in the matter of the joint application for approval … erc case no. 2015-025 rc.pdf · erccase...

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Republic of the PhilippinesENERGY REGULATORY COMMI551

San Miguel Avenue, Pasig City

IN THE MATTER OF THE JOINTAPPLICATION FOR APPROVALOF THE POWER SUPPLYAGREEMENT (PSA) ENTEREDINTO BY AND BETWEENEASTERN SAMAR ELECTRICCOOPERATIVE, INCORPORATED(ESAMELCO) AND FDCUTILITIES, INCORPORATED(FDCUI), WITH PRAYER FOR THEISSUANCE OF PROVISIONALAUTHORITY

ERC CASE NO. 2015-025 RC

EASTERN SAMAR ELECTRICCOOPERATIVE, INCORPORATED(ESAMELCO) AND FDCUTILITIES, INCORPORATED(FDCUI),

Applicants.)( - - - - - - - - - - - - - - - - - - - - - - - - )(

NOTICE OF PUBLIC HEARING

TO ALL INTERESTED PARTIES:

Notice is hereby given that on February 17, 2015, EasternSamar Electric Cooperative, Incorporated (ESAMELCO) and FOCUtilities, Incorporated (FOCUI) filed a joint application for approval oftheir Power Supply Agreement (PSA), with prayer for the issuance ofprovisional authority.

ERC Case No. 2015-025 RCNOTICE OF PUBLIC HEARING/March 23, 20150f 13.

In the said application, ESAMELCO and FDCUI alleged, amongothers, that:

The Nature of the Application

1. This is a joint application submitted to the Commission forits due consideration and approval of the PSA executedby and between ESAMELCO and FDCUI, pursuant toRule 20(B) of the ERC's Rules of Practice and Procedure(the ERC Rules)1 and other pertinent rules andregulations;

The Applicants

2. ESAMELCO was created pursuant to the provisions ofRepublic Act No. 6038 or the National ElectrificationAdministration (NEA) Act, as amended by PresidentialDecree No. 269. Pursuant to this Decree, it wasincorporated and registered on December 9, 1977 withprincipal office at Barangay Cabong, Borongan City,Eastern Samar. It serves the power requirements of theCity of Borongan and the Municipalities of Arteche,Balangiga, Balangkayan, Can-avid, Dolores, Giporlos,Guiuan, Hernani, Lawaan, Llorente, Maydolong,McArthur, Mercedes, Oras, Quinapondan, Salcedo, SanJulian, San Policarpio, Sulat and Taft, all in the Provinceof Eastern Samar;

3. FDCUI is a corporation duly organized and existing underthe Philippine Laws, with principal office address at the23rd Floor PBCom Tower, 6795 Ayala Avenue corner V.A.Rufino St., Makati City. It was formerly known andregistered under the name ALG Renewable EnergyHoldings, Incorporated. It is a wholly owned subsidiary ofFilinvest Development Corporation (FDC);

1 ERC Resolution No. 38, Series of 2006

ERC Case No. 2015-025 RCNOTICE OF PUBLIC HEARING/March 23, 2015 of 13 ,_ .~.

Compliance with Pre-filing Requirements

4. In compliance with Rule 6 of the ERC Rules and insupport of the instant application for approval of the PSA,copies of the joint application (including annexes) werefurnished to the respective legislative bodies of BoronganCity and the Province of Eastern Samar, whereESAMELCO principally operates;

5. Likewise, a copy of the joint application (includingannexes) was furnished to the City of Makati whereFDCUI principally operates;

6. The entire joint application (excluding annexes) waspublished in a newspaper of general circulation within theareas where ESAMELCO and FDCUI principally operate;

ESAMELCO's Power Situation

7. ESAMELCO currently sources bulk of its electricityrequirements from the Power Sector Assets and LiabilitiesManagement Corporation (PSALM) and the WholesaleElectricity Spot Market (WESM). However, on December25, 2014, its bilateral contract with PSALM expired;

8. To ensure continuous supply and security of electricitywithin its franchise area, ESAMELCO signed with FDCUIon December 22, 2014, a PSA for a contracted demandof 4 MW for two (2) years from December 26, 2014 toDecember 25, 2016. The power requirements forESAMELCO shall be sourced from the Unified LeyteGeothermal Power Plant (ULGPP) Output administeredby FDCUI;

9. ESAMELCO has forecasted and simulated the effect ofthe inclusion of the power supplied by FDCUI from theOutput of the ULGPP, taking into consideration thereduced supply from the PSALM, to wit:

