Press Release
August 3, 2010

Recto: Fat bonuses, overtime pay & consultancy fees
of PSALM inserted as part of Napocor's unpaid debts

Performance bonuses, overtime pay and consultancy fees of state-run Power Sector Assets and Liabilities Management Corp. (PSALM) were also being converted as part of the stranded debts of the National Power Corp. (Napocor) and is now being passed on to power consumers, according to Sen. Ralph G. Recto.

Recto said these were among the reasons why the power rates have never gone down nine years after the Electric Power Industry Reform Act (EPIRA) or Republic Act (RA) 9136 was passed to stop the bleeding of the Napocor by privatizing its power assets.

"Despite the nine-year implementation of the EPIRA, the power rates in the country remains to be one of the highest in Asia, with an average effective electricity rate estimated at P7.2491/kWh as of December 2009, with the Visayas regions getting the highest rate at P7.4313/kWh and Mindanao, the lowest, at P5.8445/kWh," Recto said.

The EPIRA law created the PSALM and tasked it to privatize Napocor's power assets and use the proceeds to pay off its debts. Recto said PSALM has recently petitioned the Energy Regulatory Commission (ERC) to allow it to pass on to electricity consumers some P80.9 million "performance incentive" bonus that it bestowed to its employees. He said this was on top of the P80.5 million salaries for its 165 personnel; P18.4 million night differential pay for the trading personnel manning the Wholesale Electricity Spot Market (WESM) and another P118 million for the professional fees of consultants hired by PSALM.

Recto said the bonuses, salaries, overtime pay and professional fee of consultants reaching P217.3 million were now part of the P470.865 billion stranded costs of Napocor that would be paid or recovered through power rate adjustments.

"A cursory reading of the EPIRA law yields no mention of any provision prescribing that stranded debts will include employee compensations or bonuses," he stressed.

As of May 2010, the government has already privatized 25 operating/generating power facilities or 91.8 percent of the total 3,778.23 megawatt (MW) total rated capacity of Napocor's generating assets in the Luzon and Visayas grids, which translated to proceeds of $10.6 billion or roughly P470 billion.

The senator said PSALM appears to have only paid down part of the Napocor debts while piling up new mountain of debts through fresh loans to refinance existing loans and bankroll ballooning operating expenses. Recto stressed that the law that created PSALM never mentioned that bonuses, overtime pay and even professional fees of consultants should also be charge against the multi-billion stranded contract costs of the state power firm.

Stranded costs are basically unpaid financial obligations of the Napocor, which are being serviced through the disposal of the assets of the state-owned power company.

"This is the reason why power rates remain high amid the promise of EPIRA because every time PSALM feels generous and gives its top executives and personnel hefty bonuses, we're the ones who have to pay for it through power rate adjustments," Recto said.

Recto said the series of increases in power rates had been attributed to the charges for the stranded recovery costs of Napocor and Manila Electric Company (Meralco), missionary electrification, watershed rehabilitation, as well as cost of royalty on energy from indigenous or renewable sources being passed on to consumers. He said Napocor's stranded debts along with its stranded contract costs will have to be shouldered by power consumers through an additional universal charge of P0.3049 per kilowatt hour (kWh) in the next 17 years or until PSALM's corporate life expires in 2025. The EPIRA primarily aims to make the entire energy sector more efficient by providing reliable, secure and affordable supply of electric power while privatizing assets of the Napocor and correspondingly using the proceeds to pay for its existing financial or loan obligations at the time of the passage of the law.

Recto has filed a Senate resolution asking the Senate energy committee to look into the series of power rate hikes reportedly due to the ballooning stranded debts of the Napocor triggered in part by the inclusion of bonuses, overtime pay and consultant fees of top executives and employees of PSALM.

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