Guidelines on the Implementation of
Special Provision 11 Under Budgetary Support to Government
Corporation (BSGC)-Others of Republic Act No. 11518 or
the General Appropriation Act for FY 2021

  WHEREAS, Section 50 of Republic Act (RA) No. 9136 or the Electric Power Industry Reform Act of 2001 (EPIRA) provides that the principal purpose of the Power Sector Assets and Liabilities Management Corporation (PSALM) is to manage the orderly sale, disposition, and privatization of the National Power Corporation (NPC) generation assets, real estate and other disposable assets, and independent power producer (IPP) contracts with the objective of liquidating all of NPC’s financial obligations and stranded contract costs (SCC) in an optimal manner;

  WHEREAS, Section 34 of the EPIRA provides, in part, that a universal charge (UC), to be determined, fixed and approved by the Energy Regulatory Commission (ERC), shall be imposed on all electricity end-users for the payment of stranded debts (SD) in excess of the amount assumed by the National Government (NG) and SCC of NPC, as well as qualified SCC of distribution utilities resulting from the restructuring of the industry, among others;

  WHEREAS, RA No. 11371 or the Murang Kuryente Act (MKA) provides that the State shall implement policies and programs to ensure transparent and reasonable prices of electricity to consumers by minimizing the UC for SCC and SD;

  WHEREAS, Section 4 of the MKA provides that the amount of Two Hundred Eight Billion Pesos (PHP208,000,000,000.00) of the proceeds of the net NG share from the Malampaya fund, shall be utilized for the payment of SCC and SD transferred to and assumed by PSALM, including all anticipated shortfalls in the course of payment of such liabilities after applying PSALM’s collections from the privatization of NPC’s assets, IPP contracts and proceeds from operations of existing assets: provided, that annual allocations from the Malampaya fund for the payment of SCC and SD, including all anticipated shortfalls, shall be included in the General Appropriations Act (GAA) consistent with the fiscal program of the government, the procedure for which shall be provided in the implementing rules and regulations (IRR) of the MKA;

  WHEREAS, Paragraph 4, Section 4 of the MKA provides that the UC for SCC and SD currently being collected may be covered by the allocated amount from the Malampaya fund, subject to the IRR of the MKA;

  WHEREAS, Section 7 of the MKA provides that the Department of Energy (DOE) and the Department of Finance (DOF), in consultation with the Department of Budget and Management (DBM), the Bureau of the Treasury (BTR) and PSALM, shall promulgate the IRR of the MKA, and that upon the effectivity of the IRR, no new UC-SCC and SD shall be collected;

  WHEREAS, the DOE and the DOF issued Joint Circular No. 1, Series of 2020 or the Implementing Rules and Regulations of the MKA (MKA-IRR) prescribing the procedure for the: (1) determination, verification and confirmation by the PSALM Board of the annual amount of SCC, SD and anticipated shortfalls; (2) allocation of amounts from the Malampaya fund on an annual basis for the payment of SCC, SD and anticipated shortfalls, which shall be included in the GAA; and (3) timely release by the DBM of the amount appropriated in the annual GAA, among others;

  WHEREAS, Sections 2.4 and 9 of the MKA-IRR provide that upon the effectivity of the MKA-IRR, no new UC for SCC and SD shall be collected; provided, that upon exhaustion of the PHP208 Billion allocation under the MKA and no additional allocations are made by Congress, PSALM may again file petitions applying for UC-SCC and SD with the ERC, following such rules and regulations as may be applicable;

  WHEREAS, Section 5.1 of the MKA-IRR provides that, the UC for SCC and SD currently being collected and remitted to PSALM may be covered by the allocated amount from the Murang Kuryente – Special Account in the General Fund (MK-SAGF) subject to the fiscal program of the government.

