PSALM disputes 'anomalous' insertions in universal rate bid

MANILA, Philippines - The management of state-run Power Sector Assets and Liabilities Management (PSALM) Corp. denied yesterday the allegations that bonuses, night differentials and consultancy fees were tucked into the universal charge (UC) applications it filed.

PSALM also belied claims its corporate expenditures that included bonuses, night differentials and consultancy fees were part of the P470.8- billion stranded debts of National Power Corp. (Napocor) which would be recovered through the UC.

PSALM also asserted that the expenditures were never part of the UC applications it filed with the Energy Regulatory Commission (ERC), and its officers never claimed in hearings before the ERC that the expenditures are being claimed under the UC.

These expenses were recently reported as part of PSALM’s UC applications. The fact is, however, these were only items in the corporation’s financial statements that were required by the ERC.

PSALM vice president for finance Lourdes Alzona said she never claimed in her testimony that these expense items would be recovered through the UC.

For purposes of the UC-stranded debt filing, the Electric Power Industry Reform Act (EPIRA) and the ERC allow the recovery of the following only: Napocor’s outstanding financial obligations as of the effectivity of the EPIRA; new loans contracted by Napocor after the effectivity of the EPIRA; loans incurred by PSALM on behalf of Napocor and loans contracted by the National Transmission Corp. prior to its privatization; and obligations in accordance with ERC guidelines.

In its filings, PSALM stringently adhered to the provisions of the EPIRA and the ERC’s rules. The UC petition for stranded debt is pending with the ERC.

PSALM has appealed to the public to allow ERC to evaluate the petition and to track the hearings on the subject.

Energy Secretary Jose Rene Almendras earlier said they are initiating a probe on PSALM’s debts in relation to the application of the UC to check if all that would be passed on to consumers will be justified accordingly.

PSALM is an entity created under Republic Act 9136 or the Electric Power Industry Reform Act (EPIRA) which now manages the finances and privatization of the state-owned Napocor.

“The money should have been paid to retire debts. In 2006 and 2007 they paid about $18 to $19 billion. It has been used to pay loan. The question now is, why was the debt continuing to grow?” Almendras said.

While privatization proceeds keep coming in, PSALM has been on a borrowing spree. Earlier this year, it was allowed to raise P30 billion to P50 billion through domestic bonds and another $1 billion for refinancing of debts for 2011.

As of end-December 2009, Napocor’s outstanding debt stood at $16.5 billion, 40 percent of which is set to mature starting this year until 2014. For 2010, Napocor has around $3 billion worth of maturing loans.

Based on PSALM’s application, it would need to recover P470.8 billion worth of stranded debts and P22 billion stranded contract costs of the Napocor.

PSALM submitted two options to recover the P471-billion stranded debts: by charging electricity consumers 30 centavos per kWh for 17 years or 22.5 centavos per kwh for 25 years.

For the stranded contract cost, PSALM proposes three options: 50.24 centavos per kwh for a one-year recovery period; 16.04 centavos for a three-year period; and 9.20 centavos per kwh for a five-year period.