Business Mirror
Published on Thursday, 25 October 2012 19:20 Written by Butch Fernandez / Reporter
FREEDOM from debt advocates on Thursday pressed for a congressional review leading to a renegotiation of “onerous” contracts between the National Power Corp. (Napocor) and various foreign and local independent power producers (IPPs).
This even as the Senate Committee on Energy, chaired by Sen. Sergio Osmeña III, is set to endorse for plenary approval Senate Bill (SB) 3250, extending the corporate life of Power Sector Assets and Liabilities Management (PSALM) Corp. by 10 years, or until 2036, to allow it “better manage remaining liabilities and lPP contract obligations.”
In his explanatory note on SB 3250, Osmeña recalled that the Electric Power Industry Reform Act of 2001 (Epira), created PSALM with the principal purpose of managing the sale, disposition and privatization of the Napocor assets and IPP contracts with the greater objective of managing Napocor’s financial obligations in an optimal manner.”
“The reason why we are in favor of extending the life of PSALM is that the longer you stretch out a payment mode [on its debts] the lower it would be on a per kilowatt hour basis [for the consumers],” Osmeña said.
He explained that extending PSALM’s corporate life could effectively bring down an impending 39-centavo power rate increase to 7 centavos. He had asked the Energy Regulatory Commission (ERC) to defer approval of a pending petition for the 39-centavo increase to give Congress time to pass the bill.
“ERC was going to approve it already, sabi ko teka muna. Let us bring this down and the only way we can bring it down is by getting a long-term loan. The only way to get a long-term loan is to tell the banks they will not expire and PSALM will still be in business 25 years from now.”
But the Freedom from Debt Coalition (FDC), whose members staged a protest outside the Senate as Osmeña’s committee conducted a hearing on the PSALM extension bill, insisted that PSALM’s corporate life should instead be shortened because it “failed to drastically reduce Napocor’s debt and electricity rates.”
It added that the huge Napocor debt is still being passed on to consumers through the universal charge (UC). “Worse, it has this callous practice of giving huge incentives and bonuses to its executives and employees,” the FDC said in a statement calling on senators to reject Osmeña’s PSALM extension bill.
It pushed for a review and renegotiation of IPP contracts, saying this would “provide a three-in-one alternative” to the issue.
The FDC said before the enactment of Epira and creation of PSALM Corp., the debt of Napocor/PSALM Corp. stood at $16.39 billion. It added that with more than 70 percent of the Napocor generation assets and IPP contracts privatized, PSALM Corp. has an outstanding debt of $16.73 billion. “The question is: Where are the proceeds of the sale of these assets?”
The coalition also recalled that prior to the enactment of Epira and creation of PSALM Corp., the average electricity rate was around P5 per kilowatt-hour (kWh) but today, the average rate is around P10 per kWh.
FDC maintained that a thorough review will “expose the onerous terms to which the government were bound by and the contractual guarantees to the IPPs that resulted to the unjust passing on of the debt to the consumers.”
“Through the review and renegotiation, the government will be able to rescind the contracts where the IPPs have already more than sufficiently milked the government and the people for profit, as they have already recouped their investments and are only sitting pretty enjoying their returns—all at the consumers’ burden,” it added.
PSALM Corp. President Emmanuel Ledesma Jr., on the other hand, maintained that extending PSALM Corp.’s corporate life would help cushion the costs consumers would have to pay in writing-off the debts and contractual obligations of the Napocor. He told reporters in an interview that the proposal to extend PSALM’s term is intended to mitigate the impact of the UC on consumers.
“If we collect UC over a longer time, the resulting peso per kWh cost to be paid by consumers would be lower.”
Ledesma said they hope that the proposal to extend PSALM’s corporate life will be appreciated in the proper context.
(With a report from Jonathan L. Mayuga and Paul Anthony A. Isla) source
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