Universal charge to increase power rates

MANILA, Philippines – Electricity users may end up paying 39 centavos per kilowatthour (kwh) more in their bills once the Energy Regulatory Commission (ERC) approves the proposed universal charge (UC) of the Power Sector Assets and Liabilities Management Corp. (PSALM).

PSALM president and CEO Emmanuel Ledesma Jr. said this is the universal fee they are eyeing to apply with the ERC.

Ledesma said PSALM determined the final amounts for the UC-stranded debt (UC-SD) at three centavos per kwh to be collected over a 15-year recovery period.

He said for the UC-stranded contract costs (UC-SCC), PSALM will apply to collect 36 per kwh over a four-year period in accordance with formulas prescribed under the revised guidelines issued by the ERC.

The PSALM chief said they would propose to the ERC that the UC be collected over a 15-year period to mitigate the impact of the power rate increase on consumers.

If PSALM is allowed by the ERC to recover the UC-SCC over 15 years, the amount to be collected will only be six centavos per kwh.

The Electric Power Industry Reform Act (EPIRA) provides that a UC will be imposed on all electricity end-users for the payment of the stranded debt and stranded contract costs of the National Power Corp. (Napocor).

The ERC will determine, fix and approve the UC to be collected from electricity consumers after an extensive review of PSALM’s applications.

Ledesma said PSALM seeks to recover stranded debt amounting to P66 billion until the end of its corporate life.

“The stranded debt sought to be recovered is now significantly lower than the P470 billion previously filed with the ERC. This significant decrease was mainly due to the substantial privatization proceeds generated by PSALM from the sale of generation assets and IPP (independent power producer) contracts to reduce Napocor’s financial obligations as mandated by the EPIRA,” Ledesma said.

Ledesma also explained that financial obligations forming part of the stranded debt are actually obligations incurred by Napocor prior to the enactment of the EPIRA as a result of the need to construct power plants to avoid power outage and supply the country’s electricity requirements.

It, he said, also includes additional debts incurred by Napocor to subsidize plant operations in light of the rate capping measures previously implemented by the government to ensure more affordable electricity costs at that time to consumers.

The EPIRA defines stranded debts as any unpaid financial obligation of Napocor that has not been liquidated by the proceeds from the privatization of the generating firm’s assets, and stranded contract costs as the excess of the contracted cost of electricity under eligible contracts over the actual selling price of the contracted energy output of these contracts in the market. –Donnabelle L. Gatdula (The Philippine Star)