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MANILA, Philippines – A local court’s order to garnish over P60 billion of the Power Sector Assets and Liabilities Management Corporation’s (PSALM) assets will result in a power shortage and additional charges for consumers.
PSALM issued this warning on Tuesday, August 26, explaining that the garnishment order will make it “cash deficit.”
“If our funds are garnished, our long-term debts would become immediately due and demandable,” said PSALM President Emmanuel Ledesma, Jr.
The Quezon City regional trial court recently ordered PSALM to pay P60 billion in compensation to National Power Corporation (Napocor) employees who were terminated when the state energy firm was reorganized in 2003 in compliance with the Electric Power Industry Reform Act (Epira). At the same time, the court’s sheriff also sent private sector power generation administrators and distributors notices of garnishment requiring them to report PSALM funds in their possession for seizure.
Under PSALM’s loan agreements, Ledesma said garnishment is among the grounds for default. This, he explained, would then activate the payment acceleration clause. Given cross-default provisions, an event of default in one loan will cause default in other loans. Consequently, Ledesma said PSALM would be obligated to instantly settle outstanding obligations amounting to P329 billion.
“As a result of insufficient funds to cover operational requirements, PSALM’s performance of its responsibility to ensure energy security will be rendered difficult, if not impossible,” said Ledesma.
He said that without money for fuel, PSALM would not be able to fire up its own power plants. The state firm, which took over the assets of Napocor, is responsible for the fuel supply and operations budget of the Malaya thermal power plant in Luzon, Power Barges (PB) 101 and 102, and Naga coal-fired thermal power plant in Visayas, and PB 104 in Mindanao – all of which produce around 430 megawatts (MW) in power capacity.
PSALM is likewise obliged contractually to provide for the fuel requirements of Independent Power Producer plants, namely Ilijan natural gas power plant in Luzon, and Zamboanga and General Santos diesel power plants in Mindanao.
Ledesma explained that if Independent Power Producer Administrators (IPPAs) allow the garnishment of monthly generation payments to PSALM, PSALM would be unable to pay capacity and other fees for the IPPs, in breach of its contract with the IPPs.
PSALM is contractually responsible to pay for the capacity fees for the following power plants with appointed IPPAs: Bakun Hydroelectric Power Plant, Ilijan plant, Pagbilao and Sual coal plants, and San Roque hydroelectric power plant.
The capacity or energy fees for the following power plants without IPPAs are PSALM’s direct obligations, and will likewise be adversely affected: Benguet Mini-Hydros, Caliraya-Botocan-Kalayaan hydroelectric plant, Casecnan hydroelectric plant, General Santos diesel plant, Mindanao coal plant, Mt. Apo 1 and 2 geothermal plants, Unified Leyte Geothermal Power Plant, and Zamboanga diesel plant.
PSALM also collects and administers the universal charge for Missionary Electrification, which is the source of funds of Napocor operations in off-grid areas.
“Again, we implore the recipients of the patently void notices of garnishment to exercise prudence. We reiterate our earlier statement, which explains the necessity for compliance with the legal procedure for garnishment of public funds, and with the Supreme Court’s 2009 Resolution holding that PSALM is entitled to due process and has a mere subsidiary liability,” Ledesma said.
Ledesma said the notices of garnishment issued by the sheriff of the court were “legally baseless, violative of due process, premature at best, and hence patently void.”
The court’s decision was based on a June 30 Supreme Court resolution that upheld the settlement payment to Napocor employees. PSALM was told to pay P60.24 billion, inclusive of a 10% lien amounting to P6.02 billion as well as P1.81 billion in lawful fees and costs for the execution of the SC’s resolution.
However, Ledesma said that the sheriff’s move was inconsistent with the terms of the SC’s earlier resolution dated December 2, 2009 on the same case. This 2009 resolution emphasized PSALM’s right to due process, he said.
Ledesma also argued that pursuant to established jurisprudence, public policy considerations dictate that government funds dedicated for specific public uses may not be diverted for other purposes and seized under writs of garnishment to satisfy monetary judgments by courts. Moreover, Ledesma said that all disbursements of public funds should be covered by an appropriation from Congress, to avoid disruption of public functions.
Also, PSALM stressed that jurisprudence likewise provides that a money claim against the government, despite validation in a final and executory judgment, should first be filed with the Commission on Audit (COA) given its primary jurisdiction to examine, audit, and settle all claims against the government pursuant to Presidential Decree No. 1445 (Government Auditing Code of the Philippines).
“In light of the foregoing, in order to preclude any devastating effects on the general welfare and the country’s energy security and financial stability, PSALM cautions the recipients of the notices of garnishment against unlawfully, carelessly, and hastily releasing PSALM’s receivables or bank deposits in their possession,” Ledesma said.
Additional cost for consumers
Energy Secretary Carlos Jericho Petilla, meanwhile, agreed that consumers would be burdened by the enforcement of the court order if and when PSALM borrows money from the national government to settle the P60 billion.
“If PSALM will borrow, the amount will form part of the liability of the Napocor and that will be charged to the people in the form of universal charge,” said Petilla.
According to Petilla, PSALM filed a motion for reconsideration before the SC last Friday, August 22. “PSALM, in its motion, wants the en banc to act on its case and not just the SC special division.”
The Energy department has asked the Joint Congressional Power Commission to allow PSALM to contract additional generating capacities to plug the anticipated power deficiency in summer 2015.
Petilla earlier said demand in Luzon would be 9,011 MW next year, higher than this year’s 8,717 MW. He said there would be a deficit of 200 MW next year, and an additional 400 MW to 500 MW capacity is needed to act as buffer supply. (READ: Power emergency: What it means) – Rappler.com
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