by Lenie Lectura - August 11, 2016
The Department of Energy (DOE) has
formally proposed to the Duterte Cabinet to tap the Malampaya fund to pay for
billions of pesos worth of debt incurred by power state firm National Power
Corp. (NPC).
These debts—in the form of stranded
debts (SDs) and stranded contract costs (SCCs)—are being passed on to consumers
via the collection of universal charge (UC), an item found in monthly power
bills.
SDs refer to any unpaid financial
obligations of NPC that have not been liquidated by the proceeds from the sales
and privatization of NPC assets.
SCCs of NPC or distribution utility,
meanwhile, refer to the excess of the contracted cost of electricity under
eligible contracts over the actual selling price of the contracted energy
output of such contracts in the market.
On the average P0.35 per
kilowatt-hour (kWh) is collected from consumers every month to pay for NPC’s
debts.
This move from the agency is meant
to reduce the consumers’ monthly electricity bill.
Balance
DOE Spokesman Felix William B.
Fuentebella said the balance of the Malampaya fund currently amounts to “over
P100 billion.”
“There is already existing stranded
contract cost and there’s also the stranded debt. Both are being studied as to
how these two should no longer be passed on to consumers,” he said.
The Malampaya fund comes from
proceeds of the Malampaya natural- gas project, which is a joint undertaking of
the Philippine government and the private sector.
The project is spearheaded by the
DOE and was developed and being operated by Shell Philippines Exploration BV
(Spex) with a 45-percent stake on behalf of joint-venture partners
Chevron Malampaya Llc. also with a 45-percent stake, and PNOC Exploration
Corp., which holds the remaining 10 percent.
Under the service-contract
agreement, 70 percent of the gross proceeds from the sale of natural gas would
go to the contractor to recover the investment cost. The remaining 30 percent
is shared by the government and the consortium on a 60-40 basis, respectively.
In 2015 the Philippine government
received $400 million as its share of the income from the Malampaya deepwater
gas-to-power project.
Malampaya royalties has, so far,
been used for the fuel requirements of the NPC-Small Power Utilities Group
(NPC-SPUG) amounting to P2 billion.
Congressional decision
Fuentebella said part of the
agency’s proposal is “to come up with an interagency approach” as to how much
of the remaining Malampaya fund should be allocated to reduce the SD, as well
as the SCC.
“We asked interagency to account.
So, it could be a portion or all of it. It’s up to the interagency,”
Fuentebella said.
But the decision whether to tap the
Malampaya fund for such use is up to Congress. Fuentebella explained that a
more detailed proposal would be up to the interagency committee, while the
approval would have be decided by lawmakers.
“Based on [a] SC [Supreme Court]
decision, this needs to go through Congress when it comes to appropriation. The
process will be through an act. All appropriation laws would originate from the
House of Representatives and the Senate may introduce amendments, if any,” he
said, adding that with Congress’s approval, “then this can be carried out in
2017.”
Former Rep. Mark O. Cojuangco said
in a social-media post on the same day that the Malampaya funds “should be used
as capex [capital expenditure], not subsidy. That is tantamount to it being
squandered.
Because subsidies do not create
lasting solutions, they are but a never-ending expense. Then what when funds
ran out?”
When asked to comment, Fuentebella
maintained that “it’s up to Congress.”
Meanwhile, the Matuwid na Singil sa
Kuryente Consumer Alliance Inc. (MSK) said consumers should not pay for these
debts.
“The way things are going, all debts
and losses of NPC that would not be covered by PSALM’s [Power Sector Assets and
Liabilities Management Corp.] proceeds and collections for privatization would
eventually be recovered from electricity consumers nationwide. The losses and
deficits are combinations of so many factors, many not the fault and to the
benefit of the consumers. Hence, it would be a grave injustice to our people to
make them responsible for all the financial losses,” it said.
ERC concurs
The Energy Regulatory Commission
(ERC) said it would fully support any DOE initiative aimed at reducing
electricity rates, and it will implement national government policies
consistent with its mandate to set the rates and protect the interest of the
consumers.
“There is much wisdom in Secretary
[Alfonso G.] Cusi’s proposal. This could be a near-term solution to the issue
of power rates. We should help him find a solid legal basis for this option. We
believe that Secretary Cusi’s proposal is a boost to our effort to help fulfill
the President’s commitment to make power rates more reasonable and affordable,”
ERC Chairman Jose Vicente B. Salazar said.
The ERC itself, he said, is finding
ways and means to guarantee that only just and reasonable costs get into their
electricity bill.
There are three pending filings of
PSALM for the recovery of SD in the total amount of P70,161,501,376.86,
according to the ERC.
PSALM is the agency mandated by
Republic Act 9136, or the Electric Power Industry Reform Act of 2001, to handle
the sale of the remaining state power assets and financial obligations of NPC.
The government transferred NPC’s assets and debts to PSALM in 2008.
Of the total amount, the latest
application of PSALM pertain to the recovery of P27.7 billion of NPC’s SD
portion of the UC for the Luzon, the Visayas and Mindanao grids for calendar
year 2015.
The ERC said it is closely
scrutinizing the petition, which will have to undergo due process before it can
finally render its decision on the case.
“The ERC is studying the case
meticulously and with a lot of caution since the petition concerns pass-on
charges. The case will have to be evaluated on the basis of reasonableness and
affordability,” Salazar added.
There is no timetable as yet as to
when the commission can issue a decision. It only said the amount and period
for recovery would be determined through hearings and evaluation. “And of
course, after considering the impact to consumers,” ERC Spokesman Rexie Digal
said in a text message.
Privatization efforts
For the PSALM’s part, the agency’s
officer in charge, Lourdes Alzona, said her office is determined to reduce the
debts of NPC.
“We are continuously identifying
certain measures to avoid and/or minimize costs, specifically on refinancing.
Among these steps are stringent management of collectibles, sale of real-estate
assets, disposal of other assets, which entail high costs for maintenance,” she
said in a text message.
PSALM, she added, plans to sell some
real-estate assets that could fetch an estimated P5 billion.
“The sale would be staggered since
we still have to sort out which can be sold, depending on the land title. There
are areas that can be sold, such as the resort in Puerto Asul, while there are
others that can’t be sold, such as the one in Bagac,” Alzona said.
This plan, she added, will be over
and above the UC charge administration and other regular activities to support
the liquidation of PSALM’s financial obligations, that being its main mandate.
The outstanding financial
obligations as of December 31, 2015, stood at P550.81 billion. This is broken
down into P305.41 billion debts and P245.40 billion lease obligations.
For 2015 alone, it paid P55.398
billion. Of which, P29.041 billion were principal debts serviced, including
debt prepayment of P6.32 billion, while independent power producers’ lease
obligations serviced amount to P26.357 billion.
In addition to debts serviced,
interests on principal debt amounting to P23.353 billion were also paid in
2015.
In all, PSALM paid off P78.751
billion for 2015.
PSALM sourced internal funds from
operations of remaining plants and collection of privatization proceeds to pay
off the debts in 2015.
The remaining obligations would also
be settled through privatization collection proceeds.
Based on DOE data, UC collection as
of May 2016 amounted to P0.468 billion.
“As of May 31, 2016, remittances of
collecting entities to PSALM amounted to P94.817 billion with interest earnings
from deposits and placements of UC funds amounted to P0.147 billion. On
the other hand, UC fund disbursement amounted to P94.496 billion.
Accounting for the inflows and
outflows of the UC fund leaves it with a balance of about P0.468 billion as
of May 31, 2016,” said the DOE.
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