QuestionsQuestions (EXECUTIVE ORDER NO. 119)
Under Section 60 of EPIRA, upon the effectivity of EPIRA, all outstanding financial obligations of ECs to NEA and other government agencies incurred for the purpose of financing the rural electrification program are assumed by PSALM in accordance with a program approved by the President within one (1) year, to be implemented within three (3) years from EPIRA’s effectivity.
Only those outstanding financial obligations incurred by ECs for the purpose of financing the Rural Electrification Program—i.e., loans and grants for construction/acquisition, operation and maintenance of distribution/generation/subtransmission facilities supplying electric service, and loans for restoration/upgrading/expansion in areas considered rural at the time of the grant (the “Rural Electrification Loans”).
The assumption of EC loans is intended to reduce electricity rates because ERC must ensure a rate reduction commensurate with the savings resulting from removal of amortization payments on the assumed loans, in line with EPIRA’s affordability and public interest policies.
Among others: (a) loan must be duly recorded in NEA/creditor agency books; (b) validated by COA; (c) confirmed by the EC as due and outstanding; (b) loan must be audited by PSALM; (c) ERC must approve rate reduction commensurate with savings; and (d) EC must be current in paying NPC obligations (otherwise it must enter a sustainable payment arrangement acceptable to NPC).
EO No. 119 requires that ERC approved the reduction in EC rates commensurate with resulting savings due to removal of amortization payments. The assumption takes effect only upon such ERC approval, safeguarding consumer welfare.
Each Rural Electrification Loan must be validated by the Commission on Audit before PSALM assumption is effective, ensuring auditability and verification of the obligation.
It is a eligibility condition: an EC must be current in paying its obligations to NPC. If not, it must first execute a sustainable payment arrangement with NPC acceptable to NPC, before becoming eligible for PSALM’s assumption.
NEA must issue guidelines for submission of PIP and/or REP within 30 days, and each EC must submit its plan within 30 days thereafter. These plans must cover institutional, technical, financial, and managerial reforms with targets (at least over the five-year period under Section 60 EPIRA), including efficiency metrics like system losses, collections, customer service, cost control, tariff competitiveness, and capital/financing adequacy, and may include preventive/disciplinary measures prior to assumption.
Within thirty (30) calendar days from EO No. 119’s effectivity, NEA must submit a reorganization plan to DOE and DBM for approval, after which DBM releases necessary funds and DOE monitors implementation.
Within thirty (30) calendar days from EO No. 119’s effectivity, NEA must submit to DOE a plan of action to implement Section 58 of EPIRA (preparing ECs for deregulated market competition and strengthening capability/viability) and to ensure full compliance with Section 5 of the EO.
ERC shall ensure a reduction in EC rates commensurate with savings due to the removal of amortization payments on Rural Electrification Loans assumed by PSALM; NEA assists ECs in rate formulation and application to ERC.
Thereupon (i.e., after PSALM assumes the Rural Electrification Loans upon EC compliance with Section 5), the EC shall cease to be a debtor of NEA or other creditor government agencies for those assumed loans.
PSALM and NEA/other creditor agencies must enter contracts/agreements with an amortization schedule. Where necessary, they may modify mortgage/security arrangements. However, any contracts of mortgage and other security cannot be released by NEA/creditor agencies without PSALM’s written consent.
Revocation occurs for failure to continuously comply with Section 5 of EO No. 119, or if within five (5) years from assumption an EC transfers ownership or control of its assets, franchise, or operations, consistent with Section 60 of EPIRA.
The EC must repay PSALM the total assumed Rural Electrification Loans including interest thereon.
Yes, with NEA’s consent, an EC may enter loan/financing agreements for flexibility in sourcing funds for rehabilitation/modernization, provided such agreements do not involve any permanent transfer or control of assets, franchise, or operations.
It takes effect on the fifteenth (15th) day from the date of its publication in at least two (2) newspapers of general circulation.