1

With FDCUI - ULGPPWithout FDCUI - ULGPPRate Impact

PhP6.2246/kWhPhP6.2487/kWh(PhPO.0241/kWh)

ERC Case No. 2015-025 RCNOTICE OF PUBLIC HEARING/March 23, 2015 of 13

The Selection of an Independent Power ProducerAdministrator UPPAl for the Strips of the ULGPP

10. On November 7, 2013, PSALM conducted the opening ofbids for the selection and appointment of IPPAs for theStrips of Energy of the ULGPP located in Tongonan,Leyte;

11. FDCUI was selected as the winning bidder for the 40 MWStrips of Energy of the ULGPP. The Notice of Award wasissued by PSALM on January 29,2014;

The Region VIII electric cooperatives (R8 ECs) haveundertaken a competitive selection process (CSP) inSeptember 2014 inviting power suppliers to participate inthe Joint Competitive Power Supply Procurement(JCPSP) process for the short-term supply of power of theeleven Region 8 member-ECs for the Contract Years2015 to 2018. Qualified bidders which signified interest toparticipate in the bidding process were provided with theInstructions to Bidders, Checklist of Eligibility and BidRequirements, which include the legal, technical andfinancial requirements and Information Memorandum onthe R8 JCPSP and member ECs;

As part of the bidding procedures, the eligibility and bidrequirements submitted by each bidder were assessedwhile the technical and financial proposal (Bid Form) wereseparately and independently evaluated by calculatingand comparing the effective price (PhP/kWh) of the powersupply offered from the perspective of member-consumers of the ECs (i.e., net passed-throughgeneration rates);

The Bid with the lowest calculated effective price in acontract year was considered the Lowest Calculated Bid(LCB) and was subjected to post-qualification;

For the bidder/s that has/have passed the post-qualification, its/their Bid/s was/were declared as theLowest Calculated Responsive Bid(s). The ECs thenawarded the PSAs to the Bidder/s whose Bid/s has/havebeen determined to be the Lowest Calculated ResponsiveBid(s);

November 7, 2014November 14, 2014December 2014

DateSe tember 24, 2014October 7-10, 2014


12. For the JCPSP process for the short-term supply of powerof the Region 8 member ECs for the Contract Years 2015to 2018, below is the Transaction Schedule indicating theactivities conducted and the corresponding timetable:

ActivitiesPublication and Invitation to BidPayment of Bid Participation Feeand Issuance of Biddin DocumentsPre-Bid Conference 1 October 13, 2014Deadline of Submission of October 17, 2014Comments on Biddin DocumentsPre-Bid Conference 2 October 23, 2014Issuance of Final Instructions to October 27, 2014BiddersSubmission and 0 enin of BidsDeclaration of Winnin BiddersSi nin of Power Su I A reements

The PSA

13. After extensive negotiations with FDCUI,ESAMELCOsigned on December 22, 2014, a PSA from the Strips ofEnergy of ULGPP for a contracted demand of 4 MW fortwo (2) years;

Executive Summary

14. The PSA governs the relationship between the Supplierand the Customer for the sale of electric power. Theelectric power supply will be drawn from the Output ofULGPP. The Monthly Generation Charge is equal toFixed Monthly Charge and Energy Charge. The PSA issubject to the Customer's security deposit, assignmentand termination;

Salient Features

15. The PSA between ESAMELCO and FDCUI contains thefollowing salient terms and conditions:


a. Term. The PSA shall have a term of two (2) yearsor from December 26, 2014 to December 25, 2016;

b. Service Specification.' They agreed to thefollowing service specifications:

Contract Duration ContractedYear Capacity

2015 December 26, 2014 to 2,000December 25, 2015

2016 December 26, 2015 to 2,000December 25,2016

Unutilized Contracted Capacity. The unutilizedContracted Capacity of the Buyer may be madeavailable for utilization of other Region 8 ECs orsold to WESM in accordance with its Rules, andScheduling and Dispatch Protocol of the PSA;

Reallocation of Contracted Capacities AmongRegion 8. In order to maximize capacity utilization,the Buyer may, from time to time, reallocate otherload nodes, its Contracted Capacities in accordancewith the WESM, and Scheduling and DispatchProtocol, provided, that the Buyer shall still be solelyand exclusively responsible for the settlement andpayment of the Contracted Capacities. All chargersagainst any Parties, related to the reallocation of thecontracted capacities such as but not limited to,Value-Added Tax (VAT), Local Business Tax,WESM Charges, Line Rentals and such other I

incidental or regulatory charges or penalties as maybe imposed shall be for the account of the Buyer;

c. Reduced Generation Output. Should theContracted Capacity delivered for the Seller by theULGPP be interrupted or curtailed to a level belowits allocated Strips of 40 MW, for the period, due tothe fault or lack of generation capacity of theoperator of the ULGPP, the Contracted Capacity ofthe Buyer shall be adjusted proportionately with theother customers of the Seller;

