x..GD\...i\TORy c.Republic of the Philippines ,-;~~ o,,~

ENERGY REGULATORYCOMMISSIO i .ia~~Approvedfor '%San Miguel Avenue,Pasig City {-'J Posting Z

\;..'N,er .OV,'Ph

IN THE MATTER OF THEAPPLICATION FORAPPROVAL OF THE POWERPURCHASE AND TRANSFERAGREEMENT FOR THEADDITIONAL UNITBETVVEEN AGUSAN DELSUR ELECTRICCOOPERATIVE (ASELCO),AND PEAK POWER SANFRANCISCO, INC. (PSFI)~TH PRAYER FORPROVISIONAL AUTHORITY

ERC CASENO. 2016-064 RC

AGUSAN DEL SURELECTRIC COOPERATIVE(ASELCO), AND PEAKPOWER SAN FRANCISCO,INC. (PSFI),

Applicants."------------------------------------,,

[)OC1{JnTEl,OCT 07 2016D11to: "1::"';""'" ....-.

IIV: .....r.IC..••..•••.••••-

ORDER

On 28 April 2016, applicants Agusan Del Sur ElectricCooperative (ASELCO) and Peak Power San Francisco, Inc. (PSFI)filed an Application for the Approval of the Power Purchase and.Transfer Agreement for the Additional Unit with Prayer forIssuance of a Provisional Authority (Application) seeking theCommission's approval of the Power Purchase and TransferAgreement entered into by both parties on 08 December 2014.

Applicants alleged the following in their Application:

AGUSAN DEL SUR ELECTRIC COOPERATIVE (ASELCO)and PEAK POWER SAN FRANCISCO, INC. (PSFI), through theundersigned counsels and unto the Honorable Commission, most

respectfully state that: "'" /-'

Parties to theC~ .

ERC CASE NO. 2016-064 RCI

ORDER/ 04 OCTOBER 2016PAGE20F19

1. 4Pplicant ASELCO is an electric cooperative dulyorganized and existing under and by virtue of the laws of theRepublic of tHe Philippines, with principal office address at SanFrancisco, Agusan del Sur. It has been granted a franchise by theNational Electrification Administration (NEA) to distribute electricservice in the City of Bayugan and the municipalities of SanFrancisco, Prosperidad, Rosario Trento, Bunawan, Veruela, Sta.Josefa, Loreto,1Sibagat, Esperanza, Talacogon, La Paz and San Luis,all in the ProvinceofAgusan del Sur. A Copy of its NEACertificateof Registration is attached to this Application as Annex "A".

2. Applicant PSFI is a domestic corporation dulyorganized and existing under the laws of the Republic of thePhilippines wi~h principal office address at 3rd Floor Joy-NostalgCenter, Exchange Road, Ortigas Center, Pasig City. PSFI currentlyoperates a 1x 5.2 MW (Gross) Wartsilla 12V32Bunker/Diesel-firedpower plant located at the ASELCO Head Office Compound,National Highway, Brgy. San Isidro, Municipality of San Francisco,Province of Agusan del Sur (the "Power Plant") that is contractedexclusively to I ASELCO under a Power Purchase and TransferAgreement dated May 29, 2013 and approved by the HonorableCommission in its decision dated 22 June 2015 in ERC Case No.2014-032RC.

3. ~SFI is in the process of expanding the Power Plantvia the installation of another 1 x 5.2 MW (Gross) Wartsilla 12V32Bunker/Diesel-fired generating Unit at the Power Plant (the "PowerPlant Expansion") which, like the initial unit, it shall own, operate,and maintain, for the duration of the Cooperation Period asdescribed below.

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4. qopies of PSFI's Certificate of Registration, Articles ofIncorporation and latest General Information Sheet and AuditedFinancial Statements are attached hereto as Annexes "B", "C", "D"and "E" respectively and all made integral parts hereof;

5. .A summary of the relevant technical characteristics ofthe Power Plant Expansion is attached hereto as Annex "F" andmade an integral part hereof.

6. A summary/description of the relevant facilitiesnecessary to connect the Power Plant Expansion directly to thedistribution system/grid of ASELCO is attached as Annex "G"hereof. .

Nature of the Application

7. Bursuant to Rule 20 (B) of the Energy RegulatoryCommission's iRules of Practice and Procedure (the "ERC Rules")and other pertinent rules and regulations, this Application is beingsubmitted to this Honorable Commission for the approval of thePower Purchase and Transfer Agreement for the AdditionalGenerating Unit ("PPTA for the Additional Generating Unit")entered into by and between Joint Applicants ASELGOand PSFk:/copy of the PPirA fo, the Additional Genemting Unit i, attache~

ERC CASE NO. 2~)16-064RCORDER/ 04 OCTOBER 2016PAGE 3 OF 19

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Annex "B" of this Application and made an integral part hereof.

CJmpliance with Pre-Filing Requirements

8. In compliance with the pre-filing requirementsmandated under Rule 3, Section 4 (e) of the Implementing Rules

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and Regulations of Republic Act No. 9136, otherwise known as theElectric Power Industry Reform Act of 2001 or the EPlRA, and Rule6 of the 2006 ERCRules of Practice and Procedure, JointApplicants furriished the legislative bodies of the local governmentunits where they principally operate with a copy of the presentApplication together with all the annexes and accompanyingdocuments. Copies of the Affidavits of Service on the PresidingOfficer or Secretary or their duly authorized representatives, of thelegislative bodies of the Province of Agusan del Sur and theMunicipality df San Francisco, where Applicants both principallyoperate, attesting to the fact of such service are attached heretoas Annexes "I" and "1-1".

