PSALM to end UC-stranded cost collection by next June

Published December 28, 2019, 10:00 PM By Myrna M. Velasco

https://business.mb.com.ph/2019/12/28/psalm-to-end-uc-stranded-cost-collection-by-next-june/

State-run Power Sector Assets and Liabilities Management Corporation (PSALM) is scheduled to end its collection of universal charge for stranded contract costs (UC-SCCs) in the power bills of consumers by June next year.

That has been based on the ruling of the Energy Regulatory Commission (ERC) relative to the existing UCs for stranded contract costs that are currently passed on in the electric bills.

PSALM president Irene Joy Garcia noted that the ERC decision in 2014 on the UC-SCC of 5.43 centavos per kilowatt-hour (kWh) had been prescribed to be collected only until June 2020.

Nevertheless, for the other universal charge on stranded debts (UC-SD) amounting to 4.28 centavos per kWh; that had been mandated for pass-on in the electric bills until the end of PSALM’s corporate life in 2026.

The aggregate UCs being collected from the two line items on stranded debts and stranded contract costs amounted to 9.71 centavos per kWh – and such are being reflected monthly in the electric bills of Filipino consumers.

As noted by PSALM, UC stranded debt collections for 2019 already hovered at ₱2.507 billion; while UC stranded contract costs already fetched ₱2.547 billion or a total of ₱5.005 billion for both – and all coming from the consumers’ pockets.

It will be the UCs on stranded debts and stranded contract costs that the “Murang Kuryente” Act or the Republic Act 11371 would be intending to expunge from the electric bills.

However, the law’s implementation has been encountering delays because this policy will require fresh round of government borrowings so the mandated costs absorption could be funded in the General Appropriations Act (GAA) or the national budget.

As targeted, the cost subsidy under the Murang Kuryente Act should have been covered by the Malampaya fund, but since hard cash from it is no longer available, the national government would have to tap loans for it.

Garcia noted if the Murang Kuryente rate reduction will be enforced next year, it will be PSALM that will do the borrowings first and will subsequently pass that on into the account of the national government.

But she said the level of loans to be tapped has yet to be calculated – and the timeframe they have been looking at for that to be firmed up is by April of 2020.

“There was a timing issue because the law got passed in August 2019 and the national budget was already submitted that time. So what we will do is: we will borrow as PSALM, but it will still be covered by NG (national government) guarantee and then obviously that loan obligation will be spread and it would appear still as part of the computation of the stranded contract costs and stranded debts,” Garcia explained.

She similarly indicated that the UCs for stranded debts and contract costs may not necessarily be wiped out in the electric bills, because it will just be the shortfall in cost recoveries that shall be funded by the Murang Kuryente Act.