Olongapo starts paying up power debts

Olongapo City has started settling power bills and almost P5 billion in debts to the state-run Power Sector Assets and Liabilities Management Corp. (PSALM), a top official said.

PSALM president and CEO Emmanuel Ledesma Jr. told the Inquirer that the Olongapo City government has paid P90 million in power bills. In July, the city committed to pay the amount in installments “in two months.” This puts the city on track with their payment plan and keeps their power supply on, Ledesma said.

The city government also committed to pay back almost P5 billion in debts (as of May 31) to PSALM. Of that amount, the Olongapo City government had paid P500 million on June 28 and committed to settle the balance through a restructuring agreement.

“The city committed to pay P20 million this year as part of the restructuring,” Ledesma said in a text message.

The debt payment means power services for the operations of the local police, public schools and other local facilities administered by national government agencies will continue.

Debt restructuring

Systems losses and interests from previously unpaid bills were said to have caused the ballooning of the city government’s power debt. Industry observers said such a situation happens in many other localities for various reasons from nonremittance and fund mismanagement to a simple lack of funds.

On July 2, city officials met with PSALM representatives and Energy Secretary Jericho Petilla on an acceptable payment scheme. Olongapo City Mayor-elect Rolen Paulino has said the debt restructuring plan was different from that signed by former Mayor James Gordon Jr.

On June 18, PSALM had served notice to Gordon and the city council that the local government had until June 25 to settle its debts. The Olongapo City government, then under Gordon, had said they were questioning PSALM’s computations, citing the Electric Power Industry Reform Act of 2001, which supposedly condoned some of the financial obligations of local governments.

The city government later used part of the sale proceeds of the Public Utility Department (PUD), which used to distribute electricity in the city, to pay at least some of the debts to PSALM. PUD was sold for P610 million to Olongapo Electricity Distribution Co. Inc. (OEDC). While OEDC now manages the local utility, the Olongapo City government must still pay its obligations.

On March 1, President Aquino granted OEDC a 25-year franchise to supply power to Olongapo City, enabling the privatization of the city’s power distribution infrastructure and paving the way for its modernization.