  WHEREAS, in accordance with Section 5.4 of the MKA-IRR, PSALM submitted to the DOF and DBM the computation for CY 2021 SCC and SD in the amount of PHP56.75 Billion, which amount did not contemplate the suspension of UC-SD collection with an estimated amount of PHP3.2 Billion for FY 2021 at a rate of PHP0.0428/kWh;

  WHEREAS, the UC-SD of PHP0.0428/kWh currently being collected from the end-users was approved by the ERC in an Order dated 15 January 2019 under Case No. 2013-195 RC, or prior to the passage of the MKA, and so PSALM expected the continued collection of the aforementioned UC-SD at the time that PSALM requested from the DOF and the DBM for allocation of PHP56.75 Billion for FY 2021 pursuant to the MKA;

  WHEREAS, notwithstanding PSALM’s request for an allocation of PHP56.75 Billion, Republic Act No. 11518 or the General Appropriation Act (GAA) for FY 2021 was signed on 28 December 2020 and Volume 1-B, Page 763, Special Provision 11, of the said GAA FY 2021 provides that “the amount of Eight Billion Pesos (P8,000,000,000) shall be used for the payment of stranded contract costs (SCC) and stranded debts (SD) transferred to and assumed by the Power Sector Assets and Liabilities Management (PSALM) Corporation, including anticipated shortfalls in accordance with Section 4 of RA No. 11371, sourced from the proceeds of the net national government share from the Malampaya fund under Section 8 of Presidential Decree No. 910; Provided, That no UC-SD shall be collected for FY 2021. Release of funds shall be subject to the submission of a Special Budget pursuant to Section 35, Chapter 5, Book VI of Executive Order No. 292, s. 1987 (Conditional Implementation);”

  WHEREAS, the said PHP8 Billion did not likewise contemplate the suspension of UC-SD collection with an estimated amount of PHP3.2 Billion for FY 2021 at the rate of PHP 0.0428/kWh;

  WHEREAS, President Rodrigo Roa Duterte subjected Budgetary Support to Government Corporation (BSGC-Others), Special Provision No. 11 “Proceeds from Exploration, Development and Exploitation of Energy Resources”, Volume 1-B” to a conditional veto subject to the guidelines that will be issued by PSALM in accordance with the MKA;

  WHEREAS, since only PHP8 Billion was allocated to PSALM, the substantial shortfall will have to be sourced by PSALM through additional borrowings that will eventually be passed on to the NG at the end of PSALM’s corporate life, but the approval for such additional borrowings did not cover the said PHP3.2 Billion that would be generated if UC-SD is continued for FY 2021;

  NOW, THEREFORE, in consideration of the foregoing, PSALM hereby promulgates the following guidelines in accordance with the instruction of the President:

SECTION 1: GENERAL PRINCIPLES

1.1 The PHP8 Billion MKA fund under the GAA FY 2021 shall be applied to the UC-SD and UC-SCC as allotted by the Development Budget Coordination Committee to PSALM; and

1.2 The current UC-SD approved by the ERC in Case No. 2013-195 RC, and prior to the passage of the MKA, shall not be collected for FY 2021, provided that the following conditions are complied with:

• 1.2.1 A supplemental allocation from the MKA fund to cover the anticipated UC-SD collection for FY 2021 is approved by the DBM in accordance with the MKA IRR and such allocation is given to PSALM;

• 1.2.2 The ERC issues an order directing the collecting entities of UC and PSALM to suspend the billing of the UC-SD currently collected from the end-users, for FY 2021.

1.3 Insofar as BSGC-Others, Special Provision No. 11, “Proceeds from Exploration, Development and Exploitation of Energy Resources”, Volume 1-B, Page 763 of the GAA FY 2021 provides, among others, that no UC for SD shall be collected for FY 2021, PSALM shall immediately submit to the DOF and DBM a request for supplemental allocation from the MKA fund for such corresponding amount equal to the anticipated UC-SD collection for FY 2021.

