psalm-debtMANILA, Philippines – The Freedom from Debt Coalition (FDC) today welcomed the move of House Deputy Speaker Lorenzo “Erin” R. Tañada III, asking “Congress and the executive department to convene an inter-agency, inter-branch, and multi-stakeholder process to discuss and decide whether consumers can afford a full pass-on of the PSALM debts and losses, and to look for other approaches in retiring the obligations of PSALM.”

PSALM, or the Power Sector Assets and Liabilities Management Corp., is the government body mandated by Republic Act No. 9136 or the Electric Power Industry Reform Act (EPIRA) to manage the privatization of the state’s power assets and handle the liabilities of the National Power Corporation (Napocor).

Milo Tanchuling, FDC secretary-general, said that the P139 billion stranded debt and contract costs of Napocor that it seeks to pass on to consumers through the universal charge (UC) would have adverse social and economic consequences.

Last June 28, PSALM filed a petition before the Energy Regulatory Commission (ERC) for the recovery from consumers P65 billion or P0.03 per kWh over 15 years for stranded debts, and another P74.3 billion or P0.36/kWh for stranded costs covering the years 2007 to 2010.

“We have been demanding that PSALM and Napocor open their books to the public so that the citizens and consumers can ascertain whether this application is fair and reasonable. We welcome this move of Representative Tañada and we look forward to have an active part in finding a just and viable solution to PSALM’s ballooning debt and high electricity rates,” Tanchuling said.

On Wednesday, Rep. Tañada, also a member of the Joint Congressional Power Commission, lamented the continuing “financial hemorrhage” of PSALM, stressing that the agency’s “debts and losses should be recognized as a key policy issue that cannot be left to its failing management.”

“EPIRA was intended to be the solution to the country’s electricity problems, but the PSALM now literally wallows in debt amounting to some $16 billion and continuing operational losses,” Tañada said.

Tañada also took notice of the Commission on Audit’s 2009 report where PSALM was found out to have paid excessive amounts in professional fees to legal advisors, consultants, and contractors, and also paid high incentives to employees.

COA found out that the cost of its professional services ballooned to P1.16 billion in 2009 from P118 million in 2008.

Last year, PSALM had sought to recover P471-billion stranded debts recovery bid and three other applications which had been initially intended for pass-on to consumers under the universal charge component of the electric bills. Said petition was withdrawn and revised by the Aquino administration.

FDC had already urged PSALM to veer away from the past administration’s strategy of passing on the firm’s inefficiency to the consumers in terms of high electricity rate, and to confront head-on one of the roots of this problem – the onerous contracts with independent power producers (IPPs).

The group also urged the government to conduct a meaningful and substantial new round of review and renegotiations of contracts with IPPs, and immediately rescind onerous ones already established by the previous Inter-Agency Review Committee.

FDC said that the Committee produced a report that showed five contracts were ‘onerous’, 24 other contracts contain various degrees of legal, financial, and social infirmities, and only six of the 35 contracts are ‘clean’.

FDC said that the debt of Napocor will continue to grow and that electricity rates will continue to increase as long as the government continued to legitimize and honor these one-sided agreements. (30)

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