Garnishment of PSALM assets to cause power lack

Business Mirror
26 Aug 2014 Written by Lenie Lectura

THE Power Sector Assets and Liabilities Management Corp. (PSALM) on Monday warned the public of a possible nationwide power shortage if a local court’s order to garnish over P60 billion of its assets is enforced.

“If our funds are garnished, our long-term debts would become immediately due and demandable,” PSALM President Emmanuel R. Ledesma Jr. said.

“This will result in operating- cash deficit, which will lead to power shortage nationwide.”

Under PSALM’s loan agreements, Ledesma said garnishment is a ground for default. This, he explained, will then activate the payment-acceleration clause. Given cross-default provisions, an event of default in one loan will cause default in other loans. Consequently, PSALM would be obligated to instantly settle outstanding obligations amounting to P329 billion.

Ledesma also pointed out that without any budget allotted for this unscheduled expenditure, PSALM would have to rely on the national government for support through advances, or on-lending arrangements, which would entail additional government borrowings.

“As a result of insufficient funds to cover operational requirements, PSALM’s performance of its responsibility to ensure energy security will be rendered difficult, if not impossible,” Ledesma added.

In particular, PSALM, if it encounters money problem, will not be able to fire up its own power plants because it could not provide fuel to run the facilities.

The state firm, which took over the assets of the National Power Corp. (Napocor), is responsible for the fuel supply and operations budget of the Malaya Thermal Power Plant in Luzon, Power Barges (PBs) 101 and 102 and Naga Coal-fired Thermal Power Plant (CFTPP) in the Visayas and PB 104 in Mindanao, all of which produce around 430 megawatts (MW) in dependable capacity.

PSALM is, likewise, obliged contractually to provide for the fuel requirements of independent power producer (IPP) plants, namely, Ilijan Natural Gas Power Plant (NGPP) in Luzon, and Zamboanga Diesel Power Plant (DPP) and General Santos DPP in Mindanao.

Ledesma explained that if the independent power producer administrators (IPPs) allow the garnishment of monthly and generation payments to PSALM, it, in turn, will be unable to pay capacity and other fees for the IPPs in breach of its contract with the IPPs.

PSALM is contractually responsible to pay for the capacity fees for the following power plants with appointed IPPAs: Bakun Hydroelectric Power Plant (HEPP), Ilijan NGPP, Pagbilao CFTPP, Sual CFTPP and San Roque HEPP.

The capacity or energy fees for the following power plants without IPPAs are, in contrast, PSALM’s direct obligations, which will likewise be adversely affected: Benguet Mini-Hydros, Caliraya-Botocan-Kalayaan HEPP, Casecnan HEPP, General Santos DPP, Mindanao CFTPP, Mount Apo 1 and 2 GPP, Unified Leyte Geothermal Power Plant (GPP) and Zamboanga DPP.

PSALM also collects and administers the Universal Charge for Missionary Electrification, which is the source of funds of the Napocor for its operations in off-grid areas.

“Again, we implore the recipients of the patently void notices of garnishment to exercise prudence. We reiterate our earlier statement, which explains the necessity for compliance with the legal procedure for garnishment of public funds, and with the Supreme Court’s 2009 Resolution holding that PSALM is entitled to due process and has a mere subsidiary liability,” Ledesma said.

Just recently, the Regional Trial Court in Quezon City has issued notices of garnishment on PSALM’s assets worth P60,244,316,841.88. The amount represents settlement claims of the Napocor’s Drivers and Mechanics Association (Dama), who were terminated in 2003.

Ledesma, however, said the notices issued by the sheriffs of the local court to PSALM’s banks, customers and other energy industry partners are “legally baseless, violative of due process, premature at best, and hence patently void.”

The local court’s decision was based on a June 30 Supreme Court (SC) resolution that upheld the settlement payment to the Napocor’s Dama. PSALM was told to pay P60.24 billion, inclusive of a 10-percent lien amounting to P6.02 billion, as well as P1.81 billion representing lawful fees and costs for the execution of the SC’s resolution.

The sheriffs also demanded the immediate settlement of the amount.

However, Ledesma said the sheriffs’ actions are inconsistent with the terms of the SC’s earlier resolution dated December 2, 2009, on the same case. This 2009 resolution emphasizes PSALM’s right to due process, he said.

Ledesma also argued that pursuant to established jurisprudence, public-policy considerations dictate that government funds dedicated for specific public uses may not be diverted for other purposes and seized under writs of garnishment to satisfy monetary judgments by courts. Moreover, Ledesma said all disbursements of public funds should be covered by an appropriation from Congress, to avoid disruption of public functions.

Also, PSALM stressed that jurisprudence likewise provides that a money claim against the government, despite validation in a final and executory judgment, should first be filed with the Commission on Audit given its primary jurisdiction to examine, audit and settle all claims against the government pursuant to Presidential Decree 1445 (Government Auditing Code of the Philippines).

“In light of the foregoing, in order to preclude any devastating effects on the general welfare and the country’s energy security and financial stability, PSALM cautions the recipients of the notices of garnishment against unlawfully, carelessly and hastily releasing PSALM’s receivables or bank deposits in their possession,” Ledesma said.

Energy Secretary Carlos Jericho L. Petilla, meanwhile, agreed that consumers will be burdened by the enforcement of the local court’s order if and when PSALM borrows money from the national government to pay off the P60 billion.

“If PSALM will borrow, the amount will form part of the liability of the NPC and that will be charged to the people in the form of universal charge,” Petilla said.

According to Petilla, PSALM filed last Friday a motion for reconsideration before the SC. source