Manila Bulletin
Published: April 13, 2013
At pre-divestment period of Power Barges (PB) 117 and 118, the Power Sector Assets and Liabilities Management Corporation (PSALM) had been running the assets but selling the generated electricity below market costs, thus, resulting in P3.8 billion losses for the company.
“Prior to privatization in February, 2010, PB 117 and 118 incurred average annual operating losses for three consecutive years – from 2007 to 2009 – of about P1.7 billion and P2.1 billion, respectively,” PSALM president Emmanuel R. Ledesma has admitted.
PSALM has been generating at relatively high cost but it was compelled to sell the electricity below market given the benchmark grid rate in Mindanao.
The pass-on rate to consumers, according to sources, is way too low to even recoup the fuel utilized in running the power barges.
Ledesma indicated that the losses “were subsidized by the operations of all the other plants in the Mindanao grid and eventually recovered through borrowings.”
The recovery paradigm through borrowings had raised more questions rather than provide concrete explanation though on how PSALM’s losses are being recouped, passed on or perhaps, cross-subsidized by other end-user segments or by the consumers from other grids.
Perceptibly, in economic regulation, losses cannot be “recovered through borrowings.” Instead, these can only be covered momentarily, but that borrowed cash will also be recouped eventually through the rate-payers.
Onward to that phase of cost recovery, PSALM cannot give a straightforward answer yet if even consumers from Luzon and Visayas will eventually shoulder part of those operating losses. Accordingly, these are items demanding stern scrutiny by the Energy Regulatory Commission.
The below-market selling rate of PSALM, or the government for that matter, for such generating assets has always been a dilemma for prospective investors in Mindanao because they cannot match the “very low tariff” and incur losses.
This has been one of the reasons why Mindanao consumers were flabbergasted when the buyer of the power barges reflected true cost of generation. And the same case may happen when the government rolls out its planned modular genset solution for the grid.
Conversely, if PSALM will be the entity logging the losses, it can still apply for recovery via stranded debts if the cost-plugging scheme had been done through borrowings.
And since book entries are fungible, consumers will no longer identify in time if they have been subsidizing part of the below-market selling rates in Mindanao. (MMV) source
“Prior to privatization in February, 2010, PB 117 and 118 incurred average annual operating losses for three consecutive years – from 2007 to 2009 – of about P1.7 billion and P2.1 billion, respectively,” PSALM president Emmanuel R. Ledesma has admitted.
PSALM has been generating at relatively high cost but it was compelled to sell the electricity below market given the benchmark grid rate in Mindanao.
The pass-on rate to consumers, according to sources, is way too low to even recoup the fuel utilized in running the power barges.
Ledesma indicated that the losses “were subsidized by the operations of all the other plants in the Mindanao grid and eventually recovered through borrowings.”
The recovery paradigm through borrowings had raised more questions rather than provide concrete explanation though on how PSALM’s losses are being recouped, passed on or perhaps, cross-subsidized by other end-user segments or by the consumers from other grids.
Perceptibly, in economic regulation, losses cannot be “recovered through borrowings.” Instead, these can only be covered momentarily, but that borrowed cash will also be recouped eventually through the rate-payers.
Onward to that phase of cost recovery, PSALM cannot give a straightforward answer yet if even consumers from Luzon and Visayas will eventually shoulder part of those operating losses. Accordingly, these are items demanding stern scrutiny by the Energy Regulatory Commission.
The below-market selling rate of PSALM, or the government for that matter, for such generating assets has always been a dilemma for prospective investors in Mindanao because they cannot match the “very low tariff” and incur losses.
This has been one of the reasons why Mindanao consumers were flabbergasted when the buyer of the power barges reflected true cost of generation. And the same case may happen when the government rolls out its planned modular genset solution for the grid.
Conversely, if PSALM will be the entity logging the losses, it can still apply for recovery via stranded debts if the cost-plugging scheme had been done through borrowings.
And since book entries are fungible, consumers will no longer identify in time if they have been subsidizing part of the below-market selling rates in Mindanao. (MMV) source
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