Palace on P500-B Napocor bailout: We must bite the bullet

Malacañang admitted yesterday that the government has no choice but to assume the P500-billion debt of the state-owned National Power Corp. (Napocor) under the Electric Power Reform Industry Act (EPIRA) of 2001.

In a statement, Presidential Spokesman Ignacio Bunye said "biting the bullet" on Napocor’s debt woes will ensure that power services to consumers will not be affected.

"We just have to bite the bullet. We have to assume the power firm’s losses and operational improvement," he said.

President Arroyo, however, is determined to put an end to the problems of Napocor, which is in the process of being privatized by the government as dictated by the EPIRA law.

Under the EPIRA Law, the national government is mandated to absorb the combined assets and losses of Napocor to make it salable to the private sector.

Bunye noted the P500 billion in debts of Napocor were accumulated through several administrations.

"We can neither wish our debts away nor turn back on these without risking a collapse of our credibility," he said.

"The neglect of our past cannot be cured by breeding more crises, uncertainties and hardships," Bunye added.

The President and her economic advisers met last week at the Palace where they took up, among other fiscal matters, the effects of Napocor’s financial concerns to the national government’s overall monetary affairs.

Bunye, however, reassured the people that the government can manage the issue "over the long term along a strong economic framework."

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Following the Palace meeting, National Economic and Development Authority chief Romulo Neri disclosed they took up possible new tax measures that the President would endorse to the next Congress to legislate.

These measures, Romulo said, aim to ease the public burden of rising power costs due to the mounting debts and losses of Napocor.

"We hope to raise between roughly P85 to P115 billion so that we can absorb Napocor’s losses and debts as mandated by the EPIRA," Neri said.

"Because the EPIRA Law mandates us to absorb P200 billion of Napocor’s debts, we also try to address Napocor’s losses (of) about P100 billion a year, which can run even higher if we don’t resolve it quickly," he said.

Although the Arroyo administration has started Napocor’s privatization, Neri explained the government has to absorb the power firm’s losses for the next two to three years more before all its assets are sold to the private sector.

This was why the government had to allow Napocor to increase its generation rates which it passes on to its distributors like the Manila Electric Co. (Meralco), he said.

Effective next month, Meralco’s electricity rate will increase by 13.27 centavos.

Meralco clarified that the new generation rate hike will be a mere recovery of the generation cost of Napocor, which Meralco will only collect.

This will be implemented by Meralco in its June billing cycle and will be reflected in the customers’ billing statement next month.