By Lenie Lectura - July 9, 2017
THE Power Sector Assets and Liabilities Management Corp. (PSALM) is seeking regulatory approval to pass on to end users the stranded debt of the National Power Corp. (NPC) amounting to P3.7 billion through the universal charge (UC).
PSALM, in a petition for the availment of NPC’s stranded contract costs (SCC) portion of the universal charge for 2016 filed before the Energy Regulatory Commission (ERC), proposed to collect P0.0429 per kilowatt hour (kWh) for one year to mitigate the impact on consumers.
“The calculated UC-SCC for the calendar year 2016 amounts to P3,686,192,736.05, which is equivalent to P0.0429 per kWh covering a one-year recovery period”, said PSALM, which is seeking a provisional authority (PA) from the ERC to charge and collect the computed UC-SCC, or such amount determined by the commission.
It said the 2016 UC-stranded debt (UC-SD) adjustment was calculated based on the projected energy sales of 85,935 gigawatt-hours. “The UC-SCC rate for 2016 is derived by dividing the calculated 2016 SCC by one-year electricity sales forecast for 2018 based on the Power Development Plan 2015-2030.”
As provided under Section 34 of the Electric Power Industry Reform Act, UC will be imposed on all electricity consumers to cover payment of NPC’s stranded debt and stranded contract costs.
Stranded contract costs refer to the excess of NPC’s contracted cost of electricity with independent power producers (IPP) over the actual selling price of the output. Stranded debt refers to NPC’s unpaid obligations that were not liquidated by proceeds from the sale of its assets.
The UC, which is a separate line item in consumers’ electric bills, has different subcomponents, depending on the utilization of the funds as specified in the UC collection.
“As PSALM has vigorously pursued its mandate of privatizing the generation assets and the power facilities, revenues from the sale of electricity of the remaining assets are not enough to cover its operations and provide funds for the payment of NPC debts and obligations,” the PSALM said.
To address the funding gap, PSALM is forced to resort to temporary solution by borrowing that entails borrowing costs, which, in turn, will form part of the UC-SD, effectively increasing the UC burden of all electricity users.
But if PSALM would be allowed to immediately recover the UC-SD under its petition through provisional approval, new loans and refinancing to service maturing debts and lease obligations would lessen.
“PSALM seeks this Commission to grant the PA to enable PSALM to immediately recover SCC and accumulate sufficient funds to service loan obligations that were incurred for the eligible IPP contracts. Early SCC recovery will, likewise, translate to substantial savings on borrowing costs, as PSALM need not resort to refinancing to service the eligible IPP obligations and maturing debts,” it added.
PSALM, the state agency tasked to privatize NPC’s power assets to help generate funds to pay off NPC’s debts, is authorized to impose UC from all end users to compensate for any remaining deficit.
It is also mandated by law to calculate the amount of the stranded debts and stranded contract costs of NPC, which shall be the basis for the ERC in determining the universal charge.