Wednesday, March 23, 2011

NGCP prods GSIS to improve terms so public won’t bear uncovered losses

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WEDNESDAY, 23 MARCH 2011 20:07 LENIE LECTURA / REPORTER

THE National Grid Corp. of the Philippines (NGCP) has urged the Government Service Insurance System (GSIS) to come up with a better, more comprehensive and efficient insurance policy so as to avoid incurring unnecessary expenses that could force the private firm to pass this on to consumers.
NGCP chief administrative officer Anthony Almeda said in a letter to GSIS president and general manager Roberto Vergara that the current policy should be reviewed and include the lowering of its Industrial All Risks (IAR) policy’s high deductible level feature, which prevented it last year from being indemnified or compensated either partially or in full for damages to the country’s transmission assets.
Being a private corporation, the NGCP asked the GSIS for an insurance cover that is separate from the package covering the National Power Corp., and the Power Sector Assets and Liabilities Management Corp., which are both state-run firms.
The NGCP paid a $6.7-million premium for its policy with the GSIS covering the December 2009-December 2010 period. Almeda said the company’s insurance package  for this year should include this lower deductible level to prevent it from passing on its losses to the public.
“It is significant to note that the NGCP is under the regulatory authority of the Energy Regulatory Commission [ERC], which protects the public interest and frowns upon applications to recover losses in the event of calamities, accidents or otherwise, when it can procure proper insurance to cover such,” said Almeda.
According to NGCP spokesman Cynthia Perez Alabanza, the policy contains a double threshold or deductible feature of $5-million annual aggregate, then $2 million for each and every loss, which is combined for the IAR and submarine cables,  and another $2 million for each and every loss occurring from sabotage and terrorism.
The GSIS insurance package covers transmission assets valued at $2.26 billion, with liability limits of $50 million for IAR; $50 million for natural catastrophe; $15 million for the submarine cables; and $50 million for losses occurring from sabotage and terrorism.
“While it appears that Transmission Assets have been sufficiently insured against risks, unfortunately, the cover seems to be ineffective, inefficient and unresponsive, due to its high deductible feature which prevents NGCP from being indemnified or compensated either partially or in full for any damage to, or loss of, its Transmission Assets during the relevant period,” said Alabanza, quoting from  Almeda’s letter sent to the GSIS.
Alabanza said that because the NGCP manages and operates facilities  that are owned by the government, it is required under the law to obtain insurance for these assets from the GSIS.
“But we need a better package that is more comprehensive and efficient than the present one offered by the GSIS,” Alabanza said.
“As I see it, there are two options: either we call on Congress to pass a law that would allow private entities operating public utilities to choose their own insurer or the GSIS can implement  reforms in its reinsurance procedures,” she noted.
One instance where the NGCP had failed to tap its insurance cover under the GSIS was when it occurred losses to its transmission lines and substations due to the heavy rainfall and flooding brought by Typhoons Ondoy and Pepeng in 2009.
The GSIS insurance package also failed to cover losses incurred by the NGCP arising from the sabotage of  several transmission towers in Mindanao,  also in 2009.
As a result, the NGCP filed a petition with the ERC seeking the recovery of these losses  in the form of “force majeure event-pass through” claims that would be charged to power consumers in Luzon and Mindanao. 

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