NGCP insists only ERC can order technical audit

Published by admin at February 4, 2020

By Lenie Lectura @llectura, Butch Fernandez & Samuel P. Medenilla

THE National Grid Corp. of the Philippines (NGCP) said on Monday that only the Energy Regulatory Commission (ERC) is authorized to conduct an audit on its technical performance as stated in the concession agreement, amid pressure from the Department of Energy (DOE) and lawmakers for an audit based on, among others, concerns over foreign control in daily operations.

“What NGCP cannot accede to is an audit of the system operations and other facilities as demanded by TransCo (National Transmission Corp.). The law and the concession agreement are clear that such audit may be ordered only by the ERC based on the standards defined in the Philippine Grid Code,” NGCP President Anthony Almeda said at a Senate Energy Committee hearing.

Also invited as resource person to the hearing called by Sen. Sherwin Gatchalian, ERC chief Agnes Devanadera assured senators that within the first quarter of the year, the ERC can conclude the procurement for the third party that will conduct the audit and commence with the review thereafter.

NGCP is 40-percent owned by the State Grid Corp. of China (SGCC), and this has fanned fears raised in some quarters that a foreign entity can remotely shut down the Philippines’s power supply. The NGCP repeatedly disputed this.

“Hindi po totoo ito [That is not true]. There is no proverbial red button that can instantly turn off the Grid. Kahit ako po hindi ko maisasara ang Grid nang mag-isa (Even I cannot shut it down on my own). There are existing protocols that actually prevent the unsupervised remote access to the Grid. I am willing to discuss with the Honorable Committee these protocols, but only in executive session,” said Almeda.

At the beginning of their operations, Almeda said the Chinese had advised NGCP on technical matters, given their experience and expertise. Over the years, the Chinese side passed on their know-how, and Filipino technical staff have acquired their own experience and expertise, he added.

“The management and control of system operations are exercised exclusively by Filipino engineers. Even the specifications of technical equipment sourced from various suppliers were designed by Filipino engineers before purchase orders were made. The fact that a number of these technical equipment were supplied by Chinese entities does not mean that SGCC now exercises control over system operations,” Almeda continued.

As such, he pointed out that there is no need to “take over” system operations from the Chinese and “turn over” the same to the Filipinos, since the control of the systems operations has always been and remains to be with NGCP.

At present, Almeda said the only Chinese nationals within NGCP are the directors who were elected based on SGCC’s proportionate shareholding in NGCP.

Cybersecurity

Nonetheless, the National Security Council (NSC) is now calling for stronger “cybersecurity” for the country’s critical infrastructure, particularly the energy sector, amid concerns it could be hijacked by foreign powers.

National Security Adviser Hermogenes C. Esperon Jr. issued the statement after the National Cybersecurity Inter-Agency Committee (NCIC) completed its preliminary baseline assessment of the NGCP.

The NCIC includes representatives from the NSC, Office of the Executive Secretary (OES), Department of Information and Communications Technology (DICT), Armed Forces of the Philippines (AFP) and the Professional Regulation Commission (PRC).

“It was suggested that periodic cyber-security assessments are needed to ensure that our power grids are safe from foreign manipulation,” Esperon said.

NSC held the review from December 2019 up to last month after some energy officials said at an earlier Senate hearing that the State Grid Corp. of China, which has a 40-percent stake for NGCP, could remotely access NGCP’s systems.

Esperon noted they have “taken seriously” the “allegation that the National Grid can easily be controlled by foreign entities,” thus they conducted the review.

He said they are now working with stakeholders “to reinforce the security protocols and guarantee” for the energy sector.

“With this in mind, and with the recently conducted assessment, we assure Filipinos that the administration is taking steps and precautionary measures to guarantee that the National Grid Corp. of the Philippines, its facilities and infrastructures are protected with the highest security procedures,” Esperon said.

Audit pushed

The DOE and TransCo have been pushing for the conduct of an audit of the transmission grid.

