PSALM pushes reforms to bring down rates

State-run Power Sector Assets and Liabilities Management Corp. (PSALM) has criticized a lawmaker who claimed that the agency has only created more problems in the power industry as it allegedly engaged in “questionable sales and bidding of power plants.”

“We understand that House Deputy Speaker Lorenzo R. Tañada III’s concerns about privatization arose from reports that his office received. PSALM has no knowledge of those reports, and cannot verify if they are true or false,” said PSALM president Emmanuel R. Ledesma Jr.

“PSALM, however, is willing to answer these reports in order to better enlighten the people of what really transpired since the Electric Power Industry Reform Act (Epira) was enacted, at least on the privatization of the power plants owned by National Power Corp.,” Ledesma explained.

Tañada raised questions against PSALM’s sale of the Manila thermal power plant, the Bohol-Dingle plants and the Pagbilao power plant independent power producer administrator (IPPA) contract bidding.

“The transactions under question are a wanton disregard of the mandate of Epira, which is to bring down electricity rates and improve delivery of power supply to end-users by encouraging greater competition and efficiency in the electricity industry,” Tañada had claimed.

However, Ledesma pointed out that it “does not appear in the Epira that privatization by itself was intended to result in reduced power rates. Other reforms must also be undertaken by Congress and other government agencies.”

“The privatization process has been ongoing for 10 years since the enactment of the Epira in 2001, and it has successfully diversified the ownership of Napocor power plants consistent with PSALM’s mandate. The privatization of government assets is only part of the reform framework provided under the law, which seeks to achieve reasonable power rates in the country,” Ledesma explained.

“Specific measures to reduce electricity rates are also provided in the law, such as zero-rating of VAT (Sec. 6); use of excess universal charges collected (Sec. 33); reduction of rates of power from indigenous sources (Sec. 35); removal of inter-grid and intra-grid cross subsidies (Sec. 36); and other similar measures,” Ledesma further noted.

According to Ledesma, the condonation of loans of electric cooperatives, which was already undertaken by PSALM, should have also resulted in lower rates charged by the electric cooperatives concerned—and not just privatization.

“With respect to the observation that only a few play a major role in power generation, it must be noted that we initially have only one owner [Napocor] of all these plants. After privatization, we now have at least 10 successor generator companies, which we think is hardly few,” he said.

“In any case, with the nationwide generation ownership cap of 25 percent, it may be assumed that the Epira only envisioned a minimum of four owners of all generating capacity nationwide. Privatization has resulted in a much more diverse ownership base than the minimum set by the Epira,” Ledesma added.