquired also played a part on its authorization, since it made it a condition for it to release a $300 M treatment loan for the Philippines since 1999. By this, we could clearly observe that the government got pushed it not to enhance the condition of accessible electric power service to the folks, however the adverse that preferred the private companies and additional strengthened their control over the energy service.

Transmission Organization (TransCo)

Along EPIRA in 2001, the creation of a National Transmission Firm (TransCo) in 2003 under NAPOCOR was also agreed upon into law. In line with this, the Arroyo administration had also pushed for its privatization by the mandate of the same aforementioned legislations. This TransCo as a GOCC is basically responsible for operating and handling the power transmission system of the country which will web page link power vegetation to the electric distribution resources throughout the Philippines (TransCo). Basically, it will be taking control over the transmitting and sub-transmission functions, investments, as well as the liabilities of NAPOCOR. TransCo, in overtaking the sub-transmission assets will take care of it until these are finally disposed into their proper distribution resources which will maintain its planning and overall maintenance of those assets. But, as like NAPOCOR, through EPIRA, TransCo is mandated to be privatized through either an outright deal or a management concession agreement lasting for about 25 years. The Section of Energy (DOE) and the Section of Financing (DOF) were in essence in charge in the look and setting up its transfer to private companies (Make and Mendoza, 9; 68).

As again an expectation of the government, from privatizing TransCo, it desires a high income which will be used to pay the NAPOCOR's staying debts that is thoroughly big which will in end result lessen or reduce the government's general population sector deficit. Aside from that expected income from its sales, the government also expects that when a technologically progress and skillful private concessionaire will need over the transmitting line, it will result to more efficient and top notch network. It says that because of the crippling energy problems, people are hard to be provided with a reliable and secured way to obtain electricity at low rates, so privatization of such sector will be a necessary response to it, while appealing to more investments at the department (Perez).

But, the federal government actually marginalizes the stake of local electricity sector using this method. First, they can be exploited since through the privatization of TransCo, it'll surely lead to a monopoly of the private business. Since in EPIRA, the cross-ownership of syndication, generation, and transmission under NAPOCOR is allowed, this only means that through the profit-seeking goal of the monopolies over those areas, vitality rates will still remain indefinable (TransCo).

TransCo's privatization obviously manifest the federal government favoring TNC's as well as local elites like the Lopez Group of Companies in their reinforced power above the Philippines' vitality sector. Based on the president of PSALM or Consumer Sector Assets and Liabilities Management Edgardo del Fonso, it could seem not appealing to foreign investors if the possessions of TransCo will never be franchised countrywide (PSALM).

Actually, predicated on a primer released by IBON Base in 2003, there were already at least eight TNCs which got expressed their involvement in the privatization of TransCo, not to mention that these TNCs are among the world's largest. And some of those TNCs were already on hold of some local electricity industries' functions. But credited to certain limits of your constitution, these were only allowed to operate up to 40 percent of the power sector, but then again PSALM possessed admitted that later on, it is possible that there would be some restructuring to be achieved to allow higher share of private sector on power service. This only means that alternatives are wide open on the total overseas control of our local vitality sector at the trouble of the countrywide interest and welfare.

As of now, this transmitting system under NAPOCOR known as the "crown jewel" of the government's vitality privatization program is already at the hands of the private sector. Over the 12th of December in 2007, PSALM has conducted an effective bidding for TransCo's 25-years concession contract to be able to maintain its functions on transmission. On the year 2008, it finally declared that TransCo's transmitting function will be transferred under the management of the National Grid Firm of the Philippines (NGCP), the successful bidder who offered a US $3. 950B for the said concession following the three failed endeavors in the previous years (PSALM).

This was regardless of the opposition of various consumer and militant groupings like people Against Warrantless Electricity Rates (Ability) and the Bagong Alyansang Makabayan (Bayan) because for them it was an essential step for the government to take since the burden soon will greatly fall at the neighborhood consumers when the winning bidder will make ways to recover its reduction and opportunities at the earliest time possible. As Legazpi cited in her article, regarding to Tapang, a convener of Electricity, "(Transco's) infrastructure offers a highway for electricity and other uses. Whoever manages it can impose a 'toll payment' on users of the highway. Within the hands of private passions, there's always the potential for maltreatment in the name of better profits". Bayan has also released their declaration through their secretary general in the person of Reynato Reyes, adding that TransCo is of tactical importance to our economy therefore it must remain as state-owned which is fundamentally a prejudice on the part of the government to continue to such action due to the fact that this will lead to a great load to be carried on by typical consumers (Legazpi).

