Consumers may pay for NPC’s stranded debts, contract costs

By Lenie Lectura – August 29, 2018
from Business Mirror

CONSUMERS should expect to pay for an accumulated universal charge (UC) of P0.5593 per kilowatt hour (kWh) from 2020 to 2026, unless government agrees to utilize the P207-billion Malampaya fund to pay the stranded contract costs and stranded debt of the National Power Corp. (NPC). “We have been paying P0.1938 per kilowatt hour since January 2013, and P0.2203 per kWh since June 2017, to pay for PSALM’s [Power Sector Assets and Liabilities Management Corp.] obligations through the universal charge for stranded debts [SD] and stranded contract costs [SCC],” Senate Energy Committee Head Sherwin T. Gatchalian said.

PSALM is the agency tasked to manage the privatization of existing assets of  NPC with the objective of liquidating all of the latter’s financial obligations.

The senator said this means an expenditure of P44.06 per month—the equivalent of about 1 kilogram of rice—for a 200-kWh Filipino household.

“The universal charge is estimated to further increase in the coming years to pay off the remaining debt of P466.2 billion.  The cash-flow projection of PSALM shows the necessity of collecting an accumulated UC of P0.5593 per kWh from 2020 to 2026. This means a total additional charge of P111.86 per month for an average household—money that could have been used to buy 2 to 3 additional kilos of rice,” said Gatchalian in his sponsorship speech of Senate Bill 1950, the Murang Kuryente Act, a measure based on a bill authored by Senate President Pro Tempore Ralph G. Recto.

Since 2000 over P1.479 trillion worth of PSALM’s financial obligations were paid from privatization proceeds, independent power-producers’ contracts and collections from power consumers through the UC.

“The measure I am sponsoring today proposes to minimize, if not completely eliminate, the universal charges for stranded contract costs and stranded debts. If passed into law, this bill would lower electricity rates and provide significant consumer savings for Filipinos,” he said.

The Murang Kuryente Act proposes to use the existing and future collections of the Malampaya fund solely for the payment of the SD  and SCC.

Since 2001 the total remittance to the National Treasury for Malampaya Fund has been P251 billion, but only 17 percent has been released, leaving a balance of P207 billion.

The Malampaya Fund is the government’s net share from the net production proceeds from Service Contract 38, the Malampaya Natural Gas Project. This fund, initially intended for exploration, development and exploitation of energy resources, has remained largely unused since 2001.

“Using P204 billion, the total collection as of December 2017, would result in savings of P0.5467  per kWh. For a household consuming 200 kWh per month, this would result in savings of P109.34 per month, and P1,312.08 per year. The projected annual savings would be enough for a household to buy an extra sack of rice—a welcome relief for poor families burdened with the high price of this essential Filipino food staple as of the moment,” Gatchalian said.

To safeguard the use of the fund,  PSALM is required to first apply collections from its different sources of revenue before it can tap the Malampaya fund.  Also, the amount used from the Malampaya fund for the payment of debt shall be allocated through the General Appropriations Act.

Once the obligations have been fully paid, the Malampaya fund will accrue back to the special fund used to finance energy-resource exploration, development and exploitation programs.

The bill also has a key transparency feature. It requires PSALM’s annual projected and actual cash-flow statements, including its payment schedule, to be submitted to the Department of Energy, Energy Regulatory Commission, Department of Finance, Department of Budget and Management, and the Joint Congressional Power Commission.