PSALM looks to NGCP receivables to ease impact of universal charge

Manila Times.net

STATE-RUN Power Sector Assets and Liabilities Management Corp. on Wednesday said the government may use the receivables from National Grid Corporation of the Philippines’ concession contract to ease the impact of the universal charge.

Julie Domino, PSALM spokesperson and corporate lawyer, said the government is pushing for the review of all existing power contracts, including that of the NGCP concession, to help cushion the impact of the universal charge, which consumers will shoulder.

Domino said if they can sell the receivables ahead of the scheduled payment of the concessionaire, this may help in the efforts to lower the charge on consumers.

“What we want to do at PSALM is to sell all the assets of Napocor, it will lower the [universal charge],” she said.

PSALM recently sought the approval of the Energy Regulatory Commission to collect a total of 39 centavos per kilowatt-hour in the form of the universal charge to recover state-owned National Power Corporation’s stranded debts and stranded contract costs incurred over the years.

The Electric Power Industry Reform Act provides that a universal charge will be imposed on all electricity end-users for the payment of Napocor’s stranded debts and stranded contract costs.

The Epira defines stranded debt as any unpaid financial obligation of Napocor that has not been liquidated by the proceeds from the privatization of the generating firm’s assets. The stranded contract cost is the excess of the contracted cost of electricity under eligible contracts over the actual selling price of the contracted energy output of these contracts in the market.

Domino said the government can collect a total of $5.87 billion, with interest for the next 15 years, from the lease contract of state-run National Transmission Corporation to NGCP.

She also said PSALM is talking to various banks and financial institutions to look at the possibility of selling TransCo’s receivables, but admitted the government may not need to get the approval of NGCP on this scheme.

“We may give them notice. The decision to carry out this scheme would be decided upon by PSALM and the banks or financial institutions that would be buying these receivables at a discounted rate,” she said.

She said there are delays in the privatization of some assets and contracts—including the Unified Leyte geothermal complex and Agus-Pulangi hydropower plants—that have been subjected to review by lawmakers.

Domino said they are also converting most of PSALM’s dollar loans to peso-denominated obligations to save on foreign exchange costs.

The official said that PSALM is asking Congress to lengthen its corporate life to stretch the payment of the universal charge from the proposed 15 years to 25 years. Created under the Epira, PSALM’s corporate life ends in 2026.

Domino said these Napocor debts, which were used to put up power plants that helped ease the power crisis in the 1990s, will have to be paid no matter what.

“We are urging the public to understand that these debts of Napocor would have to be eventually settled by the government. The government will need money to pay for it and the money would come from the people in any other form such as new tariff and/or new taxes,” she said.

“We need to do something about these debts so we won’t be paying more in the future. The universal charge is a social payback to the efforts of the government to provide affordable power rates and to resolve the power crisis that virtually crippled the country’s economy in the past,” she added.

At present, PSALM’s financial obligations stand at $15.8 billion, $7.7 billion of which are debts and $8.8 billion are independent power producer contracts.

PSALM started to settle the maturing obligations of Napocor when the asset and debt transfer provision in the Epira was consummated in 2008. If the debts of the state-owned utility firm had remained at their 2001 level of $16.39 billion, PSALM would have wiped out these financial obligations.

PSALM said the liabilities of Napocor, however, increased significantly after the enactment of the Epira because of commitments and obligations to sustain its operations. To date, PSALM is incurring some P5 billion worth of operating losses a year for running power plants that are not earning enough.

In 2003, new IPP plants—the CBK hdyro, Ilijan natural gas, San Roque hydro—raised PSALM’s obligations to $22.35 billion.

With the completion of the privatization program and the implementation of the universal charge, PSALM expects to reduce its financial obligations to $3.78 billion by the end of its corporate life.

Based on its application, PSALM wants three centavos for the stranded debt component of the universal charge to be recovered over a 15-year period.

For the stranded contract cost component, PSALM wants to collect 36 per kWh over a four-year period in accordance with formulas prescribed under the revised guidelines issued by the ERC.

PSALM would propose to the ERC that the universal charge be collected over a 15-year period to mitigate the impact of the increase on consumers. If it would be allowed by the ERC, the stranded contract cost component to be collected will only be six centavos per kWh.

James Konstantin Galvez