Amidst those oppositions, regrettably on that same season also, the congress got approved a bicameral quality which will offer franchise of TransCo to NGCP, legitimizing it as a private unit to perform a general public service. By Dec of that 12 months, past Pres. Arroyo agreed upon the law that may officially grant franchise to NGCP, RA 9511. Following that year, in 2009 2009, TransCo was officially turned to PSALM in a ceremony kept at PSALM's office in Makati on January 14, 2009. The event significantly mentioned the NGCP's expert to get started on TransCo's procedure under its new management with Atty. Moslemen T. Macarambon as its first new chief executive. Currently, it is going by Rolando T. Bacani, leader and CEO (TransCo).

After the sales transaction of TransCo, NGCP has paid almost All of us $1B to PSALM as provisioned by the contract as its straight payment for its procedure. PSALM is also positive that after TransCo's privatization and turning over of NGCP on its operation will eventually lead to an efficient operation and effective maintenance of our transmission network, while relying on the successful record and vast connection with the consortium and its own foreign lovers (PSALM).

After TransCo's successful bidding and private transfer of ownership, PSALM continues to be opening its invitation for bidding of other vitality plant life such as those at Naga, Cebu, the Naga Electricity Plant Complex, in Tongonan, Leyte, the Unified Leyte Geothermal Electric power Vegetation, and in Pililia, Rizal, the Malaya Therman Power Plant life (PSALM).

In 2010, many property under power era have been sold as well as its contracted capacities. Regardless all those, the PSALM and the government still pushes for further privatization of the power sector.


When the government holiday resort to privatizing express owned businesses especially those involved with economic services, this fundamentally turn to an impact which is really as dangerous as the liberalization of trade and investment. Like a Third World country, taking this critical step marginalizes the eye and welfare of the folks and other monetary development programs and jobs for the united states. The people tend to be more vulnerable and are easily damaged by the impact of experiencing no jobs and the inaccessibility of basic cultural services. After some years of the offer of improved success and efficiency of the privatized areas by the federal government to the people as the reason behind the privatization of such basic consumer services, the supposedly great results are yet unseen but on the other hand, general public menaces and problems are experienced of the folks on that particular service (IBON 131-134).

First of most, the government did not acquired a financial alleviation on privatizing general population services, since like in NAPOCOR and other corporations, the federal government becomes more bankrupt and indebted to private or international buyers since privatizing resources only provide short-term or one-time big-time earnings, but in the long term, leads to a great reliance on private sector due to the bills incurred after privatization. it has also resulted to a lesser allocation of cover other cultural services due to the programmed appropriation of budget to debts servicing mandated by the law. Some privatized belongings by the government were also much less significant since sometimes they are fundamental financial players in the country's economic growth. Moreover, regarding privatization of NAPOCOR, the federal government had shouldered the huge liabilities kept when it was privatized, or some elements of it. This results to a huge community funds getting used to pay for its hobbies and amortization. Through point out guarantees, the federal government bore the obligations of the IPPs, which through long-term contracts are reassured by the government to have come back on its ventures no real matter what. In short, the government is no more than losing in this kind of program and little by little is put into a profound personal bankruptcy. That is one of the key reasons for the fiscal turmoil experienced by national federal government in 2004 but still contributes to the worsening condition of the overall economy.

On increased efficiency

One point that is usually to be remembered regarding privatization is that having the private sector will not indicate that the used and controlled organization of the federal government would yield better efficiency. To begin with, these were not intended to be profit-oriented but to provide accessible support and basic service to individuals. This is critical to the consumer's situation, since if the market fails, there if the administration to secure them against it and continue steadily to provide them its responsibility. Supposedly, our federal expect that whenever private corporations required control over it, they will invest in its improvement, but just like the MWSS privatization, this isn't what is actually happening however they use their income to broaden their properties around the globe, in a nutshell they aren't concerned of effectiveness of operation of the organization, but more worried on how to gain more income.

