PSALM warns of power outages in Davao del Norte, Compostela Valley

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MANILA, Philippines—The provinces of Davao del Norte and Compostela Valley could soon face blackouts due to an impending disconnection as the Davao del Norte Electric Cooperative, Inc. (Daneco) that has been serving them has failed to settle obligations of more than P500 million, the Power Sector Assets and Liabilities Management (Psalm) Corp. said.

The state firm said it has asked the Department of Energy (DOE) for approval of the issuance of the notice of disconnection to Daneco, after which the date of disconnection would be announced.

“After exhausting all possible remedies, Psalm has issued a final demand to Daneco for failure to comply with its financial obligations, and the period to comply with such final demand has already lapsed on March 21, 2014,” Psalm president and CEO Emmanuel R. Ledesma, Jr. said in a statement.

Ledesma said the issuance of the notice complied with existing regulations. These include the failure of a customer, as to this case of Daneco, to comply with its financial obligation with Psalm under their power supply agreements or any existing contracts for the supply of electricity and restructuring agreement.

When the power accounts were transferred from the National Power Corporation to Psalm in June 2009, Daneco’s outstanding obligation amounted to about P230 million.  In March 2011, Psalm approved the restructuring of Daneco’s outstanding Value Added Tax (VAT) account amounting to more than P106 million, with a monthly amortization of more than P4 million for a period of two years or from March 2011 to February 2013.  While the electric cooperative fully settled its VAT obligation, it has failed to fully settle its monthly power bills (PB) starting July 2012.

Based on representations of Daneco, its operations starting June 2012 have been affected due to the legal dispute between Daneco-National Electrification Administration (NEA) group and Daneco-Cooperative Development Authority (CDA) group, and the effect of typhoon Pablo in Davao del Norte and Compostela Valley – the areas being catered to by Daneco.

In June 2013, Psalm and Daneco-NEA entered into an agreement for the three-year restructuring of Daneco’s outstanding obligation amounting to P275 million as of March 31, 2013. The monthly amortization of Daneco was set at over P8 million covering the months of May 2013 to April 2016. Daneco-NEA is religious in paying this monthly restructured amortization.

However, Daneco continued to incur unpaid PB for the reason that while Daneco-NEA group was dutifully paying Psalm for its PBs, the Daneco-CDA group’s payment is not up-to-date as the last was made in December 2013.

From March 2013 to April 2014, the average monthly billing of Daneco was P92.26 million, composed of monthly PB amounting to P83.29 million, monthly interest charges due to non-payment of monthly billing in the amount of P820,000, and monthly amortization on the restructured account of P8.15 million.  Its average monthly payment was only P64.36 million or only 69.76 percent of its average monthly billings.  As a result, Daneco’s total outstanding obligation amounted to P576 million as of April 30, 2014.

This outstanding obligation is expected to continue increasing due to the shortfall in Daneco’s monthly payments to Psalm. Psalm has diligently exhausted the following remedies to assist Daneco in the payment of its financial obligations: approval of the second restructuring agreement for the settlement of Daneco’s outstanding obligations amounting to P275 million as of March 31, 2013; grant of extension to Daneco to fully settle its outstanding account by November 2013; and issuance of a notice of collection and two final demand letters and repeated follow-up with Daneco for the settlement of its outstanding obligations.

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