The government’s rural electrification program is gaining significant headway in energizing the countryside, including the remote areas, thanks largely to the Power Sector Assets and Liabilities Management Corporation (PSALM) for assuming the loans of electric cooperatives (ECs) in coordination with pertinent government agencies.
Section 60 of the Electric Power Industry Reform Act (EPIRA) specifies PSALM’s mandate to assume all outstanding financial obligations of ECs to the National Electrification Administration (NEA) and other government agencies incurred as of 26 June 2001, the start of the implementation of the law. The primary purpose is to finance the government’s rural electrification program. In fulfilling this mandate, PSALM partners with specific government entities in assuming these loans.
Under the EPIRA’s Implementing Rules and Regulations, the NEA is responsible for the “accounting of all outstanding financial obligations of ECs in accordance with existing accounting and auditing rules and regulations.” Once these obligations are finalized, the ECs have to obtain certification from the electrification firm that their loans have been duly recorded in the NEA’s books and confirmed by the ECs themselves. As an additional requirement, an EC’s outstanding loan as of the effectivity date of the loan condonation has to be validated by the Commission on Audit.
Prior to loan condonation, PSALM requires the ECs to obtain a certification that they are current in the payment of their obligations to the National Power Corporation. If an EC’s account is not current, it has to frame an agreement containing a sustainable payment arrangement that is acceptable to the government power firm.
By law, the ECs are also required to cooperate with the NEA in preparing themselves to operate and compete in the anticipated deregulated electricity market. This means that an EC applying for loan condonation has to comply with the guidelines on the Performance Improvement Program and/or the Rehabilitation and Efficiency Plan set by the NEA.
The EPIRA has tasked the Energy Regulatory Commission (ERC) to ensure that reductions in electricity rates as a result of condoned loans will be passed on to EC customers. The NEA supports the ECs in the formulation of these rates. The ERC order has to be stated in an EC’s application for loan condonation.
As soon as the ECs have complied with the terms and condition for loan condonation by the various agencies, PSALM, through its Internal Audit Department, conducts a final audit of the rural electrification loans of ECs and submits its recommendations to the PSALM Board for approval. Once approved, PSALM, in coordination with the NEA and the ECs, prepares the Memorandum of Agreement on the terms and conditions of the loan condonation.STATUS
As of 31 December 2008, PSALM has assumed a total of PhP8.7 billion worth of financial obligations to the NEA and other government agencies.
The following table shows a summary of PSALM’s outstanding financial obligations to the NEA and other EC creditors.Status of Loan Condonation
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