Power Sector Assets and Liabilities Management Corp. is seeking an approval to recover P27.67 billion from consumers to pay for the stranded debts of National Power Corp.
The amount would translate into an increase of P0.0283 per kilowatt-hour in power rates for nine-and-half years beginning January 2017, data showed.
PSALM asked the Energy Regulatory Commission to approve an increase in power rate to pay for the stranded debts of NPC.
Stranded debts refer to unpaid financial obligation of NPC which were not liquidated by proceeds from the sale and privatization of its assets.
The Electric Power Industry Reform Act allows PSALM to recover Napocor’s stranded debts through the universal charge—a line item in the power bill of consumers.
PSALM said the actual gross debt service of NPC reached P51.96 billion in 2015, but it was able to earn only P18.957 billion from privatization proceeds and P5.33 billion from proceeds of power plant operations.
The gross debt service included Napocor’s outstanding debts following the implementation of the Electric Power Reform Industry Act of 2001, new loans of NPC contracted after Epira law took effect and loans incurred by PSALM on behalf of Napocor. PSALM was formed to privatize the assets of NPC.
PSALM said it vigorously pursued its mandate to privatize the generation assets and power facilities but revenues from the sale of electricity of the remaining assets were not enough to cover its operations and provide funds for the payment of NPC debts and obligations.
PSALM said it would be forced to resort to borrowing to address the funding gaps but this would form part of the universal charge for stranded debt, “effectively increasing the universal charge burden to all electricity end-users.”
“On the other hand, if PSALM will be allowed to immediately recover the UC-SD under this petition through provisional approval, new loans and refinancing to service maturing debts. And lease obligations would lessen,” it said.
PSALM said the approval of the petition would redound to the benefit of electricity end-users due to reduced borrowing costs, effectively reducing the universal charge burden.
PSALM said the stranded debt equivalent rate of P0.0283 per kWh was calculated by dividing the P27.67 billion stranded debt with the projected energy sales for the January 2017 to June 2026 based on the Energy Department’s 2014 to 2030 Power Development Plan.
ERC rejected in 2013 PSALM’s application to recover P65.019 billion from consumers for the stranded debts of Napocor equivalent to P0.0313 per kWh.
“Based on the parties’ submissions and records of the case, the ERC determined that after excluding certain expenditure items, such as the proposed operating expenses for the National Transmission Corp. and the projected capital expenditures for the rehabilitation of the remaining hydro power plants of Napocor, no stranded debts will be incurred,” ERC said previously.