[Opinion] Eradicating PSALM

The PSALM here is not a book in the King James Bible, but rather, it stands for the Power Sector Assets and Liabilities Management Corp. The entity was created by virtue of the Electric Power Industry Reform Act or EPIRA which mandated the full restructuring of the country’s power industry.

A government-owned and controlled corporation, PSALM is responsible of taking over the ownership of all existing generating assets of the National Power Corp. (NPC), the contracts signed with independent power producers, real estate properties and the transmission business under the National Transmission Corp. (Transco). Its role is not only to take over NPC assets but to liquidate NPC assets.

It also assumed the outstanding obligations of NPC from loans, bonds and securities, and other instruments of indebtedness.

The EPIRA gave PSALM 25-years to carry out what it is mandated to do. So it started doing its work on July 2001 with the hope that it will be able to complete its job by July 2026. Yet halfway of its existence, Sen. Serge Osmeña already moved to provide PSALM another 10 years of life. If the move of Sen. Osmeña will get materialized, the outcome will give PSALM an additional 10 years from 2026.

The problem, however, is that PSALM was not able to carry out what it is directed to do as scheduled. In one of the forum wherein a PSALM official was invited as a resource person, it said that the privatization process has been slow from the period 2001 to 2010 and that the delay is taking a toll at PSALM’s operations for it continues to acquire new debts aggravating its debt situation.

As instructed by EPIRA, the proceeds that will be raised by PSALM from the privatization of NPC assets must be used to settle NPC’s outstanding financial obligations. It also directs PSALM to apply residual obligations of NPC in the Universal Charge through “stranded debts” but by securing approval from the Energy Regulatory Commission (ERC).

The issue has been a subject of PSALMs petition submitted to the ERC which sought to recover, not only the residual obligations of NPC, but the billions of pesos of NPC debts by charging consumers “stranded debt” under the Universal Charge.

The target amount that PSALM intends to pass on to consumers has been increasing all these years from P470-billion to an additional P200-billion. Currently, the amount is said to have reached more than P700-billion in spite of the fact that government has absorbed around P200-billion of NPC debts already.

However, instead of looking at how all these problems came to be, Sen. Osmeña has passed House Bill 3250 which sought to extend the life of PSALM for another 10 years. I believe that the steps being taken by Sen. Osmeña is totally contrary to public interest.

Extending the life of PSALM is not a fitting solution. Its existence and its failure to carry out its task is, in fact, a testimony that government’s privatization of the country’s power industry was bound to fail from the start. It likewise illustrates how our legislators have failed the Filipino people by approving EPIRA.

It is puzzling today that prior to the enactment of EPIRA and the creation of PSALM, the debt of NPC/PSALM was only US$16.39 billion. Now, with more than 70-percent of NPC’s generation assets and lPP contracts privatized, PSALM’s outstanding debt has jumped off to US$16.73 billion. The question now is this: Where are the proceeds from the sale of NPC assets?

Likewise, prior to the enactment of EPIRA and the creation of PSALM, the average electricity rate was around P5.00 per kilowatt-hour. Today, we pay an average rate of around P10 per kWh.

I would also urge Sen. Osmeña to review and renegotiate the contracts it entered with the IPPs for these onerous contracts were the root cause of its ballooning debt and the reason why consumers unjustly pay expensive electricity. The review and renegotiation will pave the way for the rescinding of the contracts. The IPPs have more than sufficiently recouped their investments and they have milked the government and the people for profit. These IPPs are now sitting pretty enjoying their returns – all at the expense of consumers’ burden.

Senator Serge Osmeña must immediately put a stop at PSALM’s callous practice of giving out huge incentives and bonuses to its executives and employees and initiate an audit at PSALM’s internal operations in order to look into the various transactions it has undertaken and what were the contracts and agreements that it has entered from the start of its operations.

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