All Transco’s assets set to be auctioned

REPORT FROM BUSINESSWORLD The Power Sector Assets and Liabilities Management Corp. (PSALM) will divest all of National Transmission Corp.’s (Transco) assets to a concessionaire come September. At the sidelines of the Joint Congressional Power Commission meeting on Thursday, PSALM president Nieves L. Osorio told reporters the body has rejected plans for it to retain 15% interest in the concessionaire. Lawmakers argued the plan would violate Republic Act 9136, or the Electric Power Industry Reform Act of 2001 (EPIRA), which requires government to make way for the private sector. In a presentation, PSALM -- tasked to dispose generation and transmission assets -- said that "we target to formally launch [the privatization process] during the week of May 28." PSALM is bidding out the power transmission business through a 25-year concession contract, divided into five-year regulatory periods. The Energy Regulatory Commission (ERC) will determine at the start of each regulatory period the concessionaire’s annual revenue requirement, based on its operating and maintenance expenses, estimated tax payments, depreciation of assets, and return on capital. These factors will be the basis for computing the concessionaire’s maximum allowable revenue (MAR) for the period. At the end of each year, MAR will be compared against the actual revenue collection of the concessionaire. The difference will be the basis for adjusting the following year’s revenue cap. Hence, the revenue cap is designed to assure consumers that fair electricity rates would be charged even after Transco’s privatization. To assure, however, that the investor will be able to recover all investments, Ms. Osorio said PSALM is mulling a "recovery payment" at the end of the investor’s concession period. This means government will pay the concessionaire what it has not recovered from its concession period. But Lanao del Norte Rep. Alipio Cirilo V. Badelles, chairman of the House of Representatives energy committee, argued that "recovery payment is like returning to the concessionaire what it already paid the government." – IPP/BusinessWorld