PSALM allowed to tap new borrowings

Updated December 2, 2019, 10:31 AM By Myrna M.Velasco

https://business.mb.com.ph/2019/12/01/psalm-allowed-to-tap-new-borrowings/

Since the national budgetary process for the Malampaya-subsidized rate reduction in the Murang Kuryente Act will start in 2021 yet, the implementing rules and regulations (IRR) of the law is allowing state-run Power Sector Assets and Liabilities Management Corporation (PSALM) to tap new loans in 2020 so the lower electricity rates can be reflected in the consumers’ power bills as early as next year.

The draft IRR of the law stipulated “considering the said amounts will not be accommodated in the GAA (General Appropriations Act) for 2020, PSALM will resort to borrowings and, correspondingly, the principal repayments and borrowing costs arising from such borrowings shall be included in the allocated amounts from the Murang Kuryente Fund for the succeeding years.”

And since the Malampaya fund had already been generally used up for other purposes and the anticipated amounts therein are now just “book entries,” framers of the law have propounded that the rate reduction from years 2020 to 2026 will have to be covered also by national government borrowings.

PSALM President Irene Joy Garcia has proposed to the Senate that if the company will borrow next year for the Murang Kuryente Act, there shall be a provision in the law’s IRR that this shall be eventually covered by the allocations to be made by the Department of Budget and Management – including the portion on interest charges.

The Murang Kuryente Act will reduce the universal charges (UCs) being paid for by consumers in the electric bills – primarily the line items on stranded debts and stranded contract costs.

Based on initial calculations, that should have redounded to a rate cut of ₱0.80 to ₱1.00 per kilowatt-hour, but the law’s IRR prescribes that the final amount must be reckoned first with those that could still be covered by the privatization proceeds of PSALM.

Based on data from PSALM, its remaining collection on proceeds from privatized power supply contracts still hover at ₱235.82 billion – and that shall be remitted by the independent power producer administrators (IPPAs) until the end of the firm’s corporate life in 2026.

The remaining collections from the IPPAs will ease up consumers’ burden on the universal charge for stranded contract costs in the electric bills, hence, the subsidy from Murang Kuryente Act may still be set at a lower base.

As set forth in the law, PSALM in coordination with the Department of Finance (DOF) shall “determine the amount to be programmed from the Murang Kuryente Act” – and that shall be computed against PSALM’s collection shortfalls.

The programming of the Malampaya subsidy shall be anchored on the following: The fiscal program of the national government; historical rate of approvals by the Energy Regulatory Commission (ERC) on the universal charge applications of PSALM; as well as the programmed corporate operating budget and cash flows of the state-run firm.