13 June 2020
The coronavirus pandemic has forced millions of Filipinos to stay home.
The lockdown began a few days before the dry season — or what most Filipinos call “summer” — was officially declared by the Philippine Atmospheric, Geophysical and Astronomical Services Administration (PAGASA).
About two months into the lockdown, many consumers experienced “bill shock” upon seeing their electricity bill. The increase in electricity consumption may be attributed to the lockdown and scorching summer heat. But then again, lockdown or no lockdown, dry or wet season, the Philippines is said to have one of the most expensive electricity costs in Asia.
One reason cited for the high electricity cost in the country is the so-called pass-on charge, which consumers shoulder and pay as “Universal Charge” in the electricity bill. This non-bypassable charge is passed on and collected from all electricity consumers on a monthly basis by the distribution utilities and remitted to the Power Sector Assets and Liabilities Management Corp.
(PSALM), for, among others, the payment for stranded contract costs and stranded debts of the state-owned National Power Corporation (NPC) pursuant to Section 34 of Republic Act 9136, or the Electric Power Industry Reform Act (EPIRA).
PSALM is a government-owned and controlled corporation created under the EPIRA to manage the privatization of existing assets of NPC and independent power producer contracts with the objective of liquidating all the financial obligations and stranded contract costs of NPC.
Stranded contract costs of the NPC refer to the excess of the contracted cost of electricity under eligible independent power producer contracts over the actual selling price of the contracted energy output of such contracts in the market.
On the other hand, stranded debts of the NPC refer to any unpaid financial obligations of the NPC, which have not been liquidated by the proceeds from the sales and privatization of NPC assets. Through the universal charge, consumers pay for stranded contract costs and stranded debts of the NPC to PSALM.
To ease the additional burden on the consumers to pay for the debts of the NPC, Congress passed Republic Act (RA) 11371, or the “Murang Kuryente Act,” which was signed into law by President Rodrigo Duterte on 8 August 2019.
The law intends to reduce electricity cost and make electricity affordable to consumers by allocating a portion of the government share from the Malampaya Natural Gas Project to settle the debts of the NPC.
The Malampaya Natural Gas Project, or Service Contract 38, is a deep-water gas-to-power joint project between the Philippine government and private sectors in offshore Northwest of Palawan.
Under the law, the amount of P208 billion of the proceeds of the net national government share from the Malampaya fund will be utilized for the payment of stranded contract costs and stranded debts transferred to and assumed by the PSALM pursuant to Section 49 of the EPIRA, including all anticipated shortfalls in the course of the payment of these obligations.
The Malampaya fund is the existing and future government share from the net production proceeds of the Malampaya Natural Gas Project pursuant to Presidential Decree 87, or The Oil Exploration and Development Act of 1972, and Service Contact 38. The annual allocation from the Malampaya fund for this purpose will be included in the General Appropriations Act to be allocated to the PSALM budget consistent with the fiscal program of the government.
The Department of Budget and Management (DBM) is tasked to ensure the timely release of the amounts allocated and appropriated to the PSALM in accordance with its debt and independent power producer payment schedule. PSALM, on its part, is mandated to ensure consistent recordkeeping of disbursements from the Malampaya fund and to submit reports on the appropriation and utilization of the fund, which will be available to the public through its website.
Recently, the Department of Finance (DoF) and the Department of Energy (DoE), in consultation with the DBM, the Bureau of Treasury and the PSALM, issued DoF-DoE Joint Circular 1, Series of 2020, which provides for the implementing rules and regulations of RA 11371 (IRR).
The IRR prescribes the procedures in the utilization of the Murang Kuryente Special Account in the General Fund. It also outlines the responsibilities of the various agencies tasked to implement the law.
Sections 7 of the law and 9.1 of the IRR state that no new universal charges for stranded contract costs and stranded debts shall be collected upon effectivity of the IRR.
Pertinently, Section 9.2 of the IRR provides that PSALM shall not file with the ERC any new petition for universal charges for stranded contract costs and stranded debts until the allocated amount under the law is exhausted and no additional allocations are made by Congress. The IRR became effective on 5 May 2020, 15 days from the date of its publication in a newspaper of general circulation.
With the IRR in place, consumers can look forward to lower monthly electricity bills. Consumers will no longer be charged an additional amount of about P0.86 per kilowatt hour of universal charge for stranded contract costs and stranded debts covering up to the year 2024, based on PSALM estimate.
And amid lockdown where consumers are confronted with mounting electricity bills during the period, this law gives consumers much needed relief.
First published on The Daily Tribune.
For further information, please contact:
Nilo T. Divina, Managing Partner, DivinaLaw
nilo.divina@divinalaw.com