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9. in addition, Joint Applicants caused the publication ofthe instant Application in its entirety in a newspaper of generalcirculation witihin the Franchise Area of Applicant ASELCO. Copies

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of the newspaper where the publication of this Applicationappeared and the corresponding Affidavit of Publication from thepublisher of Isuch newspaper attesting to such publication areattached hereto as Annexes "J" and "J-1".

Statement of Facts and of the Case

10. As stated above, PSFI currently already operates a 1 x5.2 MW (Gro,ss) Wartsilla 12V32 Bunker/Diesel-fired power plantlocated at th~ ASELCO Head Office Compound that is contractedexclusively to ASELCO and directly connected to its DistributionSystem. AS~LCO utilizes the PSFI Power Plant primarily as apeaking plant but also as an intermediate source of electricityespecially wh~n there is a shortage in the supply from the MindanaoGrid. However, the current PSFI Power Plant could only serveconsumers served by the San Francisco Substation and not othersubstations. I PSFI offered to expand the existing Power Plant byadding another Brand new Wartsilla 12V32 generating unit at thePower Plant under substantially the same terms and conditions asthe original PPTAbetween the Parties.

11. iAs will be discussed further below, ASELCOdetermined tpat the offer of PSFI to expand its Power Plant was themost advantageous due to the reasons cited below. Thereafter,Joint Applicants commenced negotiations for the execution of thePPTA for tlie Additional Generating Unit. Applicant ASELCOconsidered the need to address, at the soonest possible time, thefurther need for additional generating capacity due to the currentMindanao p;ower crisis as well as the security of the long termpower supply requirements of the consumers in its franchise areawhich is projected to increase yearly from 2015 and onwards. Thepower supply of ASELCO has been adversely affected by thecontinued dbcrease of the contracted capacity allocated under t%

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ERC CASE NO. 2016-064 RCORDER/ 04 OCTOBER 2016PAGE 4 OF 19

Transition Supply Contract/Contract for the Supply of ElectricEnergy (TSC/CSEE) by the National Power Corporation/PowerSector Assets and Liabilities Management Corp. (NPC/PSALM) toASELCO.

ASELCO DEMAND-SUPPLY SITUATION AND PROJECTIONS

12. The franchise area of ASELCO had a total peak powerdemand of3.6..5.9MW in the year 2015. Currently, ASELCO sourcesits electric power requirements from the following suppliers:

SUPPLIER CONTRACTED DURATION OFCAPACITY CONTRACT

TERMNPC/PSALM 4.1MW 2012-2016TMI 5MW 2013-2016MPC lOMW 2013-2016PSFI (ORIGINAL) 5MW 2015-2030TSI lOMW 2015-2040SEC lOMW 2016-2041SMCPC 10MW 2016-2026

13. The demand within the ASELCO franchise area isprojected to grow by an average of 6.52 % yearly as demonstrated inits Distribution Development Plan. Thus, by 2017, with its loadgrowth and expiration of its contracts with NPC/PSALM, TMI andMPC, ASELCO will need an additional 5.60 MW of power supply. Aportion ofthis is what is sought to be supplied under the PPTA forthe Additional Generating Unit by PSFI. This is consistent with theDistribution Development Plan of ASELCO a copy of which with itsaverage load curve, demand supply scenario and forecasts isattached to this Application as Annex "K" and made an integral parthereof;

14. The Department of Energy (DOE) has projected thatthe Mindanao Grid will have a projected deficit of 120 to 280 MWin generating capacity by 2015 and a further deficit of 50-200MWonwards to 2020. A copy of the Mindanao supply demandprojections for 2013 to 2020 as projected by the DOE in the draft2013 Power Development Plan (PDP), is attached hereto as Annex"L" and made an integral part hereof.

15. Further, the supply by NPC/PSALM of power toASELCO under the TSC was originally for 10.765 MW average forthe year 2012 AND 4.101 MW average for the year 2016. Butcurrently, NPC/PSALM is only able to supply 2.5 MW average andthis is projected to decrease further.

16. Thus, there is no assurance that ASELCO can rely onthe supply of power from NPC/PSALM at the contracted levels intheir TSC/CSEE. This will result in the unpredictability of thesupply to the consumers of ASELCO and may expose ASELCO topower outages.

17. A copy ofthe Certification from PSALM that it canno

ERC CASE NO. 2016-064 RCORDER/ 04 OCTOBER 2016PAGES OF 19

supply the additional requirements of ASELCO beyond thecontracted energy and equivalent demand under their TSC/CSEE isattached hereto as Annex "M" and made an integral part hereof.

Details on the Procurement Process undertaken by ASELCO

18. As stated, Applicant PSFI, sent a letter to ApplicantASELCO offering to expand the Power Plant by installing anotherbrand new Wartsilla 12V32 generating unit that PSFI shall finance,build and operate and which PSFI would transfer to ASELCOat theend of the Cooperation Period under the then proposed PPTA forthe Additional Generating Unit.