People's access to basic services

When GOCCs are privatized, people can get spikes in their rates and inaccessibility and unaffordability of the basic service which were recently provided to them by the government in low and accessible prices. Needless to say this is only logical since private firms' main target is no apart from to obtain additional profit. We are able to expect this impact to be mainly aggravating to the poor and marginalized Filipino individuals who also try their best to survive with the very small income that doesn't increase in real terms and growing joblessness throughout the united states. Actually, almost 20 percent of an average household income is put in to pay their electricity bills alone. Because of this, some of the poor Filipino families had chosen to lower their electricity link with decrease daily budget costs, or even on some individuals their source was cut due to being not able to pay for their high electric invoice.

Up to now, many the typical Filipino individuals are unable to get basic services at lower or "reasonable" rates since as like the federal government said, those privatized organizations should have been more efficient due to much better infrastructure applied by private organizations. But, it just bloated up their rates that folks could hardly pay for it, just like in the energy service of NAPOCOR, cost recovery mechanisms were approved to the people's responsibility. So during that, we can already conclude that whenever market forces rule without the regulation from the government promoting general population welfare, the consumer's situation is largely at stake and worsened.

Because of the we can evidently say that where is the "selection of electricity" and "electric power choice" that the federal government said and guaranteed to its consumers if the power industry and its functions will be privatized? Evidently, it shows that it was only a incorrect and deceiving affirmation.

Worker's situations

Aside from these harmful impacts, privatization also heightens degree of unemployment especially in underdeveloped countries like the Philippines. This is because of the displacement of staff from the previous state-owned firms or in other way, through contractualization of those somehow blessed worker's left at the privatized organization. In this way, workers are placed in an serious situation as the private corporation continues to attaining more profits and lowering production costs. Also, they are aggrieved through lowering their wages without their power to stop those private businesses.

In the restructuring and privatization of NAPOCOR, more than 2, 000 of its employees experienced already lost their job and presently, as hazards of further privatization of electric cooperatives are on the way, this quantity will possibly increase. Apart from the employees of NAPOCOR who lost their jobs, there's also many workers from industrial and commercial sectors who lost their careers anticipated to closure of their companies which of the factors which triggered it's the very high electricity rates they have lesser creation that cannot compete with other establishments either around the country or outside. Factory workers also don't get wage hike since their employers insist they are spending more and more on procedure and maintenance costs as professional electricity rates also sores up.

Actually previous July 2009, more than 1, 000 previous employees of TransCo weren't accepted by NGCP to keep their focus on it after 5 weeks of move period, despite having EPIRA assurances which were not that effective afterwwards. This was because of the high NGCP benchmarks in receiving new employees according to the Mindanao Transco Employees Union or Mintrea.

Before TransCo was privatized, the consortium of the private companies to dominate it said that they will not let those more than 5, 000 employees of TransCo to reduce their careers instead they'll again hire them even privatization is already done. But regarding to Walder Revellar, North Luzon section chief executive of Mintrea, almost all of the TransCo employees suffered retrenchment even before when NAPOCOR was began to be privatized when reorganization within the sector initiated. Many of them were of old age but has not reached the age of retirement life on the new private administration of TransCo anticipated to forced leave since regarding to them, they don't have the full capacity to soak up all of the previous workers of TransCo. Being too old to be rehired, employees like them therefore had difficulties in finding new jobs because of their age constraint. Some of the previous employees also are at early age, which are reported to be too young to be retired, that can have done congrats on TransCo if they were not taken off their jobs as Revellar stressed out also. Unfortunately, regardless of the worker's complains they couldn't anything about this concern because it has been moved already to the private sector (Inquirer).

After of all results of TransCo privatization, it only seems to us that the government is just making a way to decline its sociable responsibility to their state & most especially to the people in providing the essential services it must provide in the first place. Public utilities and services play an important role in guarding the poor and marginalized sector of population so enabling the "free-market" and the market forces operate on its on those belongings would defy the public possessions' original intention like the power sector in producing effective and affordable electricity throughout the united states. It possessed also meant a lesser government treatment to the economic and sociable activities of the state, and so it leads to people's situation becoming worse as time passes as private sector is constantly on the exploit our resources and earn super-profits. This will not be tolerated since above all, they are all done at the people's expenditure.

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