.. - .' --'" .'-


The Total Customers' Contracted Capacity shall bethe sum of the Contracted Capacity of the Seller'sCustomers under a valid and binding power supplycontract with the Seller, but not to exceed 40 MW.For this purpose, the Seller shall update the Buyerof its Total Customers' Contracted Capacity;

d. Replacement Power. In case of reducedGeneration Output of the ULGPP, the Buyer shallprocure Replacement Power at its own costs. TheSeller shall cooperate to arrange for ReplacementPower from the WESM;

e. Contract Price and Total Monthly Charge. Thetotal monthly charge, before taxes, for a billing shall .be computed according to the following:

Total Monthly Charge = Fixed Monthly Charge + Variable Charge

Fixed Monthly Charge:

Fixed Monthly Charge = FMFcy * L(CAPsched* Hn)

Where:

Fixed Monthly Charge = Fixed Monthly Payment forContracted Capacity (CC) inPhP. Expanded VAT(EVAT) of twelve percent(12%) shall be applied to thisFixed Monthly Charge

FMFcy = Fixed Monthly Fee at a givenContract Year (CY) inPhp/kWh. FMFcy values are. given in the table below

CAPSched = Scheduled Capacity in kWFor Hour n


= CC except duringinterruption or curtailment asprovided under Section 1.2

= Specific Hour during thebilling period

Energy Charge:

Energy Charge = EFcy * L(CAPsched"Hn)Where:

Energy Charge

CAPSched

EFcy

= Monthly Payment for actualEnergy delivered by theSeller to Buyer in Php.ZERO E-VAT shall beapplied to this EnergyCharge

= Scheduled Capacity in kWFor Hour n

= CC except duringinterruption or curtailment asprovided under Section 1.2

= Energy Fee at Contract Year(CY= 2015 or CY= 2016) inPhp/kWh

= Specific Hour during thebilling period

The detailed Generation Charge Computation isattached to the application; and


f. Security Deposit. The Buyer shall establish aSecurity Deposit not later than thirty (30) BusinessDays after the Effective Date. The Security Depositshall be equivalent to one hundred percent (100%)of the projected highest monthly Power Bill for thefirst Contract Year of the Agreement;

RENAGMEC Security Fund. The RENAGMECPower Corporation (RPC) has established a fundexclusively for the R8 JCPSP Transaction Sellersas an additional security for the amounts payable bythe Buyer to the Seller;

If the Security Deposit is insufficient for the amountpayable by the Buyer to the Seller, the Seller isentitled to draw the balance from the RENAGMECSecurity Fund subject to drawing procedures to beagreed upon by the Parties;

Other Related Documents

16. In further support of the instant application, they submit tothe Commission the following documents:

AnnexA

B

CD

E

FG

H

H-1

Nature of DocumentsPSA between ESAMELCO and FDCUI datedDecember 22, 2014ESAMELCO's Certificate of Franchise No. 081dated Se tember 9, 1981ESAMELCO's Certificate of Re istrationALG Renewable Energy Holdings,Incor orated's Certificate of Incor orationFDCUI's Certificate of Filing of AmendedArticles of Incor orationFDCUl's General Information SheetFDCUl's latest Audited FinancialAFSAffidavit of Service of Application (includingannexes) to the Legislative Body of the City ofBoron an, Province of Eastern SamarAffidavit of Service (including annexes) to theLegislative Body of the Province of EasternSamarAffidavit of Service (including annexes) to theLe islative Bod of the Cit of Makati


J Co of the Affidavit of PublicationJ-1 Copies of newspaper publication of general

circulation within the areas where ESAMELCOand FDCUI rinci all 0 erate

K Letter to the PSALM requesting for certifiqationof insufficiency of capacity to supply Visayasdistribution utilities DUs

L ESAMELCO's Actual and Forecasted Load DataM ESAMELCO's Rate 1m act Anal sisN ESAMELCO's Board Resolution No. 96-2014o Financial Runs and Payment Schedules to the

PSALM in a sealed envelo eP PSALM's Notice of Award to FDCUIQ Affidavit of En r. Roderick Z. Fernandez

Allegations in Support of the Motion for ConfidentialTreatment of Information

17. The Commission may, upon request of a party anddetermining that the disclosure of information requestedto be treated as confidential information is justified, treatcertain information submitted to it as confidential.2 Theyare bound by confidentiality agreement prohibiting thedisclosure of any business, technical, marketing,operational, organizational, financial or other informationand trade secrets and other confidential documents,papers and information.3 Accordingly, they requestbefore the Commission that Annex "0" not be disclosedand be treated as confidential in accordance with Rule 4of the ERC Rules. This Annex contains confidentialinformation critical to the business operation of FDCUIincluding trade secrets and business calculations,assumptions and projections; .

