After emerging from the crippling power crisis that occurred in the early 1990s, the Philippine government embarked on an industry privatization and restructuring program envisioned to ensure the adequate supply of electricity to energize its developing economy. This restructuring scheme is embodied in Republic Act No. 9136, the Electric Power Industry Reform Act (EPIRA).
Enacted on 08 June 2001 the EPIRA seeks to ensure quality, reliable, secure and affordable electric power supply; encourage free and fair competition; enhance the inflow of private capital; and broaden the ownership base of power generation, transmission and distribution. The EPIRA restructured the power industry by organizing it into four sectors: generation, transmission, distribution, and supply; and introducing the following major reforms: 1) restructuring of the entire power industry to introduce competition in the generation sector; 2) change from government to private ownership through privatization; and 3) introduction of a stable regulatory framework for the electricity sector.
In implementing the restructuring of the power sector, the EPIRA created the Power Sector Assets and Liabilities Management (PSALM) Corporation, a wholly-owned and -controlled government entity, to take over the ownership of all existing generation assets of the National Power Corporation (NPC), independent power producer (IPP) contracts, real estate, and all other disposable assets including the transmission business of the National Transmission Corporation. By the same token, PSALM assumed all outstanding obligations of NPC arising from loans, issuances of bonds, securities, and other instruments of indebtedness. The principal purpose of PSALM, as mandated by the EPIRA, is to manage the orderly sale and privatization of these assets with the objective of liquidating all of NPC’s financial obligations in an optimal manner.
Formally established on 26 June 2001, PSALM began operations on 01 July 2001 with the following functions
The successful privatization of these assets will pave the way for the declaration of open access and retail competition as the EPIRA has conditioned it on the existence of at least 70% of the total capacity of generating assets of NPC and of the total capacity of the power plants under contract with NPC in Luzon and Visayas.
Moreover, to strengthen the financial viability of electric cooperatives (ECs), PSALM assumed all their outstanding financial obligations to the National Electrification Administration and other government agencies.
PSALM has 25 years from the effectivity of the EPIRA to fulfill its twin mandates unless otherwise extended by law. After the end of its corporate life, all assets it holds, all moneys and properties belonging to it, and all its outstanding liabilities will revert to and be assumed by the national government.
“A debt-free PSALM towards a competitive and stable electric power industry
Ensure the orderly privatization of government’s power and related disposable assets;
Optimally liquidate PSALM’s financial obligations; and
Efficiently administer the Universal Charge.
PSALM is committed to the consistent application of quality management principles and techniques that meet the requirements of ISO 9001:2000.
Pursuant to its mandates and goals, all PSALM officials and employees hereby declare that:
PSALM strives to accomplish its twin mandates to privatize the generating plants of NPC and to manage NPC’s liabilities in order to reduce the Universal Charge for stranded debts and stranded contract costs and to lessen its financial obligations.