PSALM vows to withdraw power rate hike petitions

MANILA, Philippines - State-run Power Sector Assets and Liabilities Management Corp. (PSALM) has promised to withdraw its four petitions for increases in electricity rates totaling P4.88 per kilowatt-hour.

The petitions are pending with the Energy Regulatory Commission (ERC). If granted, the cost of electricity in the country will be the highest in the world. 

Ferdinand Florendo of PSALM said the agency will be guided by the sense of the House committee on energy for the withdrawal of the petitions.

The committee had expressed its collective sense after voting to ask Malacañang and concerned agencies to renegotiate 19 power supply contracts entered into by the Ramos administration with local and foreign independent power producers (IPPs).

The committee said the renegotiation would affect PSALM's petitions because these include an amount that would be paid to IPPs.

Florendo said IPPs would be paid the difference between the price of electricity stipulated in their contracts with the government and the prevailing market price.

He said IPPs are supplying electricity at a much higher price than other power producers.        

Energy officials estimate that the average cost of electricity supplied by IPPs is about P20 per kilowatt-hour, while other producers only charge P3 per kwh. There is, therefore, a P17 difference. 

PSALM wants the public to pay the 17 kwh difference in small installments in their monthly bills.         

Members of the energy committee said the renegotiation of the IPP contracts should result in a reduction of the price of electricity contracted by the Ramos administration during the power crisis of the mid-'90s.       

The reduction of the P20-per-kwh average cost of power supplied by IPPs would mean that a lower power rate increase will be passed on to consumers. Parañaque Rep. Roilo Golez estimates that private producers have been overpaid by at least $10 billion over the past 10 years and would pocket another $10 billion in the next 10 years if the contracts are not changed.       

"$10 billion can build 10 power plants of 1,000 megawatts each, enough to supply the country's power requirements," he said.        

Batangas Rep. Hermilando Mandanas, a former investment banker, said IPPs had already recouped their investments, and now make billions in profits since the Ramos administration. 

The Freedom from Debt Coalition (FDC) yesterday urged President Aquino to "exercise leadership and uphold the people's interests" by ordering PSALM to immediately withdraw its application for power rate increase.                   

The group held a nationwide protest action Tuesday night dubbed "Power Off." Participants in 22 cities and provinces switched off their lights for 30 minutes and held a noise barrage to demand the lowering of power rates.

"The people have spoken through the Power Off campaign. Enough of these unbearable power rates. The ball is now in the hands of President Aquino," said FDC national president Ricardo Reyes.

He said Aquino should also order PSALM to stop the sale of remaining assets and contracts of the National Power Corp.

Among these assets – also sources of lower-priced energy – are the Agus-Pulangi hydropower complexes in Mindanao, the Unified Leyte Geothermal Plants in Eastern Visayas, and the Angat hydro-electric power plant in Norzagaray, Bulacan.

FDC also urged the Aquino administration to order the Department of Energy (DOE) to revert to the return on rate base method of computing power price than the performance-based rate method "which only results in higher power rates."      

FDC vice president Manjette Lopez said a review of IPP contracts with the government should indeed be reviewed and renegotiated.

"Here, we laud the House committee on energy for heeding the people's demand by approving a resolution to review and renegotiate IPP contracts," Lopez said.

FDC also urged President Aquino to stop the practice of indexation, or the pegging of the prices of natural gas and geothermal steam to the international prices of oil and coal, respectively.

The group also seeks legislative action for the removal of value added tax on power and for a review of the Electric Power Industry Reform Act of 2011 (EPIRA). – With Jose Rodel Clapano, Rhodina Villanueva