angat-dam-01MANILA, Philippines – Stressing that the recent petition of the Power Sector Assets and Liabilities Management Corp. (PSALM) seeking to pass on P139 billion stranded debt and contract costs of the National Power Corporation (NPC) to consumers through the universal charge (UC) would have adverse social and economic consequences, a consumer advocate demanded that PSALM and NPC open their books to the public.

In a statement over the weekend, Maitet Diokno-Pascual said that this is important so that the citizens and consumers can ascertain whether this application is fair and reasonable.

“Because this is a universal charge, we expect this to weigh more heavily on poor households. For this reason, the Energy Regulatory Commission (ERC) must carefully scrutinize this application and be absolutely certain that the numbers are justified. We are certain that the UC for stranded costs and debts is a charge that poor households cannot afford. Any charge, whether one centavo or 39 centavos per kilowatt-hour, is too heavy for households that do not earn enough to meet their basic needs,” she said.

Diokno-Pascual, who is a former president of advocacy group Freedom from Debt Coalition, said that PSALM, NPC and ERC must be fully transparent in showing what PSALM, with ERC approval, is recovering from all electricity consumers through this charge.

“We are aware that the ERC has been regulating NPC's generation charges and we know that NPC's debts and contractual obligations are embedded in these charges. We caution against any double charging that may arise from imposing this UC on us,” she said.

“We are also aware that NPC's debts increased by over a billion between 2001 and 2010, and that the provision in the EPIRA for stranded debt recovery covers only those debts of NPC before EPIRA was passed,” she added.

Diokno-Pascual said that PSALM must fully and adequately explain why NPC's debts grew rather than shrank, even after all the rate adjustments it obtained from the ERC starting in 2004-2005. PSALM is the state agency tasked to privatize NPC's power assets to help generate funds to pay off debt.

“We believe that onerous and illegitimate debts and contractual obligations that have not benefited the consumers but instead have been unfairly passed on to citizens and consumers, must not be collected from electricity consumers, rich and especially the poor, through a universal charge,” she said.

“This would have adverse social and economic consequences and would add to a long history of corrupt and questionable deals for which the power sector in general, and the NPC in particular, are most notorious,” she added.

Last week, PSALM has proposed to collect a UC of P0.03 per kWh over 15 years for the stranded debt, and P0.36/kWh over four years for stranded contract costs.

Under Republic Act No. 9136 or the Electric Power Industry Reform Act (EPIRA), a UC will be imposed on all electricity end-users to cover payment of NPC’s stranded debt and stranded contract costs.

According to EPIRA, stranded contract costs refer to the excess of the contracted cost of electricity under eligible contracts over the actual selling price of the contracted energy output of such contracts in the market. Such contracts shall have been approved by the regulatory body as of December 31, 2000. Stranded debts refer to any unpaid financial obligations of NPC which have not been liquidated by the proceeds from the sales and privatization of the firm’s assets.

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 (UC) 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 NPC 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)

FDC Chapters

chapters