Press Release: ERC dismisses PSALM's Universal Charge Petition
For failure of the Power Sector Assets and Liabilities Management Corporation (PSALM) to submit the supporting documents and information as required of it, the Energy Regulatory Commission (ERC) dismissed on 15 November 2010 the four pending petitions of PSALM filed in 2009 and 2010 for the establishment of the Universal Charge components for the recovery of the National Power Corporation's (NPC) Stranded Debts and Stranded Contract Costs.
The ERC found that PSALM failed to submit pertinent documents to support its allegations and prayers and observed that PSALM's calculation of Stranded Contracts Costs included fuel costs, the recovery of which is governed by a separate mechanism. In PSALM's petition for recovery of stranded debts, the ERC also noted significant differences and inconsistencies in the calculation of the proceeds of the sale of NPC's generation plants. Based on these deficiencies, the ERC dismissed PSALM's petitions, without prejudice to the re-filing of the same after conforming to the pertinent ERC regulations.
On June 30, 2009, PSALM petitioned the ERC for the recovery of NPC's stranded debts (SD) portion ofthe Universal Charge (UC). Based on PSALM's simulations, NPC's stranded debts was estimated to be PhP470.87 Billion by the end of 2025. To start recovering this amount, it proposed a levelized stranded debt charge of up to PhP0.3049/kWh to be imposed on all electricity consumers. On 29 June 2010, PSALM filed a petition for UC-SD that was specific for recovery of NPC's stranded debts for 2010, which it simulated to reach PhP54.898 Billion, at the rate of up to PhP0.8677/kWh.
Stranded debts refer to "any unpaid financial obligations of NPC which have not been liquidated by the proceeds from the sales and privatization of NPC assets" (Sec. 4 [vv], RA 9136). Financial obligations pertain to net obligations of NPC after deducting the PhP200 Billion debt assumed by the national government (Sec. 32, R.A. 9136).
On top of this additional charge sought by PSALM for recovery of NPC's stranded debts, on June 30, 2009, PSALM filed a petition to recover the Stranded Contract Costs component of the Universal Charge for the Luzon Grid amounting to PhP22.256 Billion and asked that it be authorized to impose a UC of up to PhP0.5024/kWh to recover these costs. On 29 June 2010, PSALM filed a similar petition, this time for recovery of its stranded contracts costs for 2009 amounting to PhP26.685 Billion, equivalent to up to PhP0.5720/kWh as additional UC.
Stranded contract costs refer to the excess of the contracted cost of electricity under eligible Independent Power Producer contracts of NPC over the actual selling price of the contracted energy output of such contracts in the market.
“Although recovery of NPC's stranded debts and stranded contract costs is recognized and sanctioned by law, the ERC is bound to 'verify the reasonable amounts' that will be allowed recovery through the UC. Without all the supporting documents to validate PSALM's claims, the ERC cannot even begin to discharge such mandate," ERC Executive Director Francis Saturnino C. Juan said.
November 15, 2010