SECTION 2. SUSPENSION OF COLLECTION OF UC FOR STRANDED DEBTS FOR FY 2021

2.1 The UC-SD currently being collected from the end-users is not a new UC, having been approved by the ERC in its Order dated 15 January 2019 under Case No. 2013-195 RC. Thus, the suspension of UC-SD collection, if implemented, will result in additional cash shortfall in PSALM’s 2021 operations. As such, and to ensure that PSALM’s FY 2021 operations would not be unduly and adversely affected, PSALM must first receive supplemental allocation from the MKA fund to cover the anticipated collection from the said UC-SD estimated at PHP3.2 Billion for FY 2021 pursuant to Section 4 of the MKA.

2.2 To this end, PSALM shall immediately submit to the DOF and DBM a request for supplemental allocation from the MKA fund to cover the PHP3.2 Billion expected to be raised from the UC-SD collection for FY 2021, subject to existing budgeting, accounting, and auditing laws, rules and regulations and the fiscal program of the government. The allocated amount shall form part of the aggregate annual amounts for the payment of UC SCC and SD, including anticipated shortfalls, to be deducted from the total MKA allocations under RA No. 11371.

2.3 When the supplemental allocation is approved and the corresponding funding is transferred to the MK-SAGF for release to PSALM, PSALM shall request for the ERC to issue a directive to the UC collecting entities and PSALM to suspend the collection of the PHP0.0428/kWh UC-SD currently collected from the end-users. PSALM shall consequently suspend the collection of the said UC-SD once the ERC issues the corresponding directive. This is to avoid additional shortfall and prevent serious financial and legal consequences in the event PSALM is unable to pay any of its maturing obligations for 2021.

2.4 PSALM shall conduct an annual verification and reconciliation of the balance of the total UC-SD approved by the ERC vis-à-vis additional allocation in the MKA fund per annual GAA. Results will be contained in the UC-SD Variance Analysis Report submitted to the DOF, DOE, DBM, and BTr in accordance with Section 5.6 of the MKA IRR.

SECTION 3: SEPARABILITY CLAUSE

If for any reason, any part or provision of these Guidelines is declared unconstitutional or contrary to law, other parts or provisions not affected thereby shall remain in force and effect.

SECTION 4: EFFECTIVITY

These Guidelines shall take effect fifteen (15) days from the date of its publication in the Official Gazette or in a newspaper of general circulation. Copies thereof shall be filed with the University of the Philippines Law Centre-Office of the National Administrative Register.

Approved, this 24th day of March, 2021.

CERTIFICATION

This Guidelines was approved and confirmed by the PSALM Board of Directors on 24 March 2021 through Board Resolution No. 2021-0324-03.

PSALM ADVISORY ON DAMA CLAIMS
Status of Funding and Release of Funds to NPC

16 November 2020

On 28 October 2020, PSALM issued an Advisory on DAMA¹ Claims & Interest Cut-off. This is to provide updates on the actions taken to secure the required funding for the settlement of these DAMA claims.

1. The Board Resolution on PSALM’s supplemental budget for the payment of DAMA claims has already been circulated to and signed by the members of the PSALM Board.
2. On the approval of the Department of Budget and Management (DBM) on the DAMA supplemental budget, all documentary requirements have been prepared and submitted by PSALM. The DBM, in an email on 09 November 2020, conveyed its recommended FY 2020 Corporate Operating Budget (COB) level for PSALM, which already includes the supplemental budget to cover the DAMA claims.
3. PSALM has already made a drawdown from its loan facility with the Development Bank of the Philippines as funding for the DAMA claims.
4. PSALM has remitted to the National Power Corporation (NPC) today, 16 November 2020, the initial funds for the payment of DAMA claims in accordance with the PSALM Board-approved procedures. PSALM expects the liquidation by NPC of the released funds, in accordance with the rules of the Commission on Audit and the PSALM Board-approved procedures.
5. We reiterate that as to the manner and timing of the release of the payments to the DAMA claimants, NPC is the one responsible for the specific arrangements for and scheduling of the release of payments to settle the claims. Any questions relative to the same should be taken up with NPC directly.

For your information and guidance.

