PSALM gets huge tax cuts in new EO

By Myrna M. Velasco – December 19, 2021, 9:30 PM
from Manila Bulletin

The newly issued Executive Order No. 157 will significantly reduce the real property tax (RPT) obligations of state-run Power Sector Assets and Liabilities Management Corporation (PSALM) for its power supply deals to P200 million from P1.019 billion.

“PSALM’s 2021 RPT obligations amounting to about P1.019 billion at 80-percent assessment rate, would be reduced to about P200 million at 15-percent assessment rate,” said PSALM President and CEO Irene Besido-Garcia said the issuance of EO No. 157

The enforcement of EO 157, she said, would translate to an estimated savings of P822 million for PSALM. Besido-Garcia said the amount can then be utilized by PSALM for the payment of other maturing obligations assumed from NPC (National Power Corporation).

As prescribed under the Electric Power Industry Reform Act or Republic Act 9136, PSALM serves as the successor-entity that shall assume the assets and liabilities of NPC, including the RPT payments due to its build-operate-transfer (BOT) contracts with the independent power producers (IPPs).

“RPT payments remitted by the IPPs in excess of the RPT due for the previous years will be applied to future RPT assessments,” Garcia emphasized.

It had been three decades of struggle on the part of the IPPs to fight for a harmonized assessment rate on RPT obligations, and prior to the issuance of E.O. No. 157 under this administration, most of the local government units (LGUs) hosting energy projects have been applying higher assessment rates ranging from 40 percent to 80 percent.

The differing assessment rates enforced also served as a “cause of intimidation” against IPPs because there were instances that they were being required to advance the RPT payments. Host LGUs also threatened to close operations for those that failed to comply.

With the compelling push of the Department of Finance (DOF), Malacanang formally announced this week the issuance of EO No. 157 that will put an end to the “tax nightmares” of power producers that have contracts with NPC, which were then subsequently assumed by PSALM.

“Through EO No. 157, the RPT assessment level is reduced to 15 percent of the fair market value of the property, machinery and equipment, depreciated at 2.0-percent per annum less any amount already paid by the IPPs,” the government-owned firm explained.

In previous years, it had been mainly the project-sponsors being harassed on RPT payments, especially when NPC had been failing on timely payments to the LGU-hosts of such tax obligations.

Because of that government predicament then, it had been the IPPs being placed at the receiving end of legal pressures from the LGUs on the tax payments. Typically, LGUs have been exerting “force” and strategies to collect the RPT. Host LGUs have sued many of the IPP companies just to enforce their rights to collect as warranted under the Local Government Code.

Some cases have been elevated to the Supreme Court and the rulings have not turned favorable to some of the power project developers. The high court opined that IPPs are the registered owner of the properties and they have been operating the plants, and on that premise, it was noted that these are neither owned nor used by the government-owned and controlled corporations (GOCCs) like NPC, hence, the tax payments shall be tossed as a responsibility for the IPPs.

The power producers have been raising to the government that such regulatory and political risks could be deal-breaker on the entry of fresh capital for new power projects, thus, they aggressively batted for a resolution of that policy snag.