JICA backs PSALM's universal charge

MANILA, Philippines - The Japan International Cooperation Agency (JICA) is supporting the Power Sector Assets and Liabilities Management Corp.’s move to collect universal charges from electricity consumers to effectively implement its mandate as specified in the Electric Power Industry Reform Act (EPIRA).

In a two-pronged study undertaken in 2009, JICA analyzed the asset and liability management (ALM) schemes that PSALM has implemented and will implement to substantially reduce, if not liquidate, the financial obligations of the National Power Corp. (Napocor) by 2026, the end of PSALM’s corporate life. 

The study’s coverage included the administration of the universal charge (UC) – the other important function of PSALM as stipulated in the EPIRA.

The study team of JICA, an independent government agency that assists economic and social growth in developing countries and promotes international cooperation, consists of Mitsubishi Research Institute Inc., Tokyo Electric Power Co. Inc. and the Bank of Tokyo-Mitsubishi UFJ Ltd. 

For the UC component of the study, the JICA team collaborated with the Preferred Energy Inc.

For the ALM component, the study provided an institutional and operational framework that included guidelines necessary to the effective application of financial instruments such as refinancing or derivatives structures at minimum cost.

The study suggested measures that would enable PSALM to prudently manage its foreign currency account and to mitigate environmental risks such as interest rates, liquidity, and foreign exchange rates through hedging and other tools since some of the debts are denominated in foreign currency.

For a more successful implementation of PSALM’s liability management program, JICA supported the corporation’s accelerated asset sale schedule.

The JICA study confirmed the necessity of PSALM’s application of the UC for the recovery of the stranded contract cost and the stranded debt.

Recognizing the importance of the UC funds, PSALM, together with the JICA study team, surveyed 25 distribution utilities from May to June 2009 to get the feedback from collecting entities and to evaluate the issues related to the UC collection and remittances. 

The universal levy administration system (ULAS) was designed to improve the performance of collecting entities and to regularly monitor their compliance with the reportorial requirements of PSALM on UC billings. 

The effective implementation of the system is expected to enhance PSALM’s collection efficiency.