19. Applicant ASELCOdetermined that the offer of PSFIto expand its Power Plant was very advantageous since:

a) PSFI would finance and install another brand newgenerating unit that was exactly the same as theexisting unit in the Power Plant and would also useless expensive bunker fuel;

b) The additional unit would be available at thesoonest time to address the power supplydeficiency in the franchise area of ASELCO asPSFI was obligated to complete the Power Plantexpansion within one year from the issuance of therequired Environmental Compliance Certificate(ECC)by the DENR;

c) PSFI would guarantee the operational efficiency ofthe power plant expansion in terms of fuelconsumption and availability;

d) There is no requirement for a minimum energyoff-take under the proposed PPTA for theAdditional Generating Unit ofPSFI;

e) Further, the additional unit would now allow thePower Plant to be connected through a 69KV Linegoing to the Substation in Pisaan 10 MYASubstation serving part of San Francisco and thewhole area of Prosperidad and the TalacogonSMYA Substation serving the Municipalities ofTalacogon, San Luis, La Paz, and some parts ofLoreto. Thus, the expanded Power Plant could nowserve a larger area of ASELCOensuring stable andreliable power for a larger portion of itsconsumers.

f) The Power Plant expansion will still be connecteddirectly to the ASELCO distribution system andwill not be subject to transmission charges and willnot be susceptible to outages in the transmissiongrid.

g) At the end of the Cooperation Period, PSFI willtransfer the Power Plant and the AdditionalGenerating Unit to ASELCOfor no consideration.

h) ASELCOwould obtain ownership of the expandedPower Plant within its franchise area withou~a;Ioutdght financial out lays and without nee~ f~

ERC CASE NO. 2616-064 RCORDER/ 04 OCTOBER 2016PAGE60F19 I

I obtaining any loans;

20. Due to the foregoing determinations, ApplicantASELCO entered into the subject PPTA for the AdditionalGenerating Unit with PSFI on 08 December 2014, after a series ofnegotiations, with the aim of ensuring the security, affordability andreliability of it~ supply of power for its consumers at the soonestpossible time and, to meet the demand growth in its franchise areain the future. and to avoid the potential exposure to spot market

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price volatility.

21. After the execution of the PPTA for the AdditionalGenerating Urtit, Applicant PSFI immediately applied for the ECCfor the Power Plant expansion project. On 26 November 2015, theDENR issued I ECC No. ECC-R13-1511-0112for the Power PlantExpansion of PSFI. Copies of the said ECC are attached hereto asAnnex "N" and made an integral part hereof.

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22. A Copy of the Letter from the DOE dated 15 April2016 stating that the PBIPower Plant ProjeCt is classified as a"Committed Pbwer Generation Project" is attached hereto as Annex"0" and made an integral part hereof.

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EXECUTIVESUMMARYANDABSTRACT OF THEELEFTRIC POWER PURCHASE AGREEMENT

23. Executive Summary. Under the PPTA for theAdditional Generating Unit, PSFI undertakes finance, construct,install, operate, maintain and eventually transfer another brandnew, complete Wartsilla 12V32 bunker fired generating unit with agross capacitY of 5.2MW, and all required auxiliaries and a blackstart generator at the current PSFI Power Plant at ASELCO headoffice compound along the National Hi-way, Brgy. San Isidro, SanFrancisco, Ag\Isan del Sur and ASELCOundertakes to take and payfor the capacity and electricity supplied by PSFI from the additionalunit, at a contracted capacity of 5 MW (the "Contracted Capacity").Further, und~r the PPTA for the Additional Generating Unit, PSFIalso undertook to finance the necessary facilities to connect theexpanded power plant to the 69kV system of ASELCO.

24. Contracted Capacity and Energy. The agreed monthlycontracted dpacity under the PPTA for the Additional GeneratingUnit is 5MW. There is no minimum contracted energy under thePPTAfor the Additional Generating Unit between Applicants PSFI

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and ASELCG. ASELCO need only pay for the fuel and vanableO&Mfees for the electricity it actually orders PSFI to generate fromthe Expande9- Power Plant.

25. Delivery Point. The Contracted Capacity and requiredelectricity sllall be delivered by PSFI to ASELCO at the deliverypoint which is the High Voltage side of the transformer at the PowerPlant as designated in the PPTA for the Additional Generating Unit

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(Schedule 7) on the Initial Delivery Date. PSFI shall deliver orcause the delivery of such electricity in accordance with good utilitypractice anq in compliance with appropriate rules and regulations

SCHEDULE 8ELECTRICITY FEES

ERC CASE NO. 2~)l6-064RCORDER/ 04 OC110BER 2016PAGE70F19

such as the Grid Code and the Distribution Code.

26. IJitial Delivery Date. The Initial Delivery Date underthe PPTA for the Additional Generating Unit was agreed to be one(1) year from I the issuance of the ECC by the DENR for theexpansion of the Power Plant and not later than ninety (90) daysthereafter.

