NEA, not PSALM, to resolve power supply issues — DOF

By Lee C. Chipongian – December 17, 2021, 4:11 PM
from Manila Bulletin

Finance Secretary Carlos Dominguez III categorically stated that the National Electrification Administration (NEA) and not the Power Sector Liabilities and Management Corp. (PSALM) should be the Default Wholesale Supplier (DWS) of the cash-impaired Lanao del Sur Electric Cooperative Inc. (LASURECO) and the Maguindanao Electric Cooperative Inc. (MAGELCO).

Finance Secretary Carlos Dominguez III

“This is pursuant to the mandates of NEA under the law,” the Department of Finance (DOF) said Friday, Dec. 17, in a statement, quoting Dominguez.

Dominguez said NEA should be the DWS of the two electric cooperatives (ECs) given that it has the power to act as a guarantor for the purchases of electricity in the Wholesale Electricity Spot Market (WESM) by any EC or small Distribution Utility (DU) to support their credit standing, consistent with the provisions of the Electric Power Industry Reform Act (EPIRA).

The DOF in the same statement said that it has “thumbed down” the Department of Energy’s (DOE) proposal for PSALM to be the one to resolve the power supply concerns of the ECs in Mindanao because this issue “is not within the state-run firm’s mandate to subsidize their energy requirements.”

“While we recognize DOE’s earnest efforts in finding possible solutions for LASURECO and MAGELCO, we also need to take into account the possible consequences of DOE’s proposed arrangement,” Dominguez told DOE Secretary Alfonso G. Cusi in a letter.

The DOF said the DOE wants to designate PSALM as the DWS of LASURECO and MAGELCO in the WESM in Mindanao for three months starting on Dec. 26.

The DOF also said that according to Dominguez who is the PSALM board chair, requiring PSALM as default supplier of the two ECs would balloon the company’s financial obligations by an additional P218.9 million for this three-month period.

As DWS, PSALM will pay WESM charges aside from the WESM prices every month such as market fees, line rental fees, value-added tax (VAT), and other billing adjustments. PSALM also has no subsidy for absorbing the costs of unpaid electricity by the two ECs.

“It is imperative that we come up with a solution to address the continuing challenges posed by LASURECO and MAGELCO in the Mindanao grid the soonest possible time. Delaying further the resolution of the problem would only result in irreparable losses and unfavorable consequences to the National Government,” said Dominguez in his letter.

He added that PSALM should not be the DWS of LASURECO and MAGELCO as this would “essentially result in additional financial obligations for PSALM, contrary to the pronouncement of the (EPIRA) and its Implementing Rules and Regulations (IRR).”

Under the law and IRR creating NEA, it is the one to exercise supervision including management and operations, of all ECs and to restructure problematic ECs, said Dominguez.