ERC will review PSALM bid to pass on P27.7-B NPC debt to consumers

by Lenie LecturaJuly 24, 2016

from Business Mirror

THE Energy Regulatory Commission (ERC) vowed to thoroughly evaluate the P27.7-billion application of the Power Sector Assets and Liabilities Management Corp. (PSALM) to pass on this amount to end-users through universal charge.

“I would like to assure PSALM that the ERC is giving this concern priority. We understand the importance and urgency of the matter at hand and we are committed to help the PSALM address this,” ERC Chairman Jose Vicente Salazar said.

The commission said it is also aware of the implications this may have on consumers.

“However, I would like to underscore that the ERC needs to study this meticulously and with a lot of caution, since this is a proposal for pass-on charges,” Salazar said. “While we are acting on this with dispatch, the proposed pass-on will have to be evaluated on the basis of reasonableness and affordability.”

PSALM made a public appeal for the ERC to act on its petition for the true up adjustment of the National Power Corp.’s (Napocor) stranded debt portion of the universal charge for calendar year 2015. The amount being applied for is P27.7 billion equivalent to P0.0283/kilowatt-hour (kWh) for a proposed recovery period of nine and a half years.

Salazar could not say when the commission would be able to decide on PSALM’s petition. “This case will still be subjected to hearing, to provide opportunities to all stakeholders to submit their positions and, thereafter, evaluated on the basis of evidence presented to the commission.”

The 2015 universal charge-stranded debt (UC-SD) adjustment was calculated based on the projected energy sales of 977,206 gigawatt-hours (GWh) for January 2017 to June 2026.

As provided under Section 34 of the Electric Power Industry Reform Act (Epira), UC will be imposed on all electricity consumers to cover payment of the Napocor’s stranded debt and stranded contract costs.

Stranded contract costs refer to the excess of Napocor’s contracted cost of electricity with independent power producers over the actual selling price of the output. Stranded debt refers to Napocor’s unpaid obligations that were not liquidated by proceeds from the sale of its assets.

The UC, which is a separate line item in consumers’ electric bills, has different subcomponents, depending on the utilization of the funds as specified in the UC collection.

“As PSALM has vigorously pursued its mandate of privatizing the generation assets and the power facilities, revenues from the sale of electricity of the remaining assets are not enough to cover its operations and provide funds for the payment of Napocor debts and obligations,” PSALM said.

To address the funding gap, PSALM is forced to resort to temporary solution by borrowing, which entails borrowing costs, which, in turn, will form part of the UC-SD, effectively increasing the UC burden of all electricity-users.

PSALM, the state agency tasked to privatize Napocor’s power assets to help generate funds to pay off the Napocor’s debts, is authorized to impose UC from all end-users to compensate for any remaining deficit.

It is also mandated by law to calculate the amount of the stranded debts and stranded contract costs of NPC, which shall be the basis for the ERC in determining the universal charge.