Gov’t to borrow P38B to fund Murang Kuryente obligations next year

THE GOVERNMENT will need to borrow around P38 billion to cover the full cost of its obligations under the Murang Kuryente Act because the budgeted funds amount to only P8 billion, the Power Sector Assets and Liabilities Management (PSALM) Corp. said.

For 2021, the Budget department allocated P8 billion for stranded contract costs and to service debt incurred from the government’s power assets, leaving PSALM to find additional financing for the estimated overall cost of P46.04 billion.

Republic Act No. 13711, or the Murang Kuryente Act, requires the government to subsidize certain components of power bills that help offset stranded costs and pay down debt incurred by the government when power assets were publicly-owned. The subsidy is to be funded from the P208 billion in net proceeds representing the government’s share from the Malampaya Gas-to-Power Project.

“We will have to borrow P38.04 billion,” PSALM President Irene J. Besido-Garcia told senators during a committee hearing on the budgets of the Department of Energy Tuesday.

PSALM said borrowing will result in an additional cost of P5.45 billion, which it factored into its P182.3-billion budget proposal.

“Since we only get P8 billion out of the P46.04 billion, we will end up having to borrow for this, and as a consequence, there will be more borrowing costs for PSALM,” Ms. Besido-Garcia said.

The borrowing costs include interest, guarantee fees, documentary stamp tax, and gross receipt tax.

Senator Sherwin T. Gatchalian, who leads the committee hearing, said the borrowing policy needs to be reconsidered.

“We have to request the Department of Finance to seriously look at this; P5 billion is a hefty amount,” he said.

The Department of Budget and Management told PSALM that it can only provide P8 billion for the subsidy due to “limited fiscal space” for 2021. On Friday, the House of Representatives passed the government’s proposed P4.506-trillion budget.

PSALM stopped collecting from consumers the P5.43 centavos per kilowatt-hour (kWh) universal charge-stranded contract cost in February, while it is still collecting the P4.28 centavos/kWh universal charge-stranded debts.

Stranded contract costs are “the excess of the contracted cost of electricity under eligible IPP (independent power producer) contracts over the actual selling price of the contracted energy output of such contracts,” according to the Murang Kuryente law’s implementing rules and regulations.

Meanwhile, the stranded debts are those unpaid financial obligations of the National Power Corp. which have not been liquidated by the proceeds from the sales and privatization of its assets.

The Murang Kuryente law has prevented PSALM from applying for new universal charges since it became effective in 2019.

The subsidy granted to PSALM is expected to end in 2024. If the government funding does not fully settle its financial obligations, the company can once more apply with the Energy Regulatory Commission to collect new universal charges on stranded costs and debt, but only after the subsidy is exhausted. — Adam J. Ang