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27. ..Electricity Fees. The Electricity Fees under the PPTAfor the Additional Generating Unit are as follows:

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Electricity fees = fixed fees + variable fees + actual fuel costs +actual lube costs + start-up and pre-warmelectricity costs

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Where:

Fixed fees per Unit = Capacity Fees per Unit + Fixed O&M Fees perUnit I

Capacity Fees Per Unit = Fixed Capacity Fee per Unit x ContractedCapacity per lJJnit

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Fixed O&M Fees per Unit = [Fixed O&M Fees per Unit x ifFOM] xContracted Capacity

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per Unit

Fixed CapacitY Fee = P1,360/kw/month

Fixed O&M FFes = P350.00/kw/month

Contracted Capacity per Unit = 5,000kw

ifFOM = 0.6 I x I PhCPIcl + 04 x~hCPIb J

Variable FeeJ = energy fee x E

IEUc x FinPPIJ~Ub FinPPIb J

E = total electricity delivered for the billing month in kwh'sI

!Energy Fee = PO.50/kwh

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Actual Fuel <Costs= E x fuel consumption rate x price of fuel

Fuel consumption rate = 0.24 liters per kwh (guaranteed at 100%dispatch), es~calatedby 1.5%per year, or actual consumptionwhichever is lower applicable also to diesel fuel (LFO) as utilized forstart-ups and shut downs only of the Power Plant.

Price of fuel'= actual delive<ed pdce of bunker fuel and diesel ~

ERC CASE NO. 2~)16-064RCORDER/ 04 OCTOBER 2016PAGE80F19

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(LFO utilized fdr start-ups and shut downs only) to SELLER for thebilling month in pesos per liter and supported by the deliveryinvoices of the ~el supplier / s of SELLER

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Actual Lube Costs = E x lubricant consumption rate x price oflubricant

Lube consumption rate = 0.002 liters per kwh, escalated by 1.5%per year, or actual consumption whichever is lower, or actualconsumption whichever is lower

Price of Lubric~nts = actual delivered price of lubricants to SELLERfor the billing rP0nth in pesos per liter, supported by the deliveryinvoices of the lubricant supplier / s of SELLER

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PhCPIc ~ Philippine CPI for the billing month for allitems published by the NSO

PhCPIb .JI Base Philippine CPI as of December, 2013

EUc = Euro Dollar - Philippine Peso exchange ratefor the billing month, as

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I published by the Banko Sentral ng Pilipinas

EUb = Base Euro Dollar - Philippine Peso exchangerate as of Dec~mber 2013, as publishedby the Banko ~entral ng Pilipinas

FinPPIc = Finland Producers Price Index forManufacturing for the billing month, aspublished by t,he International Monetary Fund

FinPPIb = Base Finland Producers Price Index forManufacturing, as of December 2013, aspublished by ~he International Monetary Fund

Start-up and pre-warm electricity costs = costs of the start-up andpre-warm ele<::tricitysupplied by BUYER to SELLER for the PowerPlant as billed by BUYER to SELLER and the actual costs of the fueland lubricants used by SELLER for the Black-Start Generator at thePower Plant for the Billing Month.

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28. Price Formula for Fuel and Lubricants. In accordancewith the previous decisions of the Honorable Commission, the fueland lubricants costs under the PPTA for the Additional GeneratingUnit will be on a pure pass through basis, subject only to the agreedconsumptionYefficiency cap of 0.24/liters of bunker fuel per kwhand 0.002 liters oflubricants per kwh of electricity generated by thePower Plant. Thus, the fuel costs under the PPTA for the AdditionalGenerating Unit is the actual delivered price of bunker fuel to PSFIfor the billing month in pesos per liter which shall be supported bythe delivery invoices of the fuel supplier/s of PSFI. Likewise, thecost of lubricants under the PPTA for the Additional GeneratingUnit is the adtual delivered price oflubricants to PSFI for the billing. month in pe~os per liter and supported by the delivery invoices of

IERC CASE NO. 2016-064 RCORDER/ 04 OCTOBER 2016PAGE 9 OF 19 I

the lubricant stipplier/s of PSFI. This is exactly the same formulaand heat rate a~the Original PPTAbetween the Parties;

29. Details of the Fuel Procurement. The swornstatement on the details for the fuel procurement of Applicant PSFIfor the fuel requirements of the additional unit are attached asAnnex "P" and made an integral part of this Application.

30. Term. The PPTA for the Additional Generating Unitshall have a term of Fifteen (15) years commencing on the InitialDelivery Date and ending on the fifteenth (15th) anniversary of suchcommencement date (the "Cooperation Period"), unless soonerterminated putsuant to the terms of the PPTA for the AdditionalGenerating Unit. The Initial Delivery Date is the date of thecommencement of PSFI's obligation to deliver to ASELCO, and forASELCO, to purchase, the Contracted Capacity, provided theHonorable Commission has approved the PPTA for the AdditionalGenerating Unit.

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31. Allowed Schedule of Outage. Under the PPTA for theAdditional Generating Unit, PSFI is allowed a Scheduled Outagewhich shall n~t exceed Seven Hundred Twenty (720) hours yearand an Allowed Unscheduled Outage period of Three Hundred Sixty(360) hours :Rer calendar year per Unit of the Power Plant. Anyunutilized Allowed Scheduled Outage periods may be used forAllowed Unscheduled Outages and vice versa but any unutilizedAllowed Scheduled and Unscheduled Outage allowances within acalendar year -kill not be accumulated for use during the succeedingyears of the Cboperation Period. Any unutilized outage for one unitcan be used for the other unit.

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32. Billing Month. A Billing Month under the PPTA forthe Additiona~ Generating Unit means the period commencing onthe first hour bfthe twenty sixth (26th) day of a calendar month andending on the last hour of the twenty fifth (25th) day of the nextcalendar month. Within ten (10) working days after the end of eachBilling Month, PSFI shall deliver to ASELCO an invoice in respectof Electricity Fees payable for the previous Billing Month. The duedates for su~h invoice shall be fifteen (15) calendar days afterreceipt of such billing. There will be separate billings andsettlements for the Original PPTA and the PPTA for the AdditionalGenerating Uhit.

