PSALM wants power rate hikes to cover Napocor debt

State-run Power Sector Assets and Liabilities Management Corp. has applied for a new round of power rate hikes to recover some P80 billion in stranded debts and contract costs from the privatization of the National Power Corp. PSALM has proposed before the Energy Regulatory Commission to increase by 19 centavos per kilowatt-hour the power rates in Luzon for stranded contract costs over a three-year period equivalent to P27 billion. The stranded contract cost is the excess of Napocor's contracted cost of electricity with independent power producers over the actual selling price of the output. PSALM also seeks to raise P55 billion from stranded debts — Napocor’s unpaid obligations that were not liquidated by proceeds from the sale of its assets — that would translate to an 87-centavo per kilowatt-hour increase all over the Philippines within the same period. Combined, Napocor’s stranded contract costs and debts amount to P82 billion — roughly $1.78 billion. Created under the Electric Power Industry Reform Act, PSALM is mandated to handle the finances and privatization of Napocor. The recovery of standard debts and stranded contracts is covered by the EPIRA. The P82-billion proposal is on top of an earlier petition to recover about P471 billion of stranded debts and P22 billion in costs, which PSALM proposed to recover over 25 years. The amounts would be collected through a so-called universal exchange of 23 centavos per kilowatt-hour for stranded debts. For stranded costs, there would be nine-centavo increases every five years per kilowatt-hour. The cost to consumers, PSALM clarified, would be less if it could sell Napocor’s assets and contracts at higher values. Napocor has an outstanding debt of $16.5 billion as of December 2009, with 91.73 percent of its generation assets in Luzon and Visayas sold to private investors for $4.16 billion. Its IPP contracts, meanwhile, are 60-percent privatized. PSALM expects to complete the privatization of Napocor’s generation assets this year. —Nikka Corsino/VS, GMANews.TV