WHEREAS, Section 50 of Republic Act (RA) No. 9136 or the Electric Power Industry Reform Act of 2001 (EPIRA) provides that the principal purpose of the Power Sector Assets and Liabilities Management Corporation (PSALM) is to manage the orderly sale, disposition, and privatization of the National Power Corporation (NPC) generation assets, real estate and other disposable assets, and independent power producer (IPP) contracts with the objective of liquidating all of NPC’s financial obligations and stranded contract costs (SCC) in an optimal manner;
WHEREAS, Section 34 of the EPIRA provides, in part, that a universal charge (UC), to be determined, fixed and approved by the Energy Regulatory Commission (ERC), shall be imposed on all electricity end-users for the payment of stranded debts (SD) in excess of the amount assumed by the National Government (NG) and SCC of NPC, as well as qualified SCC of distribution utilities resulting from the restructuring of the industry, among others;
WHEREAS, RA No. 11371 or the Murang Kuryente Act (MKA) provides that the State shall implement policies and programs to ensure transparent and reasonable prices of electricity to consumers by minimizing the UC for SCC and SD;
WHEREAS, Section 4 of the MKA provides that the amount of Two Hundred Eight Billion Pesos (PHP208,000,000,000.00) of the proceeds of the net NG share from the Malampaya fund, shall be utilized for the payment of SCC and SD transferred to and assumed by PSALM, including all anticipated shortfalls in the course of payment of such liabilities after applying PSALM’s collections from the privatization of NPC’s assets, IPP contracts and proceeds from operations of existing assets: provided, that annual allocations from the Malampaya fund for the payment of SCC and SD, including all anticipated shortfalls, shall be included in the General Appropriations Act (GAA) consistent with the fiscal program of the government, the procedure for which shall be provided in the implementing rules and regulations (IRR) of the MKA;
WHEREAS, Paragraph 4, Section 4 of the MKA provides that the UC for SCC and SD currently being collected may be covered by the allocated amount from the Malampaya fund, subject to the IRR of the MKA;
WHEREAS, Section 7 of the MKA provides that the Department of Energy (DOE) and the Department of Finance (DOF), in consultation with the Department of Budget and Management (DBM), the Bureau of the Treasury (BTR) and PSALM, shall promulgate the IRR of the MKA, and that upon the effectivity of the IRR, no new UC-SCC and SD shall be collected;
WHEREAS, the DOE and the DOF issued Joint Circular No. 1, Series of 2020 or the Implementing Rules and Regulations of the MKA (MKA-IRR) prescribing the procedure for the: (1) determination, verification and confirmation by the PSALM Board of the annual amount of SCC, SD and anticipated shortfalls; (2) allocation of amounts from the Malampaya fund on an annual basis for the payment of SCC, SD and anticipated shortfalls, which shall be included in the GAA; and (3) timely release by the DBM of the amount appropriated in the annual GAA, among others;
WHEREAS, Sections 2.4 and 9 of the MKA-IRR provide that upon the effectivity of the MKA-IRR, no new UC for SCC and SD shall be collected; provided, that upon exhaustion of the PHP208 Billion allocation under the MKA and no additional allocations are made by Congress, PSALM may again file petitions applying for UC-SCC and SD with the ERC, following such rules and regulations as may be applicable;
WHEREAS, Section 5.1 of the MKA-IRR provides that, the UC for SCC and SD currently being collected and remitted to PSALM may be covered by the allocated amount from the Murang Kuryente – Special Account in the General Fund (MK-SAGF) subject to the fiscal program of the government.