33. Prompt Payment Discount. In the event that the fulland proper phyment for the Electricity is made by ASELCO withinseven (7) days from receipt of the invoice, PSFI shall grant ASELCOa prompt payment discount equivalent to one percent (1%) of theCRF portion Mthe Electricity Fees (exclusive of, O&Mfees, fuel costand any applicable charges and taxes), corresponding to theElectricity Fees billed for such Billing Month. All payments underthe PPTA fot the Additional Generating Unit shall be made inPesos.

34.supply of

! Charges, Expenses and Taxes. In relation t~()~~~e:ectdcity by PSF! to ASELCO, any ch"ges, /' i

ERC CASE NO. 2tn6-064 RCORDER/ 04 OCTOBER 2016PAGE 10 OF 19 [

expenses, and fees that may be charged to, incurred and/orassumed by IPSFI or otherwise imposed by NGCP, anyGovernmental Authority, the market operator or any other thirdparty, for transmission and/or Ancillary Services and other relatedservices in connection with the delivery of electricity under thePPTA for the IAdditional Generating Unit shall be paid by theASELCO.

35. p1yments on Termination. In the event that the PPTAfor the Additional Generating Unit is terminated by PSFI upon theoccurrence of I any events of default under the PPTA for theAdditional Generating Unit, ASELCO shall be liable to payliquidated damages in the form of a termination penalty amountingto Capacity Fees under the said PPTA for the remainder of theCooperation Pbriod. In the event ASELCO is unable to pay thetermination penalty, PSFI may remove the Power Plant. In theevent of termination of the PPTA for the Additional GeneratingUnit in bad faith by PSFI, it shall pay ASELCOliquidated damagesin the form of a termination penalty amounting to the Capacity Feesas approved by the ERC for the remainder of the CooperationPeriod but not to exceed three (3) years. Once PSFI has paid theliquidated damages, it may thereafter remove the Power Plant.

36. Extended Operations and Maintenance for theOriginal Unit by PSFI. Upon expiration of the Cooperation Periodfor the Original Units under the Original PPTA, PSFI shall beallowed to cbntinue the operations and maintenance for theOriginal Unit I until the end of the Cooperation Period for theAdditional Unit under this Agreement, including any validextensions tHereof, such that both the Original Unit and theAdditional Utiit shall be turned over simultaneously by PSFI toASELCOat the end of the Cooperation Period in the PPTA for theAdditional G~nerating Unit. During such extended period ofoperations arid maintenance by PSFI of the Original Unit, PSFIshall charge ASELCOonly the Fixed O&MFee, Variable O&MFeeand Fuel and ILubricants Costs and Start-up Costs for the OriginalUnit.

STAGESOF SUPPLY

37. Testing and Commissioning. During the testing andcommissioning period, PSFI will deliver to ASELCOon a non-firmbasis, the elJctric power generated by the additional unit in thecourse of testing and commissioning, subject to the payment byASELCOof the Fuel and Lubricants costs and energy fees/variableO&M fees f~r actual energy taken computed in accordance withSchedule 8 of the PPTA for the Additional Generating Unit. Thesefees shall be based only on the Actual Energy Delivered by PSFI toASELCOfor [the duration of the testing and commissioning periodof the additional unit.

38. ICommercial Operation. During the commercialoperations period which shall commence on the Initial DeliveryDate, ~SFI WI..'11 deliver t? ~SELCO.on a fi!m basis, the contranced1CapaCIty from the addItIOnal umt, subject to the payment 0

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ERC CASE NO. 2016-064 RCI

ORDER/ 04 OCTOBER 2016PAGEuOF19

Electricity Fees! by ASELCO computed in accordance with theformula specified in Schedule 8 of the PPTA for the AdditionalGenerating Unit.

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IMPACTOFTHE PPTAFORTHE ADDITIONALGENERATINGUNIT ONASELCOGENERATIONCOSTS

,39. Sliould the Honorable Commission approve the

Electricity Fees ',under the PPTAfor the Additional Generating Unit,there is a projected increase in the generation cost of ASELCOofPhPo.041 per kWh during the testing and commissioning of theadditional unit.~

40. Should the Honorable Commission approve theElectricity Fee~under the PPTAfor the Additional Generating Unit,there will be an increase in generation cost of PhpO.384 per kWh onthe Initial Delivery Date upon commercial operations of theadditional unit,. A copy of the simulation of the impact of the PPTAfor the Additibnal Generating Unit on the generation costs ofApplicant ASELCO is attached hereto as Annex "Q" and made anintegral part of this Application;

I41. The expected additional capacity from the additionalunit of PSFI even as early as the testing and commissioning andpre-commercial operations of the Power Plant will contributegreatly to tlie improvement of the quality, reliability andaffordability of the electric power delivered to the consumers ofASELCOand the security of supply for its franchise area.

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42. Under the terms of the PPTA for the AdditionalGenerating Unit, among the conditions precedent to. theperformance by ASELCO and PSFI of their respective obligationsthere under i~ the approval by the Honorable Commission of thisApplication.

43. thus, for PSFI to be able to deliver and ASELCOto beable to receivJ power from the additional unit as early as the testingand commissioning and the pre-commercial operations, it isimperative thilt the Honorable Commission approve the PPTA forthe Additional Generating Unit.

