The National Power Corporation (, also known as NAPOCOR, NPC or National Power) is a Philippine government-owned and controlled corporation that is mandated to provide electricity to all rural areas of the Philippines by 2025 (known as "missionary electrification"), to manage water resources for power generation, and to optimize the use of other power generating assets.
Prior to the effectivity of the Electric Power Industry Reform Act (EPIRA) law or Republic Act No. 9136 on March 1, 2003 two years after its June 8, 2001 approval by President Gloria Macapagal Arroyo that deregulated the power industry by turning over NAPOCOR's operations, maintenance, and ownership of the Philippine power grid to another government-owned corporation National Transmission Corporation (TransCo) on March 1, 2003 as mandated on the said law that organized the industry into four sectors: generation, transmission, distribution, and supply, NAPOCOR was a vertically integrated power utility engaged in the production, transmission and distribution of electric power, used to be the largest provider and generator of electricity in the Philippines, and served as the operator and owner of the country's power grid and its related assets and facilities from its creation on November 3, 1936 to March 1, 2003, with TransCo as its then child agency from June 26, 2001 to March 2003. It was also the principal power provider for Manila Electric Company (Meralco), the only power distributor in the Metro Manila area and its nearby provinces (including all towns or cities such as Santo Tomas, Batangas on some of their respective provinces that cover the Meralco franchise).
NAPOCOR used to be the country's largest corporation in terms of revenue. Profitability however is a main concern now because it is in the business of missionary electrification that provides electricity to far-flung, off-grid remote areas and islands at subsidized rates. As a government owned and controlled corporation, NAPOCOR is subject to the scrutiny of the Commission on Audit (COA) and the Governance Commission for Government Owned and Controlled Corporations (GCG). It also manages 17 large dams and 11 watersheds in the country and continues to oversee the privatization of the government's remaining undisposed power assets. As of December 2015, NAPOCOR has a total of 1,735 megawatts (MW) of generating capacity, which includes 345 MW of small generators in small islands and off-grid locations and 1,390 MW in hydroelectric power plants and independent power producing plants in the main grids.
History
Creation The National Power Corporation was originally organized as a non-stock, public corporation under Commonwealth Act No. 120 approved by President Manuel L. Quezon on November 3, 1936. The law nationalized the hydroelectric industry and reserved for the use of NPC, all streams, lakes and springs in the Philippines where power may be developed, subject to existing rights. In 1960, under Republic Act No. 2641, it was converted into a wholly government-owned stock corporation with a capitalization of .
Revising the Charter The authorized capital stock was increased to ₱250 million under Republic Act No. 3043 passed on June 17, 1961, and was further increased to ₱300 million under Republic Act No. 4897 approved on June 17, 1967. A major event in the corporate existence of the NPC was the passage on September 9, 1971, of Republic Act. No. 6395 which gave birth to a revised charter for NPC. Under the revised charter, the activities and functions of the corporation were decentralized and carried out by three regional offices to be established in Luzon, Visayas and Mindanao. The charter, likewise, extended the corporate life of NPC up to the year 2036.
NPC placed in charge of electrifying the Philippines With the government's aim of promoting the economic welfare of the country through the attainment of total electrification, especially in rural areas, Presidential Decree No. 40 was issued on November 7, 1972, for the setting up of island grids with central/linked-up generating facilities and cooperatives for the distribution of power. The NPC, as the authorized implementing agency of the state, was entrusted with the responsibility of setting up transmission line grids and the construction of associated generating facilities in Luzon, Mindanao, and major islands of the country, including the Visayas.
In January 1974, President Ferdinand Marcos issued Presidential Decree No. 380 placing the NPC directly under the Office of the President. The move was intended to make the NPC a more efficient implementing arm of the government in the conservation and utilization of water resources and in the total electrification of the country. The Decree further boosted NPC's capitalization to ₱2 billion and its principal indebtedness, exclusive of interest, to ₱3 billion.
In December 1975, pursuant to the continuing effort of the President to make the government machinery more attuned and responsive to the needs of the service and of the people, the President decided to attach the NPC to the Department of Public Works, Transportation and Communication (now Department of Public Works and Highways). The transfer was effected by Letter of Implementation No.31 dated December 11, 1975, pursuant to Presidential Decree No.830 dated November 27, 1975, which extends ‘flexible and continuing authority to the President to restructure the Office of the President.”
