Universal charge issue now in the hands of lawmakers - Almendras

MANILA, Philippines - Energy Secretary Jose Rene Almendras said giving consumers a breather from higher electricity, like pulling out the petition for a higher universal charge (UC) at the Energy Regulatory Commission, lies in the hands of lawmakers.

Almendras said the Power Sector Assets and Liabilities Management Corp. (PSALM), an entity created under the Electric Power industry Reform Act (EPIRA) which manages the liabilities of the National Power Corp. (Napocor), is just awaiting instructions from the Joint Congressional Power Commission (JCPC). JCPC has been mandated under the EPIRA to oversee the implementation of power reform law.

“The decision to pull out the UC is not and cannot be PSALM. Only JCPC has the right to order that pullout, otherwise PSALM will violate the law. So we have to submit to JCPC. That suggestion came from the House committee on energy, so we suggested to Rep. Abad to bring it to the JCPC so that they can make a decision. PSALM will definitely be open,” Almendras said, when asked by reporters to comment on the proposed pulling out of PSALM’s UC application at ERC.

Almendras noted that there is also an ongoing audit of the UC by lawmakers.

“Congress committee ordered their audit of the UC,” he said.

He likewise stressed that “under the EPIRA, the JCPC has the right to tweak the EPIRA according to implementation targets.”

Asked about the impact of the pullout on government’s coffer, Almendras said “there’s a financial drag, it’s a few billion pesos. The recommendation of the DOE will depend on the decision of the JCPC. When they say we need to defer it, we need to find money since there are loans to be paid.”

He said if ever there would be a need to collect additional UC from consumers, the government might be able to find a way to cushion its impact on electricity rates.

“The UC should push through, but there can be ways to mitigate it. I cannot discuss what we’re going to mitigate right now,” he said. There are many options or alterations that can be done.”

The energy chief said there is also a regulator, ERC, which determines the rates.

“Have the ERC decide on what is a fair UC. And then we discuss alternatives how to make that thing work or how mitigate the impact,” he said.

PSALM filed on June 28 with the ERC its UC application for stranded debt (SD) and stranded contract costs (SCC) at 3.13 centavos per kilowatt-hour (kWh) and 3.666 centavos per kWh, respectively. If approved by the ERC, the UC will be an additional item in the electricity bill to be shouldered by consumers.

To cushion the impact, PSALM likewise proposed to the ERC that the UC-SCC be recovered over 15 years compared to the four-year recovery period mandated in the ERC amended guidelines. The longer recovery period will bring down the UC-SCC to 0.06 centavos per kWh.

Earlier, PSALM said it will aggressively spearhead and push harder for the privatization of the existing power plants and generation assets previously owned by the Napocor to fulfill PSALM’s mandate under the EPIRA. These plants were transferred to PSALM with the objective of privatizing the assets and using the sales proceeds to liquidate existing NPC debts and obligations.

PSALM president Emmanuel Ledesma earlier stressed that PSALM can bring down the UC if the remaining assets will be sold as soon as possible and at the best possible price.

Ledesma said they are implementing its liability management program to refinance the existing Napocor obligations.

“This will enable us to attain the most appropriate currency mix and average maturity of these debts in order to avoid foreign exchange losses and bring down interest costs,” he said.

He said PSALM is currently evaluating terms for the prepayment of the privatization proceeds from the Independent Power Producer Administrators (IPPAs) and the National Grid Corp. of the Philippines (NGCP).

This prepayment, Ledesma said, will allow PSALM to meet its cash flow requirements and avoid incurring additional loans for payment of maturing obligations. Shortfall in cash flow arises due to the mismatch in the timing of the collection of these receivables and the maturity of debt obligation payments.