The separate explanations given by the Power Sector Assets and Liabilities Management Corporation
(PSALM) and National Power Corporation (NPC) partly unearthed the factors that sparked off the unprecedented swell in the power firm’s residual debts that will eventually be borne by Filipino consumers via their electricity bills.

“P470 billion is the projected level (of NPC debts) 20 years from now, taking into consideration expected privatization proceeds and revenues for the period,” PSALM spokesperson Conrad S. Tolentino said.

For purposes of definition that is in keeping with the provisions of the Electric Power Industry Reform Act, the portion of the loan obligations that will be passed on to the consumers until 2025 via a proposed levelized universal charge of P0.3049 as a separate line item in the bills, is also termed as NPC’s residual debt or the remaining unpaid obligations after the privatization of its assets.

For consumers who have been promised of lower electricity rates post-privatization, this would be a difficult reality to accept. On that ground, the Freedom from Debt Coalition (FDC) already went ahead calling for a Congressional investigation on the swelling NPC debts.

Meanwhile, from NPC’s end, company sources divulged that its operating costs relating to its contracts with independent power producers (IPPs) have caused borrowing spiral.

It was gathered that at times, particularly when its rates were slashed ‘below market,’ it needed to resort to borrowings to plug gaps in operating costs, especially for its capacity payments to the IPPs. Even the operations of power facilities for its Small Power Utilities Group (SPUG) proved costly for the state-run power firm.

“So when the calculations were updated, the level of NPC debts for recovery under UC had reached that magnitude. NPC has been borrowing money just to pay off IPP costs as they come in,” the source from the power firm noted.

There was also a policy muddle as to the universal charge recovery for stranded contract costs; given that some IPPs are not eligible for UC cost recoveries.

“The IPP costs are really staggering,” the government source stressed; adding that such dilemma may linger until the retirement of the NPC’s last Build-Operate-Transfer (BOT) contract.

Since there are borrowings tied to the operations of these so-called ineligible IPPs, NPC and PSALM are reportedly trying to sort out how these obligations be shouldered given that the power firm will no longer have revenue sources after the privatization of its assets.

At present, PSALM said the level of NPC’s debts is placed at $6.7 billion. The figure was arrived at after the company’s prepayment of loan obligations and the $1.0 bond issue made by the company this year. The total debts already prepaid reached $1.297 billion as of September 2008.