WHEREAS, in accordance with Section 5.4 of the MKA-IRR, PSALM submitted to the DOF and DBM the computation for CY 2021 SCC and SD in the amount of PHP56.75 Billion, which amount did not contemplate the suspension of UC-SD collection with an estimated amount of PHP3.2 Billion for FY 2021 at a rate of PHP0.0428/kWh;
WHEREAS, the UC-SD of PHP0.0428/kWh currently being collected from the end-users was approved by the ERC in an Order dated 15 January 2019 under Case No. 2013-195 RC, or prior to the passage of the MKA, and so PSALM expected the continued collection of the aforementioned UC-SD at the time that PSALM requested from the DOF and the DBM for allocation of PHP56.75 Billion for FY 2021 pursuant to the MKA;
WHEREAS, notwithstanding PSALM’s request for an allocation of PHP56.75 Billion, Republic Act No. 11518 or the General Appropriation Act (GAA) for FY 2021 was signed on 28 December 2020 and Volume 1-B, Page 763, Special Provision 11, of the said GAA FY 2021 provides that “the amount of Eight Billion Pesos (P8,000,000,000) shall be used for the payment of stranded contract costs (SCC) and stranded debts (SD) transferred to and assumed by the Power Sector Assets and Liabilities Management (PSALM) Corporation, including anticipated shortfalls in accordance with Section 4 of RA No. 11371, sourced from the proceeds of the net national government share from the Malampaya fund under Section 8 of Presidential Decree No. 910; Provided, That no UC-SD shall be collected for FY 2021. Release of funds shall be subject to the submission of a Special Budget pursuant to Section 35, Chapter 5, Book VI of Executive Order No. 292, s. 1987 (Conditional Implementation);”
WHEREAS, the said PHP8 Billion did not likewise contemplate the suspension of UC-SD collection with an estimated amount of PHP3.2 Billion for FY 2021 at the rate of PHP 0.0428/kWh;
WHEREAS, President Rodrigo Roa Duterte subjected Budgetary Support to Government Corporation (BSGC-Others), Special Provision No. 11 “Proceeds from Exploration, Development and Exploitation of Energy Resources”, Volume 1-B” to a conditional veto subject to the guidelines that will be issued by PSALM in accordance with the MKA;
WHEREAS, since only PHP8 Billion was allocated to PSALM, the substantial shortfall will have to be sourced by PSALM through additional borrowings that will eventually be passed on to the NG at the end of PSALM’s corporate life, but the approval for such additional borrowings did not cover the said PHP3.2 Billion that would be generated if UC-SD is continued for FY 2021;
NOW, THEREFORE, in consideration of the foregoing, PSALM hereby promulgates the following guidelines in accordance with the instruction of the President:
SECTION 1: GENERAL PRINCIPLES
1.1 The PHP8 Billion MKA fund under the GAA FY 2021 shall be applied to the UC-SD and UC-SCC as allotted by the Development Budget Coordination Committee to PSALM; and
1.2 The current UC-SD approved by the ERC in Case No. 2013-195 RC, and prior to the passage of the MKA, shall not be collected for FY 2021, provided that the following conditions are complied with:
1.2.1 A supplemental allocation from the MKA fund to cover the anticipated UC-SD collection for FY 2021 is approved by the DBM in accordance with the MKA IRR and such allocation is given to PSALM;
1.2.2 The ERC issues an order directing the collecting entities of UC and PSALM to suspend the billing of the UC-SD currently collected from the end-users, for FY 2021.
1.3 Insofar as BSGC-Others, Special Provision No. 11, “Proceeds from Exploration, Development and Exploitation of Energy Resources”, Volume 1-B, Page 763 of the GAA FY 2021 provides, among others, that no UC for SD shall be collected for FY 2021, PSALM shall immediately submit to the DOF and DBM a request for supplemental allocation from the MKA fund for such corresponding amount equal to the anticipated UC-SD collection for FY 2021.
SECTION 2. SUSPENSION OF COLLECTION OF UC FOR STRANDED DEBTS FOR FY 2021
2.1 The UC-SD currently being collected from the end-users is not a new UC, having been approved by the ERC in its Order dated 15 January 2019 under Case No. 2013-195 RC. Thus, the suspension of UC-SD collection, if implemented, will result in additional cash shortfall in PSALM’s 2021 operations. As such, and to ensure that PSALM’s FY 2021 operations would not be unduly and adversely affected, PSALM must first receive supplemental allocation from the MKA fund to cover the anticipated collection from the said UC-SD estimated at PHP3.2 Billion for FY 2021 pursuant to Section 4 of the MKA.
2.2 To this end, PSALM shall immediately submit to the DOF and DBM a request for supplemental allocation from the MKA fund to cover the PHP3.2 Billion expected to be raised from the UC-SD collection for FY 2021, subject to existing budgeting, accounting, and auditing laws, rules and regulations and the fiscal program of the government. The allocated amount shall form part of the aggregate annual amounts for the payment of UC SCC and SD, including anticipated shortfalls, to be deducted from the total MKA allocations under RA No. 11371.
2.3 When the supplemental allocation is approved and the corresponding funding is transferred to the MK-SAGF for release to PSALM, PSALM shall request for the ERC to issue a directive to the UC collecting entities and PSALM to suspend the collection of the PHP0.0428/kWh UC-SD currently collected from the end-users. PSALM shall consequently suspend the collection of the said UC-SD once the ERC issues the corresponding directive. This is to avoid additional shortfall and prevent serious financial and legal consequences in the event PSALM is unable to pay any of its maturing obligations for 2021.
2.4 PSALM shall conduct an annual verification and reconciliation of the balance of the total UC-SD approved by the ERC vis-à-vis additional allocation in the MKA fund per annual GAA. Results will be contained in the UC-SD Variance Analysis Report submitted to the DOF, DOE, DBM, and BTr in accordance with Section 5.6 of the MKA IRR.
SECTION 3: SEPARABILITY CLAUSE
If for any reason, any part or provision of these Guidelines is declared unconstitutional or contrary to law, other parts or provisions not affected thereby shall remain in force and effect.
SECTION 4: EFFECTIVITY
These Guidelines shall take effect fifteen (15) days from the date of its publication in the Official Gazette or in a newspaper of general circulation. Copies thereof shall be filed with the University of the Philippines Law Centre-Office of the National Administrative Register.
This Guidelines was approved and confirmed by the PSALM Board of Directors on 24 March 2021 through Board Resolution No. 2021-0324-03.