PSALM Management

PSALM ADVISORY TO STAKEHOLDERS RE: BILLINGS
FALLING DUE WITHIN THE PERIOD OF COMMUNITY QUARANTINE

06 November 2020

In view of the continued rise of confirmed Covid-19 cases and the ensuing economic disruption therefrom, Congress passed Republic Act No. 11494 entitled Bayanihan to Recover as One Act (Bayanihan 2) in August 2020, which was approved by President Rodrigo R. Duterte on 11 September 2020 and became effective on 14 September 2020. As part of the authorized Covid-19 response and recovery intervention particular to the electric power industry, Bayanihan 2 directed the implementation of a minimum of thirty (30)-day grace period and staggered payment without interests, penalties and other charges, to all payments due within the period of Community Quarantine (CQ) in the entire electric power value chain to include generation companies, transmission utility and distribution utilities.

In compliance with the abovementioned provision of the Bayanihan 2 and the Advisories issued by the Department of Energy (DOE) in its Memorandum dated 23 September 2020 on the subject Advisory on Providing Grace Period to All Power Sector Bills Falling Due During the Period of Community Quarantine (CQ), and by the Energy Regulatory Commission (ERC) dated 29 October 2020 on its... Read More

PSALM ADVISORY ON DAMA CLAIMS & INTEREST CUT-OFF

Role of PSALM in the Settlement of DAMA¹ claims

28 October 2020

The role of PSALM is to provide the funding needed to settle the DAMA claims in accordance with the computation validated by the Commission on Audit (COA) and pursuant to the latest Resolution of COA dated 10 September 2020, officially received by PSALM’s legal counsel on 29 September 2020. PSALM was not the employer of the DAMA claimants and had nothing to do with the termination of the DAMA claimants. Since PSALM was not the employer of the DAMA claimants, obviously the employment records of the DAMA claimants are not with PSALM.

NPC being the former employer of the DAMA claimants, will handle the release of the payments to the DAMA claimants. Hence, specific arrangements for and scheduling of the release of payments to settle the claims are matters that NPC will handle, and any questions relative to the same will have to be taken up with NPC.

The DAMA claimants must note that in the preparation of the lists of claimants jointly submitted by PSALM and NPC to COA, PSALM generally relied on NPC to generate the employment details of the DAMA claimants based on NPC’s employee records. The lists of claimants were prepared by NPC based on certain requirements of NPC and then forwarded to PSALM. PSALM then reviewed the lists of the claimants to determine who were those that filed claims with the COA to ascertain compliance with the Supreme Court’s Resolution dated 21 November 2017, which required the filing of petition for money claim with COA. PSALM also shared the lists to the Civil Service Commission to inquire if the names on the list were rehired into any government office or agency from 27 June 2001 to 14 September 2007 or date of retirement. Therefore, if there are any claimants whose names are not found on any of the joint lists of NPC and PSALM submitted to COA, then such matter should be taken up by those claimants with NPC, and not with PSALM, so that employment records can be reconciled with NPC.

PSALM’s Funding Process

The funding for the DAMA claims was not included in the 2020 budget of PSALM because the specific amount was still uncertain until COA issued its latest Resolution dated 10 September 2020 and the validated computation of claims, the latest of which was received by PSALM from COA only on 26 October 2020. In accordance with the rule for government offices that the disbursement or disposition of government funds should bear the approval of the proper officials and it should be made pursuant to an appropriation or approved budget, the approval of the PSALM Board of Directors of the supplemental budget for the settlement of the DAMA claims is absolutely necessary. To disburse any funds for an expense that is not in the budget or in a supplemental budget is illegal.

Thus, upon the receipt of the COA Resolution dated 10 September 2020, PSALM immediately submitted the matter to the PSALM Board Review Committee for review of the supplemental budget to cover the DAMA claims. Thereafter, the matter was endorsed to the PSALM Board of Directors.

Today, 28 October 2020, the PSALM Board of Directors verbally approved the request for a supplemental budget. The next step is for the PSALM Corporate Secretary to prepare the written Board Resolution approving the supplemental budget and circulate the same for the signature of the PSALM Board of Directors (DOF, DOE, DOJ, DBM, NEDA, DTI and PSALM). The duly signed Board Resolution is... Read More