Add’l P0.5143/kwh rate hike seen due to Napocor suit

MANILA, Philippines - Electricity rates may go up by an additional 51.43 centavos per kilowatt-hour if the Power Sector Assets and Liabilities Management Corp. (PSALM) is forced to settle up to P62 billion in damages from a law suit filed by former drivers and mechanics (DAMA) of the National Power Corp. (Napocor).

According to PSALM computations, the universal charge, which is a separate line in electricity bills charged to all electricity consumers, will go up to P6.8 per kwh from the current P6.287 per kwh in Luzon or an increase of P0.5143 per kwh to recover the P62 billion damages ordered by the Supreme Court. The additional P0.5143 will be recovered every month for five years.

The amount is lower at P0.2616 if the recovery period is 10 years.

PSALM is studying ways on how it can pay the P62 billion damages, including an increase in the universal charge.

PSALM president Emmanuel Ledesma Jr. said if the agency’s funds are garnished, this would affect daily operations.

Energy Secretary Carlos Jericho Petilla also expressed concern.

“My more serious problem is whether PSALM can contract for next year. If its funds are garnished, can it operate this year? That is the more serious problem,” Petilla said during the hearing on the energy department’s P4.46-billion budget for 2015 yesterday at the House of Representatives.

Thus, PSALM and Napocor have filed a motion for reconsideration before the Supreme Court appealing the matter.

Napocor, the state-owned power generation company, lost a class suit filed by former members of its Drivers and Mechanics Association (DAMA) who were terminated in 2003 and is being asked to pay P62 billion in damages, according to a Supreme Court resolution dated June 30, 2014.

In accordance with the Supreme Court’s decision, the Quezon City Regional Trial Court’s sheriffs issued notices of garnishment to PSALM.

The petitioners comprised about 8,018 beneficiaries and based on their representation to the court, are claiming P60 billion in payables.  The remaining amount represents legal fees.

Ledesma said if PSALM’s funds are garnished, its long-term debts would become immediately due and demandable because under PSALM’s loan agreements, garnishment is a ground for default which will activate the payment acceleration clause.

“Given cross-default provisions, an event of default in one loan will cause default in other loans.  Consequently, PSALM would be obligated to instantly settle outstanding obligations amounting to P329 billion as of June 2014,” Ledesma said.

He said without any budget allotted for this unscheduled expenditure, PSALM would have to rely on the National Government for support through advances or on-lending arrangements, which would entail additional government borrowings.

At present, PSALM is responsible for the fuel supply and operations budget of its power plants such as the Malaya Thermal Power Plant in Luzon, Power Barges (PBs) 101, 102 and 104 and the Naga coal-fired thermal power plant in Cebu.

In all, PSALM’s plants produce 430 megawatts of dependable capacity.