National Grid seeks better insurance coverage from GSIS

MANILA, Philippines — The National Grid Corp. of the Philippines (NGCP) has sought an overhaul of its insurance policy under the Government Service Insurance System (GSIS) to allow the private concessionaire to better recoup losses from damage on transmission facilities.

In this way, the NGCP will not have to pass on and recover from all power consumers the full costs of repairing transmission facilities that had been damaged by natural calamities such as typhoon, according to company chief administrative officer Anthony Almeda.

In his letter to GSIS president and general manager Roberto Vergara, Almeda said NGCP wanted to have a more efficient, cost-effective and responsive package to cover the country’s power transmission assets.

The current GSIS insurance package covers transmission assets valued at $2.26 billion, with liability limits of $50 million for Industrial All Risks (IAR); $50 million for natural catastrophe; $15 million for the submarine cables; and $50 million for losses occurring from sabotage and terrorism. Last year, the NGCP paid $6.7 million in premiums for its policy with the GSIS.

Almeda cited the need for an insurance package with a lowered deductible level feature.

According to NGCP spokesperson Cynthia Perez Alabanza, the current policy contains a double threshold or deductible feature of an aggregate of $5 million worth of damages annually, then $2 million for each loss.

This meant that damages for a given incident should reach at least $2 million to enable NGCP to collect from insurance to pay for the cost of repairs. Anything below $2 million has to be shouldered by NGCP.

“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,” Alabanza said.

“Historically, we have never been able to collect from insurance because the threshold was too high,” Alabanza added.

An example of an instance wherein the NGCP failed to tap its insurance cover under the GSIS was in 2009 when the heavy rainfall and flooding brought by typhoons Ondoy and Pepeng extensively damaged the transmission lines and substations in Luzon.

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 then filed a petition with the Energy Regulatory Commission 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.

“It is significant to note that the NGCP is under the regulatory authority of the 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,” Almeda said in the letter.

“As a prudent public utility entrusted by the government to operate and maintain the National Transmission Corp. assets, NGCP has the responsibility to procure and cover them with cost-effective, efficient, and responsive insurance which will prevent it from passing its losses to the public,” he further said.

Alabanza added that because the NGCP has been managing and operating facilities owned by the government, it has been required under the law to obtain insurance for these assets from the GSIS. (report from Amy R. Remo, Philippine Daily Inquirer)