MANILA, Philippines – The reported looming P0.39 per kilowatt-hour increase in power rates is meant to hit two birds with one stone, and is against the interest of consumers, the Freedom from Debt Coalition said Wednesday.

Ricardo B. Reyes, FDC president, said that it is meant to pass on to consumers "the government’s incompetence, mismanagement and wrong policies that continue to aggravate the lingering problems of our power industry," and to provide "a convenient excuse to extend the life of an incompetent and patently, pro-power oligarchies agency."

“The Philippines now has the highest residential electricity rates and the second highest industrial electricity rates in Asia. The Energy Regulatory Commission (ERC) must protect ordinary consumers from this kind of burden. It must reject the rate application of Power Sector Assets and Liabilities Management (PSALM) Corp.," said Reyes.

FDC issued the statement in light of news reports that the ERC might release by January 2013 the decision regarding an application of PSALM Corp. to collect the P140 billion worth of universal charges (UC) for stranded debts and stranded contract costs from the customers of the Luzon, Visayas and Mindanao grids. PSALM Corp. likewise issued a statement expecting to collect said additional charges early next year.

There is also a current move in Senate to extend the corporate life of PSALM Corp. for another 10 years. Sen. Serge Osmeña, chairperson of Senate Committee on Energy, has filed Senate Bill 3250. Under Republic Act No. 9136 or the Electric Power Industry Reform Act (EPIRA), PSALM Corp. shall exist for a period of twenty five (25) years, meaning until 2026.

The group asserted that PSALM Corp.'s rate application before the ERC, and Senator Osmeña’s proposal to extend the agency's life are related.  

Manjette Lopez, FDC vice president, explained that in their petition, PSALM and National Power Corporation (Napocor) are seeking the approval of stranded contract costs portion of UC in the amount of P74.298 billion to be imposed at the rate of P0.3666 per kilowatt-hour over the next four years, and stranded debts portion of UC in the amount of P65.019 billion at the rate of P0.0313/kWh over a 15-year period. PSALM Corp. aims to collect about P25 billion annually from the P0.39/kWh universal charges to help settle its outstanding obligations.

"EPIRA states that the liquidation of Napocor debts and stranded contract costs be completed within the term of existence of the PSALM Corp. or until 2026. However, its rate application, if approved, would be collected until 2028," said Lopez.

PSALM Corp. is mandated, under EPIRA, to calculate the amount of stranded debt and stranded contract costs of Napocor which shall form the basis for ERC in the determination of the universal charge. EPIRA defines stranded debts as any unpaid financial obligation of Napocor that has not been liquidated by the proceeds from the privatization of its assets. On the other hand, stranded contract costs are those excess contracted cost of electricity under eligible contracts over the actual selling price of the contracted energy output of these contracts in the market.

“The problem with PSALM’s debts is that it is getting bigger and bigger despite the privatization of more than 80 percent of the Napocor generation assets and independent power producer (IPP) supply contracts,” said Lopez.

“Again we ask: where are the proceeds of the sale of these assets?” Lopez added.

According to the group, PSALM Corp. has failed to drastically reduce Napocor’s debt and electricity rates in past 11 years. Prior to the enactment of EPIRA and creation of PSALM Corp., the total debt and IPP obligations of Napocor/PSALM Corp. was US$16.39 billion. As of September 2011, it has an outstanding debt of US$16.73 billion. The pre-EPIRA average electricity rate was around P5/kWh. Today, the average rate is around P11/kWh.

"The additional universal charges and the extension of PSALM Corp.'s lifespan, clearly adds insult to the consumers' long-suffering and must be vigorously opposed. PSALM Corp. is a clear testament to the failure of EPIRA as a regime that would resolve the country’s power crisis and the Napocor debts. Its life, therefore, must be cut short, not extended," Reyes said. -30-

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