2 Rule 4 - Confidential Information, ERC Rules3 Article 12.4 of the PSA


Allegations in Support of the Issuance of ProvisionalAuthority

18. The Certificate of Closing and Effectivity for the turnoverof the output of the ULGPP is scheduled to be issued onDecember 19, 2014. FDCUI commences obligation onOO:OOH of December 26,2014 - the Effectivity Date of theIPPA Agreement dated October 20, 2014. A provisionalapproval of the PSA with indicative rate, from theCommission will allow FDCUI to perform its obligation tosupply the requirements of ESAMELCO and for the latterto receive power from the power plant. The issuance ofthe provisional authority will allow ESAMELCO to chargeand collect the respective fees enumerated in the PSA aswell as authorize it to pass on the full amount to itsmember-consumers;

19. Pursuant to the ERC Rules of Practice and Procedures,the Commission may exercise its discretion by grantingprovisional authority or interim relief prior toa finalDecision;

20. It is understood that the interim relief sought by them thatmay be granted by Commission shall be subject toadjustments and other conditions that may be imposedafter hearing and final determination; and

Prayer

21. Thus, they pray, that the Commission:

20.1 Approve their dully negotiated PSA;

20.2 Issue an Order: a) treating Annex "0" and theinformation contained therein as confidential; b)directing their non-disclosure pursuant to Rule 4 ofthe ERC Rules; and c) prescribing the guidelines forthe protection thereof;


20.3 Provisionally approve their PSA as well as aprovisional authority authorizing ESAMELCO topass on the full amount of the fees and chargesunder the said PSA to its member-consumers; and

20.4 After trial on the merits, issue a permanent approvalof their PSA between which would authorizeESAMELCO to charge and collect the fees underthe said PSA as well as authorize it to pass on thefull amount to its member-consumers.

The Commission has set the application for initial hearing,expository presentation, pre-trial conference and evidentiary hearingon May 7, 2015 (Thursday) at ten o'clock in the morning (10:00A.M.) at ESAMELCO's Main Office, Barangay Cabong, BoronganCity, Eastern Samar.

All persons who have an interest in the subject matter of theproceeding may become a party by filing, at least five (5) days prior tothe initial hearing and subject to the requirements in the ERC's Rulesof Practice and Procedure, a verified petition with the Commissiongiving the docket number and title of the proceeding and stating: (1)the petitioner's name and address; (2) the nature of petitioner'sinterest in the subject matter of the proceeding, and the way andmanner in which such interest is affected by the issues involved in theproceeding; and (3) a statement of the relief desired.

All other persons who may want their views known to theCommission with respect to the subject matter of the proceeding mayfile their opposition to the application or comment thereon at anystage of the proceeding before the applicants conclude thepresentation of their evidence. No particular form of opposition orcomment is required, but the document, letter or writing shouldcontain the name and address of such person and a concisestatement of the opposition or comment and the grounds relied upon.

All such persons who may wish to have a copy of theapplication may request the applicants, prior to the date of the initialhearing, that they be furnished with a copy of the application. Theapplicants are hereby directed to furnish all those making suchrequest with copies of the application and its attachments, subject toreimbursement of reasonable photocopying costs. Likewise, anysuch person may examine the application and other pertinent recordsfiled with the Commission during the usual office hours.

.ERC Case No. 2015-025 RCNOTICE OF PUBLIC HEARING/March 23, 2015 of 13

WITNESS, the Honorable Chairperson, ZENAIDA G. CRUZ-DUCUT, and the Honorable Commissioners, ALFREDO J. NON,GLORIA VICTORIA C. YAP-TARUC, and JOSEFINA PATRICIA A.MAGPALE-ASIRIT, Energy Regulatory Commission, this 23rd day ofMarch, 2015 at Pasig City.

ATTY. FRAN I SATURNINO C. JUANExe tive Director" I

4AMELCO and FDCUIIPSN2015-025RClnph