Lawmakers welcome ERC decision on PSALM rate hike bid

Two lawmakers on Tuesday welcomed the Energy Regulatory Commission decision dumping the petitions of Power Sector Assets and Liabilities Management Corp. (PSALM) for the National Power Corp. (Napocor) to increase power rates to recover stranded debts. In a text message Tuesday, Bayan Muna Rep. Teddy Casiño said the situation spells temporary respite from power rate hikes. He fears that PSALM will revive the petitions, noting the dismissal was simply based on technicalities. “We are apprehensive that the petitions were dismissed on the mere ground that they lacked supporting documents. This means PSALM can [file again] similar petitions that would charge the bloated bonuses and perks of PSALM executives, as well as questionable loans, on consumers," he said. Eastern Samar Rep. Ben Evardone said in another text message the decision was “a major victory for us Filipino consumers who would be spared of additional burden of high electricity costs due to mismanagement and anomalies in PSALM and the National Power Corp." Napocor is a state-owned utility firm that operates and maintains power plants and is the largest provider and generator of electricity in the country. Created by virtue of the 2001 Electric Power Industry Reform Act or EPIA, PSALM manages Napocor's debts. It also manages the sale and privatization of existing generation assets, real estate, and other disposable resources of the state power utility. GMANews.TV contacted PSALM, but failed to get through as of this posting. Unexplained money Evardone earlier asked PSALM to withdraw its petitions until it can explain what happened to the money from Napocor's privatized assets. [See: Lawmaker: PSALM should withdraw power rate hike petitions] Evardone had filed House Resolution 106 ordering the House energy committee to investigate the financial condition and funding of PSALM and Napocor, the status and schedule of payments of stranded debts and contract costs. The privatization of 91.8 percent of Napocor assets generated $10.6 billion. Of the amount, $3.39 billion was realized from the sale of 25 generating plants, $44.5 million from assets turned over to independent power producers (IPP), $7.3 million from decommissioned power plants, $3.95 billion from the National Transmission Corp. concession (TransCo), and $3.229 billion from the transfer of Napocor-IPP contracts to an IPP administrator. From May 2009 to April 2010, PSALM obtained $2.8 billion in new loans but paid only $1.3 billion of Napocor’s $5.3-billion debt after the national government absorbed about $4 billion of Napocor's obligations, Evardone said. PSALM had filed four petitions before the ERC to recover P22 billion in stranded contract cost of seven IPPs in Luzon, P470.8 billion in stranded debts, P26.6 billion in stranded contract cost of seven other IPPs, and P54.8 billion in stranded debts. Four petitions Should the ERC approve those petitions, power rates would increase by P1.4525 per kilowatt hour. Stranded debts refer to "any unpaid financial obligations, which have not been liquidated by the proceeds from the sales and privatization of Napocor assets" while financial obligations pertain to net obligations of Napocor after deducting the P200 billion in total debts assumed by the national government. Stranded contract costs refer to the excess of contracted cost of electricity under eligible IPP contracts of Napocor over the actual selling price of the contracted output of such contracts in the market. In a press statement, the ERC said it found that PSALM failed to submit pertinent documents to support its allegations and prayers, and observed that PSALM’s calculation of stranded contracts costs included fuel costs, the recovery of which is governed by a separate mechanism. In PSALM’s petition for recovery of stranded debts, the ERC also noted significant differences and inconsistencies in the calculation of the proceeds of the sale of Napocor's generation plants. Based on these deficiencies, the ERC dismissed PSALM’S petitions. “Although recovery of [Napocor's] stranded debts and stranded contract costs is recognized and sanctioned by law, the ERC is bound to ‘verify the reasonable amounts’ that will be allowed recovery through the universal charge. Without all the supporting documents to validate PSALM’s claims, the ERC cannot even begin to discharge such mandate," ERC executive director Francis Saturnino C. Juan said. — LBG/VS, GMANews.TV