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PSALM expects financial position to improve

Collection of universal charges to provide boost
By: - Reporter / @amyremoINQ
/ 04:56 AM February 25, 2013

MANILA, Philippines—State-run Power Sector Assets and Liabilities Management Corp. (PSALM) expects its cash flow to improve  over the next four years, after regulators allowed it to collect P53 billion in universal charges for stranded contract costs from all power consumers.

In a statement, PSALM president and chief executive officer Emmanuel R. Ledesma Jr. said the Electric Power Industry Reform Act (Epira) allowed PSALM to collect universal charges to cover stranded contract costs.

“The proponents of the Epira recognized the fact that the privatization proceeds would not be enough to cover National Power Corp.’s financial obligations,” he said.


“PSALM also continues to incur losses from the operation of the remaining state generating assets and independent power producer (IPP) plants. The authors of the law allowed the collection of universal charges to bridge the gap,” Ledesma explained.

Early this week, the Energy Regulatory Commission issued a decision allowing PSALM to recover stranded costs, translating to an increase of 19.38 centavos per kilowatt-hour on one’s power bill. This will be collected through the UC-SCC.

Stranded contract costs referred to the difference between the contractual payment obligations and the revenue earned from the sale of the contracted energy for eligible, government-managed independent power producers (IPPs).

The ERC, however, rejected PSALM’s petition to recover P65 billion worth of stranded debts, which would have raised power rates by another 3.13 centavos per kWh over a a period of 15 years. Nevertheless, the ERC allowed PSALM to file for an annual true-up adjustment.

Stranded debts refer to any unpaid financial obligations of Napocor that have not been covered by the proceeds from the sale of its power assets. These debts exclude P200 billion worth of Napocor obligations that were earlier assumed by the government.

Ledesma pointed out that the stranded debts were obligations incurred by Napocor prior to the enactment of the Epira. The debts were incurred to finance the construction of power plants which were needed to meet the country’s rising power requirements.

“These financial obligations included additional debts incurred by Napocor to subsidize plant operations in light of the rate capping measures previously implemented by the government to ensure more affordable electricity costs to consumers at that time,” he added.

For this year alone, PSALM is raising P60 billion to fund maturing obligations and other operational requirements. As of the end of September, PSALM is managing obligations worth $15.28 billion.


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TAGS: Consumer Issues, government offices and agencies, Power Sector Assets and Liabilities Management Corp. (PSALM), stranded contract costs, universal charges
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