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QUARTERLY INDUSTRY NEWS DIGEST
PSALM: No investment with Lehman Brothers
September 23 2010 www.doe.gov.ph
The Power Sector Assets and Liabilities Management
(PSALM) Corporation belied the claim of Eastern Samar
Representative Ben Evardone that the privatization
firm lost PhP100 million in its deal with an international
investment company that went bankrupt in 2008.
PSALM clarified that the deal it entered into with
Lehman Brothers Special Financing Inc. (LBFSI) on
18 July 2007 was not an investment but a hedging
transaction, specifically a Principal Only Swap (POS),
which can be likened to an insurance purchase where
PSALM pays an annual expense premium of 2.687% on
the notional amount of USD100 million for 19 years. In
exchange, PSALM or the government has the right to buy
dollars at PhP44.788 in 2028 regardless of the foreign
exchange rate at that time. Counterparties for the POS
deal were selected based on a comprehensive selection
process under the guidance of the Government Policy
Procurement Board, the Department of Finance, and the
Bureau of the Treasury.
24 THE ELECTRICAL ENGINEER MAGAZINE 3RD QUARTER 2010
When Lehman went bankrupt, PSALM invoked the
International Swaps and Derivatives Association, Inc.
(ISDA) agreement, terminated the transaction on
03 November 2008, and replaced it with a new POS
with the same terms and conditions. ISDA is a trade
organization of participants in the market for over-thecounter
derivatives. It is headquartered in New York, and
has created a standardized contract (the ISDA Master
Agreement) to enter into derivatives transactions.
In addition, PSALM filed for claims in the New York court
for approximately USD3.4 million representing the cost
of the replacement and other expenses (legal fees,
damages, etc) as may be allowed under provisions of
the ISDA.
Contrary to Rep. Evardone's allegation published in
news reports, PSALM did not use the proceeds from the
privatization of power assets in the deal, pointing out that
until May 2008 it was the National Power Corporation that
had paid the required premiums. PSALM made it clear
that the hedging transaction was used as an insurance
against foreign exchange volatility.
ERC resets commencement of acceptance testing of
DUs' electric meters
July 27, 2010
The Energy Regulatory Commission (ERC) resolved
to start the implementation of the sampling method
of acceptance testing of all distribution utilities’ (DUs)
electric meters on the first working day of January 2011.
This is embodied in ERC Resolution No. 15, Series of 2010
which effectively resets the original timeline from July
2010. The deferment was in consideration of the fact that
most DUs have not secured the Meter Shop accreditation
which is a major prerequisite for the implementation of
the sampling method of acceptance testing. The ERC,
as of 28 June 2010, has already approved a total of
fifty-seven (57) applications filed by fifty-seven (57)
distribution utilities (DUs) for a Certificate of Authority
(CA) to maintain a Meter Shop. The Philippines has one
hundred forty (140) DUs composed of 120 rural electric
cooperatives and 20 private utilities.
The requirement for every DUs to undertake electric meter
testing and calibration is pursuant to ERC Resolution No.
12, Series of 2010 entitled, “A Resolution Adopting the
Rules and Procedures for the Test and Maintenance of
Electric Meters of Distribution Utilities,” which took effect
in July 2009. In the said Rules and Procedures, the
DUs providing meter electric service are also required
to maintain their individually-owned or group of DU-
www.erc.gov.ph
owned Meter Shop, unless specifically exempted by the
ERC. The Meter Shop will be responsible for the routine
testing, repair, and calibration of electric meters and other
auxiliary devices and equipment essential to the metering
of electric power and energy. Thus, the DUs need to file
their respective applications to maintain a Meter Shop,
or if not practicable, an exemption should also be sought
from the ERC. DUs granted with accreditation will be
issued a Certificate of Authority (CA) to maintain a Meter
Shop, which shall be valid for three (3) years and may
be renewed upon application. The renewal will depend
on the ERC’s assessment on whether the meter shop had
been operating satisfactorily and consistently compliant
with CA requirements and with the said Rules.
“The ERC promulgated the subject Rules and Procedures
to ensure the accuracy of the DUs’ billing meters and
protect the interest of the electricity consumers.
Meanwhile, the DUs are also given consideration to
comply with the Meter Shop accreditation requirement
by providing them ample time to secure the same and
by extending the time to start the electric meter testing
to early next year,” ERC Chairperson & CEO Zenaida G.
Cruz-Ducut concluded.