Allocation of Malampaya Funds to Cut Power Rates

Policy and purpose of the Act

The State policy under Section 2 is to protect public interest by ensuring a reliable, secure, and affordable supply of electric power to consumers.
The State policy under Section 2 is to implement programs that ensure transparent and reasonable electricity prices.
The State policy under Section 2 is to minimize universal charges for stranded contract costs and stranded debts.

Key definitions established

“Joint Congressional Energy Commission (JCEC)” refers to the congressional commission constituted under Section 62 of Republic Act No. 9136, as amended by Republic Act No. 11285.
“Malampaya fund” refers to the existing and future government share from the net production proceeds of the Malampaya Natural Gas Project under Presidential Decree No. 87, and tied to Service Contract 38, forming part of a Special Account in the general fund under Presidential Decree No. 910.
“Malampaya Natural Gas Project” refers to Service Contract 38 in offshore Northwest Palawan.
“Net government share” refers to the national government’s sixty percent (60%) share of net production proceeds of Service Contract 38 under Presidential Decree No. 87, after deductions under Presidential Decree No. 910.
“Net national government share” refers to the national government’s share from the net government share after deducting the local government share under Section 290 of Republic Act No. 7160.
“Net production proceeds” refers to the balance of gross proceeds from Service Contract 38 after deducting the Filipino Participation Incentive, if any, and all operating expenses under Section 8(1) of Presidential Decree No. 87.
“Stranded contract costs of the National Power Corporation (NPC)” refer to the excess of contracted cost of electricity under eligible independent power producer contracts over the actual selling price of the contracted energy output, where the contract was approved by the Energy Regulatory Board as of December 31, 2000.
“Stranded debts of the NPC” refer to any unpaid financial obligations of NPC not liquidated by proceeds from the sales and privatization of NPC assets.
“Universal charge” refers to a non-bypassable charge collected from all end users on a monthly basis by distribution utilities.

Allocation and authorized use of Malampaya funds

Section 4 authorizes the use of PHP 208,000,000,000.00 of the proceeds of the net national government share from the Malampaya fund for the payment of stranded contract costs and stranded debts transferred to and assumed by Power Sector Assets and Liabilities Management Corporation (PSALM) under Section 49 of Republic Act No. 9136.
Section 4 covers all anticipated shortfalls during payment of such liabilities after applying PSALM collections from:
- privatization proceeds of NPC assets;
- independent power producers’ contracts; and
- proceeds from operations of existing assets.
Annual allocations for the payment of stranded contract costs and stranded debts, including anticipated shortfalls, must be included in the General Appropriations Act consistent with the government’s fiscal program, with the procedure to be provided in the implementing rules and regulations of the Act.
Any remaining and future proceeds of the net national government share from the Malampaya fund over the amount indicated in the Act must remain in the Special Account in the general fund to finance energy resource development and exploitation programs under Presidential Decree No. 910.
The Act states that the annual allocation provision does not impair the remaining amount or future proceeds’ use for energy resource development and exploitation under Presidential Decree No. 910.
The Department of Budget and Management (DBM) must ensure the timely release of amounts allocated and appropriated to PSALM in accordance with its debt and independent power producer payment schedule.
If stranded contract costs, stranded debts, and anticipated shortfalls are fully paid before exhaustion of the allocated amount, the remainder must be used to finance energy resource development and exploitation programs under Presidential Decree No. 910.
The universal charges for stranded contract costs and stranded debts currently being collected may be covered by the allocated amount from the Malampaya fund, subject to the implementing rules and regulations.

Reporting requirements and transparency

PSALM must submit to DOE, Energy Regulatory Commission (ERC), Department of Finance (DOF), DBM, and JCEC:
- an annual projected cash flow statement;
- an annual actual cash flow statement; and
- documentation covering stranded contract costs, stranded debts, anticipated shortfalls, and PSALM’s debt payment and independent power producer contract payment schedule.
PSALM must submit the annual projected cash flow statement on or before June 30 of the preceding year.
PSALM must submit the annual actual cash flow statement on or before June 30 of the succeeding year.
PSALM must regularly coordinate with DOE, DOF, and DBM to ensure consistent recordkeeping of disbursements from the Malampaya fund.
PSALM must make all reports available to the public through its website.

Congressional oversight and implementing rules

Upon the effectivity of Republic Act No. 11371, JCEC must exercise oversight powers over the Act’s implementation (Section 6).
Within ninety (90) days from effectivity, the DOE and DOF, in consultation with DBM, the Bureau of the Treasury, and PSALM, must promulgate the necessary rules and regulations for proper disposition of the funds and effective implementation (Section 7).
After the effectivity of the implementing rules and regulations, no new universal charges for stranded contract costs and stranded debts shall be collected (Section 7).

Amendments, separability, and repeal

Section 9 amends Section 8 of Presidential Decree No. 910 insofar as the use of the Special Account in the general fund is concerned.
Section 8 provides separability: if any provision is declared unconstitutional or invalid, the unaffected parts remain in full force and effect.
Section 10 repeals or modifies accordingly all laws, presidential decrees, executive orders, issuances, rules, and regulations inconsistent with the provisions of the Act.