ERC bars PSALM from passing on new universal charges in electric bills

The Energy Regulatory Commission (ERC) has barred state-run Power Sector Assets and Liabilities Management Corporation (PSALM) from passing on new universal charges (UC) for stranded debts (SD) and stranded contract costs (SCC) even with the latter’s contention that the Malampaya fund or government borrowings may not be enough to cover the programmed subsidies for such components in the electric bills.

That, as the regulatory body denied the motion for reconsideration filed by PSALM in September last year on a ruling rendered by the ERC mandating it to stop its collection of the specified UC pass-on charges in the bills.

Energy Regulatory Commission (ERC FACEBOOK / MANILA BULLETIN)

PSALM stated in its filing that the application of the Malampaya fund as subsidy cover for the UCs should have been prospective, hence, it might still be allowed to collect UCs from consumers while the allocation is still being sorted by the relevant government agencies, including the proposed borrowings that shall be approved by the Department of Finance.

The state-run company argued that “both the Murang Kuryente Act (MKA) and its implementing rules and regulations should only be applied prospectively as this is consistent with the basic tenet that laws should have prospective and not retroactive effect so as to prejudice pending disputes and cases.”

The ERC, however, has junked PSALM’s motion “for lack of merit,” and has further directed the company that it can no longer pass-on UCs for stranded liabilities – even for propounded cost recoveries already lodged previously with the Commission.

It was in May last year when the ERC ordered PSALM to stop the collection of UCs for stranded contract costs and stranded debts for an aggregate amount of P0.2536 per kWh.

The Commission said it was prompted to dismiss the pending petitions of PSALM for the UCs because of the mandate set forth under the MKA or Republic Act 11371 which targets to wipe out the UC charges in the consumers’ power bills.

Prior to the ERC order, PSALM has eight petitions for more than P90 billion worth of pending cost recoveries of universal charges for SD and SCC, which should have bloated charges to consumers by up to P0.80 per kWh if fully passed on.

The MKA-anchored rate reduction will effectively be covered by a subsidy provision through the utilization of P208 billion worth of the Malampaya fund that had been remitted to the State coffers through the years.

But PSALM raised with the ERC that “the Malampaya fund may turn out to be insufficient to cover the stranded contract costs, stranded debts,” and there might also be anticipated shortfall in the course of payment of such liabilities.

The state-run firm previously noted that the allocation approved for MKA under this year’s General Appropriations Act (GAA) had just been pegged at P8.0 billion; but since the total subsidy amount needed for 2021will be P46 billion, the company will need to borrow P38 billion to cover the funding shortfall.

But the regulatory body said it “finds no cogent reason to disturb its order” that was handed down in May last year, primarily stopping PSALM on the UC collections.