PSALM cleared to recover P21.5 B

MANILA, Philippines -  State-run Power Sector Assets and Liabilities Management Corp. (PSALM) has received regulatory approval to recover over P21 billion from consumers in Luzon and Visayas for fuel, purchased power and foreign exchange-related costs incurred from 2007 until 2014.

The Energy Regulatory Commission (ERC) allowed PSALM to recover P21.47 billion, which includes the P15.55-billion deferred accounting adjustments (DAA) generation rate adjustment mechanism (GRAM); P2.88-billion DAA on incremental currency exchange rate adjustment (ICERA); and the P3.04-billion true-up adjustments under the automatic cost recovery mechanism (ACRM).

The state-run firm said the approved cost adjustments would be recovered from customers who drew power from National Power Corp. (Napocor)/PSALM during test periods from 2007 to 2014.

Luzon and Visayas customers will have to pay more for  60 months or five years effective next billing period.

On the other hand, Mindanao customers should expect a refund from PSALM amounting to a total P7.58 billion over the five-year implementation period.

PSALM said the P21.47-billion approved cost recoveries would in part address funding requirements for the servicing of its maturing debts, which is fitting considering that costs being recovered were funded from financial obligations during the test periods.

The ERC had also previously allowed PSALM to collect P37 billion from consumers under the stranded debt (SD) and stranded contract cost (SCC) portions of the universal charge (UC).

This impending collection will relieve the state-run firm from additional borrowings this year.

 “Early recovery of said charges will partially infuse the needed monetary source to pay maturing obligations without resorting to refinancing. Contracting further loans is only a palliative solution that further widens PSALM’s stranded debts in the long run because of refinancing charges,” PSALM officer-in-charge, Lourdes Alzona said.

The SD and SCC charges are purposely intended to pay the remaining financial obligations that the government incurred when new power plants were constructed to end the power crisis that engulfed the whole country particularly in the 1990s and early 2000.

PSALM continues to incur SD and SCC because the proceeds from privatization of Napocor/independent power producer generation assets and the revenue generated from the Napocor-owned and IPP plants are not enough to pay its contractual obligations with the eligible IPPs and lending institutions.

 “The collection of UC-SD and SCC should be appreciated for its social inclusion value. Let’s look at it as a necessary contribution for the stable and quality supply of electricity we had enjoyed in the past and continue to enjoy nowadays,” Alzona said.

The Electric Power Industry Reform Act (EPIRA) defines SD as “any unpaid financial obligations of the Napocor which have not been liquidated by the proceeds from the sales and privatization of Napocor assets.”

On the other hand, the EPIRA defines UC-SCC as the “excess of the contracted cost of electricity under eligible contracts over the actual selling price of the contracted energy.”