Press Release
August 1, 2011

Tap fresh proceeds from Malampaya to
cushion impact of looming power rate hike

Sen. Ralph G. Recto yesterday batted for the use of fresh proceeds from Malampaya natural gas project to cushion the impact to consumers of the planned 39- to 40-centavo increase in the universal power charge.

Recto said Malampaya proceeds collected since June 30, 2010 and even up to last year of the Malampaya Service Contract could be tapped to help reduce future power rate hikes or even pay down the stranded contract costs and stranded debts of the National Power Corp. (Napocor).

"The Malampaya funds have been the proverbial "wangwang" of past governments, wherein funds were treated like a special kitty and used with impunity without no clear accountability," Recto, chair of the Senate ways and means and vice-chair of the Senate finance panel, said.

He said a glaring proof of this is the virtual dissipation of the P200 billion Malampaya proceeds that were collected by the national government since 2002.

Recto said consumers already reeling from soaring consumer prices and utilities like electricity and water badly need a relief from another power rate increase.

He said the Malampaya proceeds collected every year should now be included in the national budget and be specifically channeled to programmed obligations such as "subsidy to power users."

Recto said government take from Malampaya is bound to treble once the expansion plans of the Malampaya consortium led by Shell Philippines and Chevron Malampaya LLC go full blast in August.

The consortium is composed of Shell Philippines Exploration B.V. and Chevron Malampaya LLC, each with 45%, as well as PNOC-EC which has a 10% stake.

Malampaya was declared commercially operable in 2002 and is estimated to have 2.7 trillion cubic feet of natural gas with a Service Contract lasting up to 2024 with the consortium moving for an extension up to 2039.

Recto also urged the national government to make a full disclosure on how much Malampaya funds have been collected since President Aquino assumed office in June last year.

"Finding the P200 billion Malampaya funds is proving to be difficult than Finding Nemo, but surely and in the spirit of transparency, the government could now account for the billions collected since June 2010," he stressed.

Power users are poised to shell out an additional 39 centavos per kilowatt hour in their monthly electricity bills once the Energy Regulatory Commission (ERC) approves the proposal of the Power Sector Assets and Liabilities Management (PSALM) to pass on to electricity consumers Napocor's P139 billion outstanding stranded debts and stranded contract costs. "Which is another form of tax called Universal Charge," Recto said.

PSALM seeks to collect the additional 39 centavos from power users for a period of 15 years.

The EPIRA, the law that created PSALM to liquidate the assets of Napocor to pay off its debts, defines stranded debts as any unpaid financial obligation of Napocor that has not been liquidated by the proceeds from the privatization of the generating firm's assets, and stranded contract costs as the excess of the contracted cost of electricity under eligible contracts over the actual selling price of the contracted energy output of these contracts in the market.

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