44. Considering that the additional unit is still to beinstalled, it chrrently does not yet have a Certificate of Compliance(COC) from I the Honorable Commission. Pursuant to ERCResolution NO.9, series of 2010, Joint Applicant PSFI herebyundertakes that shall it shall file the necessary application for anamendment bf the COC of its current power plant not later thanthree (3) months prior to the commencement of commercialoperations of the additional unit.

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45. 'Project Cost. A summary of the relevant informationon the project cost for the additional 5.2 MW bunker-fired powergeneration unit of PSFI is provided in the Summary of ProjectCost attal1h~d Annex "R" hereto and made an integral parthereof.

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ERC CASE NO. J016-064 RCI

ORDER/ 04 OCTOBER 2016PAGE 12OF 19

46. Funding and Sources of Funds, Cash Flow and Basisfor the Purchas:ed Power Rate. The Project shall be funded througha loan from AUB and equity from the shareholders. Summaries ofthe relevant ihformation on PSFI's sources of funds for theexpansion of the Power Plant including the debt-equity ratio for theexpansion, casQ flow and basis for the purchased power rate in thePPTA for the Additional Generating Unit is hereto attached asAnnexes "S", "T" and "U" respectively and made integral partshereof.

47. B~nk Certification. A Certification from Asia UnitedBank on the fibancing for the PSFI Power Plant expansion, on theprincipal amount, term and interest of the loan agreement isattached hereto as Annex "V"and made an integral part hereof.

48. Rates Schedule. The Electricity Fees are computedand specified: in Schedule 8 of the PPTA for the AdditionalGenerating Unit;

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49. CapacIty Fee of PhP1,360.00jkW jmonth. TheCapacity Fee would allowApplicant PSFI to recover the Project Costfor the expansion of the Power Plant and have a reasonable returnover the fifteen (15) year term of the PPTA for the AdditionalGenerating Unit. The recovery period is pegged on the term of thePPTA for the Additional Generating Unit since upon the expirationof the said terrlI, PSFI is obligated to turn over the expanded PowerPlant to Applidant ASELCOfor no further consideration.

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50. Board Resolutions. A copy of the Board Resolutionadopted by the Board of Directors of PSFI authorizing the jointfiling of the instant application with ASELCO,is attached hereto asAnnex "w" and made an integral part hereof. Likewise, a copy ofthe Board Re~olution passed by the Board of Directors ASELCOapproving the ;execution of the PPTA for the Additional GeneratingUnit with PSFI and authorizing the joint filing of the instantApplication, i~ attached hereto as Annex "W-1" and made anintegral part hereof;

ALLEGATIONSIN SUPPORTOFMOTIONFORNON-DISCLOSUREOFCONFIDENTIALINFORMATION

51. Nnder Article 10 of the PPTA for the AdditionalGenerating U¥t, the Joint Applicants agreed to keep in strictconfidence all "Confidential Information" of PSFI, to ensure thatno Confidential Information of Applicant PSFI is disclosed to thirdparties and that they shall use utmost efforts to prevent anyunauthorized disclosure of Confidential Information. SuchConfidential Information includes any information relating tothe operations, businesses, technology, practices, products,marketing, sales, services, finances or legal affairs of PSFI, aswell as actilial or prospective customers, business partners,market oppdrtunities, business, sales, marketing, tech~~~financial and legal plans, pwposal, and pwjections, P/l

ERC CASE NO. 2016-064 RCORDER/ 04 OCTOBER 2016PAGE 13 OF 19

information, I know-how, design rights, trade secrets, concepts,techniques, processes, methods, systems, designs, programs, codes,formula, reseatch, experimental works and works in progress.

52. Joint Applicants respectfully request thatpursuant to their agreement to maintain in strict confidence allconfidential information of PSFI Annexes "P" "R" "S" "T" "u", , ""and "Y" whichi contain certain non-public information, data andcalculations i~volving business operations and financial tradesecrets reflecting PSFI's investment and business calculations,be treated as confidential documents.

53. Under Rule 4 of the ERC Rules, the HonorableCommission may, upon request of a party and the determination ofthe existence of conditions which would warrant such remedy,treat certain I information submitted to it as confidential.Pursuant to I such provision, Joint Applicants respectfullyrequests for the issuance of a protective order declaring theforegoing information, data and calculations contained inAnnexes ""P", "R", "S", "T", "u" and "Y"as confidential information.

54. F;urther, in accordance with Section 1(b), Rule 4 oftheERC Rules, Joint Applicants hereby submit one (1) copy of Annexes"P" "R" "s" I "T" "u" and "Y" in a sealed envelope with the, , , , ,envelope and each page of the document stamped with the word"Confidential" .

ALLEGATIONSIN SUPPORT OF THE PRAYERFORPROVISIONALAUTHORITY

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55. One of the conditions in the Loan Agreement betweenPSI and AUB as lender for the Power Plant is that Joint Applicantsmust secure the approval of the PPTAfor the Additional GeneratingUnit by the Honorable Commission prior to commercial operationsof the additional unit;

56. PSFI has already begun the construction of theexpansion oft~e Power Plant. PSFI has already ordered the 5.2MWBrand new Wartsila Bunker Fired 12Y32 Model Generating Unit

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which is scheduled to be shipped from Finland by 9 May 2016 andwill arrive in the Philippines by July 15, 2016. However, PSFI mustbe able to draw on the loan from AUB in order to have the said unitshipped to the Philippines and installed at the power plant site atthe soonest time to meet the implementation schedule for thePower Plant expansion. Otherwise, the additional unit will bedelayed and ~SFI will not be able to meet its obligation to deliverelectricity to A!SELCOunder the timeline stipulated in the PPTA forthe Additional Generating Unit. The additional unit is projected tobe ready for Commercial Operations approximately One Hundredand Twenty Days after the arrival of the unit in the Philippines.