Increasing capitalisation The presidential action giving added impetus to the corporation in the implementation of its power development program is embodied in Presidential Decree No. 938 issued on May 27, 1976, which further increased NPC's capitalization to ₱8 billion and its principal indebtedness to ₱12 billion. It also authorized NPC to contract foreign loans of up to U$4 billion. Incurring massive amounts of foreign debt was partially justified by the desire to pursue nuclear power. Marcos requested that National Power Co. (the government owned electric utility) negotiate a deal to buy two nuclear reactors.
Two proposals were submitted by General Electric and Westinghouse Electric Corporations. General Electric submitted a proposal containing detailed specification of the nuclear plant with estimated cost of US$700 million. On the other hand, Westinghouse submitted a lower estimated cost of US$650 million but the proposal did not contain any detail and specification. The presidential committee tasked to oversee the project preferred General Electric's proposal but this was overruled in June 1974 by Marcos, who signed a letter of intent awarding the project to Westinghouse, despite the absence of any specification and details on their proposal. Similarly, Marcos disregarded wishes and advice of the National Power Corporation, the government-owned and controlled corporation responsible for electricity in the country. Marcos's decision was driven by the low cost earlier proposed by Westinghouse. Also Westinghouse used connections to strike the deal. But by March 1975 after the contract was awarded, Westinghouse's cost estimate ballooned to US$1.2 billion without much explanation. The final construction cost reached to $2.2 billion for a single reactor producing half the power of the original proposal. Many problems identified in earlier stages remained throughout construction, as reported by inspectors, though all these were denied by Westinghouse to save their company's image.
On October 6, 1977, with the creation of the Department of Energy under Presidential Decree No. 1206, the NPC was attached to the new department for purposes of policy coordination and integration with sectoral programs.
President Marcos increased the capitalization of NPC to ₱50 billion, thus the Government holds 50 billion over Total Principal Capital, percents and share. The record-setting action was made through the issuance of Presidential Decree No. 1360 on April 24, 1978, which effectively established the NPC as the biggest corporation in the country.
The increase in capitalization is expected to afford a greater degree of corporate flexibility in the implementation of the countrywide power programs and corporation management. In a simultaneous development, the president appointed Gabriel Y. Itchon as Deputy Minister of Energy and concurrently president and chief executive officer of the National Power Corporation, the first ever to be appointed in such capacity in the then 43-year history of the corporation. Under P.D. No. 1360, the designation of president replaced that of the general manager as head of the office. Along with the appointment of Itchon as NPC president were the appointments of top management men to the positions of senior vice president, vice president, and department manager as part of the reorganization move to make the corporation more responsive and attuned to the needs of the service and the demands of the times.
Take-over of Meralco In November 1972, when the President issued Presidential Decree No. 40, the National Power Corporation was authorized "to own and operate, as a single integrated system, all generating facilities supplying electric power to the entire area embraced by any grid set up by NPC." Contemplated to be integrated in the system were all Meralco generating units, and thus began a long drawn-out negotiation for the sale and turnover of these units to the government at terms and conditions supposedly acceptable to all parties.
On June 11, 1978, the government and Meralco agreed on the purchase of the latter's power-generating units at a total cost of ₱1,100 million. The contract was signed by Finance Minister Cesar E.A. Virata, representing the government, and Cesar C. Zalamea, chairman of Meralco, with Energy Minister and NP Board Chairman Geronimo Z. Velasco, Energy Deputy Minister and NPC President Gabriel Y. Itchon, IBP Assemblyman Emilio M. Abelo, Sr. and Meralco Treasurer Antonio Ozaeta as witnesses.
The government purchase of the thermal plants of Meralco was in line with the NPC policy to centralize all generating capacities in Luzon under its operations as part of the unification of the so-called Luzon grid. Such centralization is aimed at providing energy throughout the Philippines and building up additional generating capacity for electricity in pursuance of the government objective of total electrification of the country.
Meralco units covered by the initial sale are those of Malaya 1 in Pililla, Rizal; Gardners 1 and II and Synders 1 and II in Sucat, Muntinlupa, and fuel storage facilities in San Pascual, Batangas. Negotiations for the Meralco sale began in 1975 when Meralco approached the government for assistance in view of financial problems that made it difficult for Meralco to meet its huge debt service requirements. Consequently, an inter-agency government panel was formed to conduct valuation studies.
On August 11, 1975, the first memorandum agreement between the government and Meralco was signed by then Executive Secretary Alejandro B. Melchor, Jr. and former Meralco Chairman Emilio M. Abello, Sr. Through the years, the composition of the government panel underwent several changes brought about by retirements from service, shifts in assignments and appointments of technical men. Representations for NPC started with Ramon R. Ravanzo in 1975, then to Conrado D. del Rosario later that year, and on to President Gabriel Y. Itchon.