Legislation eyed to remedy PPA issue

The Department of Energy (DOE) and the Power Sector Assets and Liabilities Management Corp. (PSALM) are proposing legislative measures that seek to remedy the power purchase agreement (PPA) issue.

Energy Secretary Vincent S. Perez said that once implemented, the measures would result in as much as 80 centavos per kilowatt reduction in the electric bills of each household.

Specifically, PSALM is asking legislators to allow it to borrow money to refinance the payment of the universal charge to be slapped on electricity end-users.

"PSALM has a proposal to allow us to reduce our PPA in our bills to a much lower universal charge through some refinancing scheme," he said. But such a process will have to pass through the hands of the legislators as well as the Energy Regulatory Commission (ERC).

"We need legislation. The Congress will be willing to endorse an urgent certification of this legislation. There is a need to fasttrack this since this still needs to be presented to the President but with the help of both Houses of course," he explained.

PSALM president Edgardo Del Fonso said the ERC had initially reviewed such proposed measures but "they believe there are still some issues to address."

The ERC is particularly concerned about the payment of the interest of the loans that would be used to finance the PPA.

"Our proposal to Congress is to allow us to immediately implement it even before the ERC approves it. This is a provisional segment of the PPA and the President will ask the commission to review the PPA of all the distribution utilities. We hope the ERC will approve it by June but in reality it will take six months to a year. Therefore, we ask Congress to pass a legislation to enable us to carry out the plan immediately," he said.

Perez, meanwhile, said that they have included in the proposed legislation to also allow the private distribution utilities, which have their own PPAs, to carry out the same refinancing scheme.

"This is a relief for distribution utilities. They can defer the payment of their PPA that they can’t sell and allow interest expense to be computed in their rate base. At present, this is not included in the law (EPIRA)," he said. – Donnabelle Gatdula