State-run Power Sector Assets and Liabilities Management Corporation (PSALM) will need to borrow P38.4 billion this year to augment the funds needed for the power rate reduction subsidy mandated under Republic Act 11371 or the Murang Kuryente Act (MKA) that was signed by President Rodrigo Duterte into law last year.
PSALM President Irene Joy Besido-Garcia said the company will finalize the details of the loan procurement this week, including identification of the banks where borrowings will have to be secured from.
Under the proposed 2021 General Appropriations Act (GAA), only P8.0 billion had been allocated for the MKA rate reduction, which entails then that the balance of the P46 billion required funding for this year will need to be sourced through borrowings.
The target of MKA is to reduce the overall cost of electricity being paid for by Filipino consumers – and that will be achieved by scrapping at least two line items in the power bills: the universal charges (UC) for stranded debts and stranded contract costs; and then that will be subsidized through allocations from the Malampaya fund instead of collecting them from the consumers.
PSALM, as well as the Department of Finance (DOF), had previously informed the lawmaker-authors of the Murang Kuryente Act that even if the rate reduction will be covered by the Malampaya fund, the national government will still need to borrow because that fund already needs replenishment.
As noted, the P261 billion logged by the Bureau of the Treasury as Malampaya fund is now just a book entry; hence, if that fund is needed, it has to be topped up by fresh loans.
This early, however, Senate Committee on Energy Chairman Sherwin T. Gatchalian is prompting the DOF to provide sufficient budget for the targeted power rate reduction subsidy and it must “spare the taxpayers from being choked by new borrowings to fund next year’s obligations of the Murang Kuryente Act.”
As only 20-percent of the needed MKA funding had been approved by the finance department, the lawmaker highlighted that “PSALM will have to resort to borrowing for the additional P38.4 billion and taxpayers will bear the brunt of covering the P5.45 billion borrowing cost.”
During the deliberations of the Murang Kuryente Law, framers of the policy had been cautioned that the planned subsidized power rate reduction may eventually spook Filipinos with additional tax burden; hence, that will just delay an even bigger financial pain that they will suffer from in the foreseeable future.
Gatchalian argued though “that is not the spirit and intention of the law,” hence, he noted that his Energy Committee in the Senate will have to request the DOF “to seriously look into this because the P5.45 billion (borrowing cost) is a hefty amount.”
He acknowledged that “if we will be incurring additional costs, then it will still be passed on to the taxpayers because PSALM will need to borrow.”
The lawmaker noted that while the P5.45 billion borrowing cost will not show in the consumers’ electric bills, Filipinos would still bear the cost of that through another means; and it could be through the taxes being imposed by the State.