DOF warned on PSALM debt swell
By Myrna M. Velasco – November 30, 2020, 7:00 AM
from Manila Bulletin
The Department of Finance (DOF) has been warned that the financial liabilities of state-run Power Sector Assets and Liabilities Management Corporation (PSALM) would swell because of the insufficient budget the national government had approved for the mandated power rate subsidy under the Murang Kuryente Act (MKA) or Republic Act (RA) 11371.
In a letter to Finance Secretary Carlos G. Dominguez III on November 25, 2020, Senate Committee on Energy Chairman Sherwin T. Gatchalian stipulated that “by allocating an amount lower than what is needed by PSALM to pay stranded contract cost (SCC), stranded debt (SD) and anticipated shortfalls, it may lead to increase of PSALM’s debts.”
The lawmaker stated that possible scenario because the budget shortfall in the required subsidy to cover universal charges (UCs) in the bills of consumers will have to be plugged with borrowings – and that will be at the scale of P38.04 billion for next year alone.
On top of the principal amount, the state-run firm will also need to shoulder additional estimated borrowing costs of P5.45 billion for the loans to be accessed by 2021. Dominguez is the chairman of the PSALM board.
The MKA targets to reduce power costs for electricity consumers by roughly P0.84 per kilowatt hour (kWh) – and that can be done by scrapping the SCC and SD universal charges as line items in the electric bills.
But the allocation next year to PSALM for that purpose was just at P8.0 billion, while the estimated requirement is at P46 billion.
As it stands today though, the consumers may instead suffer a double whammy in the future – if the higher borrowings of PSALM will eventually warrant increase in tax payments of the Filipinos; and fresh round of universal charges may be imposed because of future stranded liabilities of the state-run firm.
The estimated P208 billion subsidy for the UC items in the power bills will supposedly be sourced from the Malampaya fund, but the MKA lawmaker-authors have long been apprised that such fund is now just a book entry and if it will be earmarked for the targeted subsidy, the government will need to replenish it with borrowings.
This early, Gatchalian raised to the finance chief the possibility of “revival of the UCs for SCC and SD once the P208 billion allocated amount is utilized – a situation which is inimical to the intent of the Murang Kuryente Act.”
Given wrangling over budget shortfall on the MKA, the solon called on the finance department that “in the next and future budget cycles, it (must) approve the amounts needed by PSALM from the P208 billion allocated amount to fulfill the intent of the law all for the benefit of the consumers.”