57. Thus, in order for the Power Plant expansion to beready on tim~, PSFI must be able to draw on its loan from AUB atthe soonest ~nd in order for PSFI to be to do so, the provisionalapproval of the PPTA for the Additional Generating Unit m~~: ~secured as there might be a difficulty in getting a final decis7Y

ERC CASE NO. 2016-064 RCI

ORDER/ 04 OCTOBER 2016PAGE 14 OF 19 I

such a short Jpan of time due to the tremendous case load of theHonorable Commission;

58. Thus, in order for PSFI to be able to comply with itsobligations under the PPTA for the Additional Generating Unit andcomplete the Power Plant expansion and deliver the ContractedCapacity from the additional unit to ASELCOby the Initial DeliveryDate and for the additional unit to bring relief to the consumerswithin the fr~nchise area of ASELCO and further to insulateASELCOfrom ~ny further power deficiencies brought about by anypower shortage in the Mindanao Grid, it is imperative that aProvisional AUthority/Approval be granted by the HonorableCommission Ipending consideration and approval of theApplication. Otherwise, the construction and completion of thePower Plant might be delayed, to the detriment of the security ofthe power supply of the consumers of Applicant ASELCO. Incompliance with the Rules of the Honorable Commission, attachedas Annex "V" <ilfthis Application is the Affidavit of Roel Z. Castro,President of Applicant PSFI, in support of the Prayer for ProvisionalAuthority.

. PRAYERI

WHEREFORE, premises considered, it is respectfully prayedthat the Honor~ble Commission that:

1. An Order be issued treating Annexes "P", "R", "S", "T","u" and "V" of the instant Application, as confidential documentsand the information contained therein as confidential and directingits non-disclosure pursuant to Rule 4, Section 1of the ERCRules ofPractice and Procedure and prescribing the guidelines for theprotection thereof;

2. ~ending hearing of the Application on the merits,issue a Provisional Approval approving the Electricity Fees agreedupon by the IJoint Applicants in the PPTA for the AdditionalGenerating Unit;

3. After full proceedings on the merits, issue a DecisionAPPROVING the terms of the Power Purchase and TransferAgreement for the Additional Generating Unit between JointApplicants PSFI and ASELCO,thereby authorizing PSFI to chargeand collect from ASELCOthe Electricity Fees corresponding to the(1) Testing and Commissioning Period, and (2) Initial Delivery Dateas contained in the PPTA for the Additional Generating Unit andauthorizing ~SELCO to pass the full amount thereof to itsconsumers. I

Joint Applicants pray for all other reliefs just and equitableunder the preIhises.

Finding the said Application sufficient in form and substancewith the required fees having been paid, the same is hereby set fordetermination of compliance with the jurisdictional requirements,expository presentation, Pre-trial Conference, and presentation of

ERC CASE NO. 2016-064 RCORDER/ 04 OCTOBER 2016PAGE is OF 19

evidence on 08 November 2016 at nine o'clock in the morning(9:00 A.M.), at ASELCO's principal office at San Francisco,Agusan del Sur.

Applicants ASELCO and PFSI are hereby directed to cause thepublication of the attached Notice of Public Hearing in two (2)newspapers of nationwide circulation in the Philippines at their ownexpense, twice (2*) within two (2) successive weeks, the dates ofpublication not being less than seven (7) days apart and the date ofthe last publicatiort to be made not later than ten (10) days before thedate of the schedul1edinitial hearing. They are also directed to informthe consumers within the franchise area of ASELCO, by any othermeans available arid appropriate, of the filing of the Application, its

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reasons therefor, and of the scheduled heaTIng thereon.

Let copies of the Application, this Order and the attachedNotice of Public Hearing be furnished the Office of the SolicitorGeneral (OSG), the Commission on Audit (COA), and the Committeeson Energy of both Houses of Congress. They are hereby requested, ifthey so desire, to send their duly authorized representatives at thescheduled hearing.

Likewise, let copies of this Order and the attached Notice ofPublic Hearing be. furnished the Offices of the Provincial Governors,the City and Municipal Mayors, and the Local Government Unit(LGU) legislative !bodies within ASELCO's franchise area for theappropriate posting thereof on their respective bulletin boards.

,

,

Applicants AbELCO and PFSI are hereby directed to furnish allthose making reqJests therefor with copies of the Application and itsattachments, subj~ct to reimbursement of reasonable photocopyingcosts.

On the date of the initial hearing ASELCO and PFSI mustsubmit to the Commission their written Compliance with thejurisdictional requirements attaching therewith, methodicallyarranged and duly marked, the evidence on the actual posting andpublication of the Notice of Public Hearing consisting of certificationsissued to that effect, signed by the afore-mentioned Governors,Mayors, and LGU legislative bodies or their duly authorizedrepresentatives, bearing the seals of their offices, and the affidavits ofthe Editors or Business Managers of the newspapers where the saidNotice of Public Hearing were published together with the completeissues of the said newspapers, and Sucho/the proofs of compliancewith the requirements of the Commission.

