'Killing us softly' says POWER of ERC's decision to allow PSALM to continue collecting P53.8B in stranded contract costs from consumers

Press Release
March 30, 2017

QUEZON CITY – Consumer group People Opposed to unWarranted Electricity Rates (POWER) today slammed the Energy Regulatory Commission (ERC) for allowing the Power Sector Assets and Liabilities Management Corporation (PSALM) to continue charging electricity consumers with a 19 centavo/kWh universal charge to pay for its stranded contract costs.

In an order dated March 6 but released only on March 27, the ERC indefinitely extended PSALM's P0.1938/kWh universal charge originally allowed from April 2013 to February 2017. The charge was supposed to cover PSALM's stranded contract costs of P53.851 billion incurred from 2007-2010. But the ERC said PSALM was only able to collect P48 billion by February 2017, thus it should be allowed to charge consumers P5.5 billion more in the coming months.

"The amount might seem small, but they have been charging this to millions of consumers for the last four years, translating to billions already. With ERC's action, consumers will most likely be paying even more for the next nine years. They're killing us softly," said POWER Convenor and former Bayan Muna Rep. Teddy Casiño.

PSALM's stranded costs are due to the onerous "take or pay" provisions in NAPOCOR's contracts with Independent Power Producers (IPPs) which allowed IPPs to charge NAPOCOR even for unused power. It is similar to the much-hated "power purchase adjustment (PPA)" that was abolished under the Arroyo administration. Most of the contracts were signed during the Ramos administration but was continued by succeeding governments, resulting in huge stranded contract costs.

Due to strong opposition to the passing on of such costs to consumers, it was only in 2013 that PSALM was able to get ERC approval. But said charge was supposed to have ended last February.

By extending the 19-centavo universal charge, POWER says the ERC is setting a bad precedent for PSALM to charge additional stranded contract costs covering the years after 2010, including stranded debts estimated at P245 billion. At present, PSALM has pending applications in the ERC to pass on P35 billion in stranded debts and P70.12 billion in stranded contract costs to electricity consumers. This will be reflected in monthly power bills for the next nine years, at least.

“Electricity consumers are being made to suffer the consequences of NAPOCOR and PSALM's bad decisions. The original debt to be passed on to consumers was only P255 billion in 2001 as mandated by the Electric Power Industry Reform Act (EPIRA). This was supposed to be covered by the sale of NAPOCOR's assets. But the reverse happened and PSALM was left with an even bigger debt plus stranded contract costs. Why should our people suffer for PSALM's incompetence? This is unjust and cruel, considering we already have the highest power rates in Asia!" said Casiño.

Last January, Energy Secretary Alfonso Cusi announced that the Malampaya Fund would be used instead to cover PSALM's stranded debts and stranded contract costs so as not to burden consumers. "So why is the ERC now allowing PSALM to continue charging consumers for something that the government already said it would shoulder?" asked Casiño.