The Power Sector Assets and Liabilities Management Corporation (PSALM) has started lodging payment request for the P697.385 million loan it assumed for the establishment of the market management system (MMS) as well as for the operations of the Wholesale Electricity Spot Market.

The Philippine Electricity Market Corporation (PEMC) stipulated such payment demand in its filing with the Energy Regulatory Commission (ERC), as it should have wanted the same to be lumped into its market transaction fees.

The loan for the WESM establishment officially had the National Power Corporation (NPC) as borrower of record, while the National Transmission Corporation (TransCo) as the executing agency.

But due to the privatization set for the power assets, such obligation was transferred to and assumed by PSALM.

The lenders to the WESM’s market management system infrastructure are Asian Development Bank (ADB) and the Japan Bank for International Cooperation (JBIC).

Apart from the loan for the spot market’s MMS, there are also cash advances made by PEMC from TransCo to cover operating expenses for the operation of the WESM. Under the terms of the transaction, the loan repayments have to be done in five (5) years starting 2009 and such costs may be recovered from its market fees.

In PEMC’s filing for market transaction fees covering regulatory years 2009 to 2011, it indicated that loan repayments for WESM-MMS loans will amount to P223.163 million for 2009; P206.426 million for 2010; and P189.689 million for 2011. It also has TransCo loans payable amounting to P144.346 million each year from 2009 to 2011.

Nevertheless, the ERC apprised PEMC that “the cost and recovery mechanism for the MMS loan repayments have yet to start in 2009 but will be subject to a separate application.”

It similarly required the relevant parties to come up with an agreement “that should establish recovery arrangements between NPC/TransCo, PSALM and PEMC.”

As per PSALM’s request for payments, the regulator directed that final and specific figures must be provided, and not just estimates.

It observed that “the request for payments from PSALM indicated only estimates of the amount drawn, project management costs including financing costs and transaction costs incurred from 2004 to 2008.”

Given the lack of binding arrangements set yet for cost recovery mechanisms among the parties involved and with preliminary numbers just being set as reference, the ERC noted that such “does not merit approval.”