Discount scheme extension to cost PSALM P10B

State-run Power Sector Assets and Liabilities Management Corp. stands to lose P10 billion in revenue if it will be made to continue extending up to next year discounted power rates  to economic zone locators.

PSALM president Emmanuel R. Ledesma Jr. said the estimated losses were based on the assumption that the discounted power rates would be extended for one more year, or up to the time when the open access and retail competition scheme would be implemented.

The amount, Ledesma said, referred to the “difference between the production cost of our remaining (power) plants and the discounted rates (charged to ecozone locators).”

Also, the government no longer has the capacity to continue supplying electricity to ecozone locators, which is currently being done through Manila Electric Co., under the Ecozone Rate Program (ERP).

“PSALM is not in a position to renew the power supply contract with Meralco. After the privatization of several power plants of the government, PSALM’s remaining sources of power are insufficient to supply the demand of Meralco,” Ledesma further explained.

Ledesma’s statements were made in reaction to calls made by Meralco, the Philippine Economic Zone Authority and members of the Semiconductor and Electronics Industries in the Philippines Inc. (Seipi) for the extension of the provision of discounts under the ERP by one more year up to December 2012.

The ERP is said to be benefiting 279 Meralco customers in industrial areas, which account for 43 percent of the country’s total merchandise exports or about $19 billion.

Recently, Seipi  sent a letter dated Nov. 8, 2011 to Ledesma, the Department of Trade and Industry and the Department of Energy, appealing for the extension of the ERP.

In the letter, Seipi president Ernie B. Santiago and chair Norberto A. Viera stressed that the local semiconductor industry, with the prolonged weakness of the electronics market, “cannot afford any additional cost that would result in higher prices of our products. Even future expansions will be in question.”

Among the reasons it cited as to why the discounted power rates should be extended were that “market is weak and competition is bloody; every company needs every cost reduction it can get, and that there is an overcapacity in competitor countries and everybody is dropping their prices.”