“NGCP must allow DOE and TransCo to conduct an audit based on the protocols we submitted,” said Energy Secretary Alfonso Cusi.

However, NGCP officials said there are certain parameters for different kinds of audit, adding that the only agency that should conduct an audit is the ERC.

“The Epira [Electric Power Industry Reform Act] specifies that only the ERC can impose sanctions and penalties. But TransCo wants to do the performance audit itself—a matter of regulation reserved only to the ERC…NGCP will trust only the ERC not only because the ERC was established by law as ‘an independent quasi-judicial regulatory body,’ but because TransCo has so far been far from independent or fair; but also, it has demonstrated a desire for power the law rightfully withheld from it,” said Almeda.

The ERC, for its part, admitted there was a delay on its part to conduct an audit. “We did not have funds then and ERC was only granted the necessary funds in the 2020 [budget]. The practice then was NGCP would provide the fund for the audit, [then they will] award ng contract for the third party and [then they will do the] review. So, we had to change this,” explained Devanadera to senators.

No remote access

Meanwhile, Almeda also said that there is no truth to the insinuation that NGCP allows international remote access to the Grid through the Intercontinental Submarine Network installed by Huawei and allegedly linked to the NGCP.

“In the first place, NGCP was not the one which installed said Intercontinental Submarine Network…the software and hardware system that controls the national grid, the Scada [or the Supervisory Control and Data Acquisition]system, is a stand-alone system that is not connected to the Internet or any network. The Scada is disconnected from the Virtual Private Network, or VPN, by default, rendering an unsupervised direct remote access impossible,” said Almeda.

The Senate Energy Committee told NGCP to allow the DOE and TransCo to inspect the grid operator’s facilities.

The ‘deal’ pitched by Win

“Here’s the ‘deal:’ You allow the inspection of the facility or else we will proceed reviewing your franchise because clearly there’s a violation of the Constitution, which is the basis of your franchise,” said Senate Energy panel chief Gatchalian. “I have a very simple deal. Talk to your board, to your management because clearly we’ve established that you violated the Constitution.”

The violation raised by Gatchalian has something to do with the appointment of two non-Filipino citizens who used to hold key positions at the NGCP. They are both Chinese.

The Constitution requires the executive and managing officers of public utilities to be Filipinos.

Monday’s hearing was called for the committee to verify whether Filipinos are in charge of its day-to-day management amid national security concerns. The committee also wanted to scrutinize the compliance of the country’s power transmission line on its mandate to safeguard the Grid, and ensure continuous supply of electricity in the country.

Senators wary

At Monday’s hearing, senators took turns grilling officials amid concerns the China’s state-owned SGCC could control the Philippines’s lone power transmission facilities.

NGCP executives, however, insisted, “We have no problem in security.”

They said, “We do not object to inspection [of the Grid] but not to jeopardize the power grid,” adding that the cybersecurity in place had not encountered problems as the facility is checked everyday for “vulnerability.”

This, after Sen. Richard J. Gordon questioned the Chinese personnel’s role in the system.

Gordon and other senators questioned the presence of Chinese nationals in the executive and managerial positions at the NGCP, wondering why the primary signatories for the Luzon Substation Expansion Project contract in 2011 were Chinese “and not Filipinos.”

A copy of the contract presented by Gordon to the Gatchalian committee showed a certain Wen Bo signed as the technical officer and Zhou Xiaoan as the country manager, while Almeda, who was then chief administrative officer, signed “only as a witness.”

Gordon then grilled NGCP officials on the use of the NARI Transmission Control Operational Platform system, a remote monitoring and control structure located in China, in running the Grid.

Noting that the system enables the Chinese engineers to troubleshoot, operate and control the NGCP’s power transmission network, Gordon voiced concern the Grid could be shut down “from China,” a fear that NGCP officials allayed.

Gordon invoked Article 12 Section 2 of the 1987 Philippine Constitution which, he noted, states that “all lands of the public domain, natural resources, such as waters, oils, including all forces of potential energy are owned by the State.”