,

ERC CASE NO. ~016-064 RCORDER/ 04 OCTOBER 2016PAGE 16 OF 19

ASELCO, PFSI, and all interested parties are directed to submit,at least five (5) days before the date of initial hearing and Pre-TrialConference, their! respective Pre-trial Briefs containing, amongothers:

a.

b.c.

A sum~ary of admitted facts and proposed stipulation offacts. :,

The issues to be tried or resolved;

The documents or exhibits to be presented, stating thepurposes and proposed markings therefore; and

d. The number and names of the witnesses, with theirwritten testimonies in an individual affidavit form, to beattach~d to the Pre-trial Brief.

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Failure of ASELCO and PFSI to submit the required Pre-trialI

Brief and JudiciallAffidavits of their witnesses within the prescribedperiod shall be a ground for cancellation of the scheduled hearing,and the resetting of which shall be six (6) months from said date ofcancellation.

ASELCO and PFSI must also be prepared to make an expositorypresentation of the instant Application, aided by whatevercommunication m,edium that they may deem appropriate for thepurpose, in order ~oput in plain words and explain, for the benefit ofthe consumers and other concerned parties, what the Application isall about and the I reasons and justifications being cited in supportthereo£ ,

SO ORDERED.

Pasig City, 04 October 2016.

FORAND BYAUTHORITYOF THE COMMISSION:

,

LS:~/NJM

~~ .. - ..•....~JOSE VICENTE B. SALAZAR

Chairmanand CEY

---- -' _._-- -'----

..ERCOffice a/the Chairman _

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ERC CASE NO. 2016-064 RCORDER/ 04 OCTOBER 2016PAGE 17 OF 19

Copy furnished:

1. Agusan Del Sur Electric Cooperative (ASELCO)ApplicantSan Francisco, Agusan del Sur

2. Atty. Filomeno P. CadizSansaet Masendo Cadiz & Banosia Law OfficeCounsel/or Applicant ASELCO2nd Floor, Sansaet Building, Quezon Street, Barangay 2, San Francisco,Agusan del Sur

3. Peak Power San Francisco, Inc. (PSFI)Applicant3rd Floor, Joy Nostalg Center, Exchange Road, Ortigas Center, Pasig City

4. Atty. Ferdinand V. MenguitoDel Callar and PartnersCounsel/or Applicant PSFI9D, Belvedere Tower, San Miguel Avenue, Ortigas Center, Pasig City

5. Office of the MayorCity of Bayugan, Agusan del Sur

6. Office of the Local Government Unit (LGU) legislative bodyCity of Bayugan, Agusan del Sur

7. Office ofthe MayorSan Francisco, Agusan del Sur

8. Office of the LGU legislative bodySan Francisco, Agusan del Sur

9. Office of the MayorBunawan, Agusan del Sur

10. Office of the LGU legislative bodyBunawan, Agusan del Sur

11. Office of the M,ayorEsperanza, Agusan del Sur

12. Office ofthe LGU legislative bodyIEsperanza, Agusan del Sur,,

13. Office of the MayorLa Paz, Agusart del Sur

14. Office ofthe LGU legislative bodyLa Paz, Agusa~ del Sur

!

15. Office of the MayorLoreto, Agusah del Sur

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16. Officeof the fU legislative~

ERC CASE NO. 2~)16-064RCORDER/ 04 OCTOBER 2016PAGE 18 OF 19

Loreto, Agusan del Sur

17. Office of the MayorProsperidad, Agusan del Sur

18. Office of the LGU legislative bodyProsperi dad, Agusan del Sur

19. Office of the MayorRosario, Agusan del Sur

20.Office of the LGU legislative bodyRosario, Agusan. del Sur

21. Office of the MayorSan Luis, Agus~n del Sur

22. Office of the LGU legislative bodySan Luis, Agus~n del Sur

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23. Office of the M~yorSibagat, Agusart del Sur

24. Office of the LJU legislative bodySibagat, Agusari. del Sur

25. Office of the MtorISta. Josefa, Agusan del Sur

26. Office of the Ldu legislative bodySta. J osefa, Ag~san del Sur

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27. Office of the MkyorI

Talacogon, Agusan del Sur, i

28. Office of the Lcku legislative bodyTalacogon, Agt1san del Sur

29.Office of the Ml1yorTrento, Agusan del Sur

30.Office of the LGU legislative bodyTrento, Agusan del Sur

31. Office of the MayorVeruela, Agusan del Sur

32. Office of the LGU legislative bodyVeruela, Agusan del Sur

ERC CASE NO. 2016-064 RCORDER/ 04 OCTOBER 2016PAGE 19 OF 19

35. Office of the Solicitor General134 Amorsolo Street, Legaspi Village, Makati City

36. Commission on AuditCommonwealth Avenue, Quezon City

37. Senate Committee on EnergyGSIS Bldg. Roxas Blvd., Pasay City

38. House Committee on EnergyBatasan Hills, Quezon City

39. Philippine Chamber of Commerce and Industry (PCCI)3rd Floor, Chamber and Industry Plaza (CIP), 1030 Campus A~~~U~ erPark Avenue, McKinley Town Center, Fort Bonifacio, Taguig C~ ~

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