Cabinet approves Malampaya Fund use to retire power debts

By Myrna M. Velasco –  January 12, 2017, 10:01 PM

from Manila Bulletin

The economic cluster of the Duterte Cabinet has already given the green light for the use of the Malampaya Fund to retire the estimated P245-billion residual liabilities of the Power Sector Assets and Liabilities Management Corporation (PSALM), a policy that is built upon the goal of lowering electricity rates for consumers.

“That measure (use of Malampaya Fund), I have already submitted that to the Cabinet Economic Cluster and it was already approved… they don’t have any reservations about it, we’re one in this,” Energy Secretary Alfonso G. Cusi said in an interview.

If the Malampaya Fund will be applied to settle the remaining power sector debts, it is estimated that electricity rates being passed on to the Filipino consumers can be reduced by as much as P0.28 per kilowatt hour – reckoned from the aggregate cost recoveries for stranded debts and stranded contract costs being reflected as universal charges  (UCs) in the electric bills.

Cusi said if there’s seeming delay in the use of the Malampaya Fund to retire the power sector’s outstanding financial obligations, “that’s because this whole process needs to pass through legislation.” But he qualified “so far, we (the Executive Branch and Congress) have been moving simultaneously on this measure.”

The energy chief discerned that this “Malampaya Fund getting stranded in government coffers has some contradicting points – that while we have the money intended for energy resource development, the irony is that we’re actually having shortage in electricity supply… if it’s like in a family: We have the money, but we are actually poor and there’s nothing we can use to buy food because that amount is stranded in an account… so that’s not coming as a right balance.”

As communicated to the Department of Energy (DOE), the Malampaya Fund reportedly has R228-billion deposit since three months ago – labeled in the national treasury as “special account.”

Previous policies allowed Presidential discretion on fund release from the State’s gas royalty share but a ruling of the Supreme Court already invalidated such practice.

Cusi said this circuitous process of doing it through legislation is the only way for this energy resource fund to be applied in getting rid of the remaining massive power debts. In other countries, he said, “for their rates to go down, they’re not doing ‘cash conversion’ of their government share or what they call as ‘wealth of the nation’, instead the amount corresponding to that is automatically utilized to keep their electricity rates lower.”

He stressed “if we did the same, and we have not opted to convert our Malampaya revenue share to cash, and we’ve instinctively applied the amounts to moderate the price of power, our electricity rates should have been more affordable.”

Cusi expounded that with the use of the Malampaya Fund, “instead of collecting the universal charge from the consumers, we’ll just pay the debts.”

Presently, PSALM has pending applications with the Energy Regulatory Commission (ERC) for P35 billion worth of stranded debts and P70.12 billion for stranded contract costs recoveries – that when regulatory approvals would come in, these would be reflected as UC components in the electric bills.