PSALM seeks to recover P16 billion

For stranded costs, debts

MANILA, Philippines — The Power Sector Assets and Liabilities Management Corp. is proposing to recover at least P16 billion from consumers starting this year to cover the stranded contract costs (SCC) and stranded debts (SD) of the National Power Corp. (Napocor).

In separate applications, PSALM asked the Energy Regulatory Commission (ERC) to allow it to recover P5.23 billion in SCC and P11.8 billion in SD for calendar year 2017.

The total amount of SCC will be equivalent to P0.0582 per kilowatt-hour (kwh) covering a one-year period through the universal charge (UC).

The UC-SCC rate was computed based on the electricity sales forecast for 2019 of the Department of Energy (DOE).

PSALM is asking the ERC to grant a provisional authority or interim relief to charge and collect the computed SCC from consumers as the power regulator hears the merits of the application.

This will help in reducing financial obligations and borrowings of the state-run firm.

“The issuance of provisional authority for this petition will enable PSALM to immediately recover SCC, and use the UC-SCC proceeds to service maturing loan obligations that were incurred for the eligible IPP contracts. Provisional approval of this SCC will also reduce refinancing requirements of PSALM to service these maturing obligations, thus lessening additional borrowing costs,” PSALM said.

In the same application, PSALM asked the ERC to approve its true-up adjustment of the UC-SCC for 2007 to 2013 to recover P5.95 billion for the remittance period covering April 1, 2013 to Dec. 1, 2017.

The state-run firm implements the UC-SCC rate of P0.1938 per kwh to cover under-recoveries.

Approval will not result in changes in consumers’ electricity bills but will only extend the UC-SCC rate.

In its separate application, PSALM said overall SD amount would be equivalent to P0.152 per kwh in UC-SD based on a seven and one half years recovery period.

The rate was computed by dividing the P11.80 billIon by the DOE’s projected energy sales from January 2019 to June 2026.

PSALM said revenues from the sale of electricity of the remaining assets are not enough to cover its operations and provide funds for the payment of Napocor debts and obligations.

“To address the funding gaps, PSALM is forced to resort to temporary solution by borrowing, which entails borrowing costs, which in turn will form part of the UC-SD, effectively increasing the UC burden of all electricity end-users,” it said.

“On the other hand, if PSALM will be allowed to immediately recover the UC-SD under this petition through provisional approval, new loans and refinancing to service maturing debts and lease obligations would lessen. This would redound to the benefit of electricity end-users due to reduced borrowing costs, effectively reducing the UC burden,” PSALM said.

SCC refers to the excess of the contracted cost of electricity under eligible contracts over the actual selling price of the contracted energy output of such contracts in the market.

SD, on the other hand, are any unpaid financial obligations which have not been liquidated by the proceeds from the sales and privatization of Napocor assets.

The SD and SCC charges are purposely intended to pay the remaining financial obligations that the government incurred when new power plants were constructed to end the power crisis that engulfed the whole country particularly in the 1990s and early 2000.

 PSALM continues to incur SD and SCC because the proceeds from privatization of NPC/independent power producer (IPP) generation assets and the revenue generated from the NPC-owned and IPP plants are not enough to pay  contractual obligations with the eligible IPPs and lending institutions.