ERC approvals on UC-SD and SCC to relieve PSALM from further borrowings this year

27 Jul 2017

The impending collection of the stranded debt (SD) and stranded contract cost (SCC) portions of the Universal Charge in the total amount of around PhP37 billion will relieve the Power Sector Assets and Liabilities Management (PSALM) Corporation from additional borrowings this year.

“Early recovery of said charges will partially infuse the needed monetary source to pay maturing obligations without resorting to refinancing. Contracting further loans is only a palliative solution that further widens PSALM’s stranded debts in the long run because of refinancing charges,” said PSALM Officer-in-Charge, Lourdes S. Alzona.

PSALM stressed that the SD and SCC charges are purposely intended to pay the remaining financial obligations that the government incurred when new power plants were constructed to end the power crisis that engulfed the whole country particularly in the 1990s and early 2000.

“The collection of UC-SD and SCC should be appreciated for its social inclusion value. Let’s look at it as a necessary contribution for the stable and quality supply of electricity we had enjoyed in the past and continue to enjoy nowadays,” Alzona, said.

The Energy Regulatory Commission, in two separate Orders dated 07 July 2017, allowed the recovery by PSALM of PhP24.198 billion for UC-SD covering 2011 and 2012 true-up adjustments. The collection will be spread over a nine-year period with a rate of PhP0.0265/kilowatt hour (kWh). UC-SD will be reflected in the consumers’ power bill starting next billing period from the receipt of the relevant ERC decision by the distribution utilities.

For the SCC, which was already approved earlier by the Commission, PSALM was ordered to extend its collection for another 10 months providing PSALM PhP12.878 billion recoveries covering calendar years 2011, 2012, and 2013. The said amount will be recovered at the existing UC-SCC rate; thus, there is no increase or decrease in the UC-SCC rate as the 10-month collection is only an extension, the ERC stressed. ERC also ordered the Distribution Utilities and National Grid Corporation of the Philippines to continue collecting the said rate in their July 2017 billing.

The Electric Power Industry Reform Act (EPIRA) defines SD as “any unpaid financial obligations of the National Power Corporation (NPC) which have not been liquidated by the proceeds from the sales and privatization of NPC assets.”

On the other hand, the EPIRA defines UC-SCC as the “excess of the contracted cost of electricity under eligible contracts over the actual selling price of the contracted energy.”

PSALM continues to incur SD and SCC because the proceeds from privatization of NPC/Independent Power Producer generation assets and the revenue generated from the owned and IPP plants are not enough to pay its contractual obligations with the eligible IPPs and lending institutions.

Corporate Communications Division
Tel. No. (632) 9029067