n electric cooperative, inc....erccaseno.2016-169 rc order/7november 2016 page2of24 city of san...

;' .J"

Republic of the PhilippinesENERGYREGULATORYCOMMISSION .

Pacific Center BuildingSan Miguel Avenue, Pasig City

IN THE MATTER OF THEJOINT APPLICATION FORAPPROVAL OF THE POWERSUPpLY CONTRACT (PSC) 'lENTERED INTO BY ANDBETWEEN CENTRALPANGASIN1\N ELECTRICCOOPERATIVE, INC.(CENPELCO) AND LIMAY. ' - -.PREMIERE POWERCORPORATION (LPPC),~TH PRAYER FORCONFIDENTIALTREATMENT OFINFORMATION

ERCCASENO. 2016-169 RC

CENTRAL pANGASINANELECTRIC COOPERATIVE,INC. (CENPELCO) ANDLIMAY PREMIERE POWERCORPORATION (LPPC),

Applicants."- - - - - - - - - - - - - - ~- - - - - - "

DOCKETlil);lDate: ~Q.y.U..lDj6By: ~ .

ORDER

On 9 September 2016, Central Pangasinan Electric Cooperative,Inc. (CENPELCO) and Limay Premiere Power Corporation (LPPC)jointly filed with the Commission an Application for the Approval ofthe Power Supply Contract (PSC) with Prayer for ConfidentialTreatment of Information dated 20 May 2016 (Application).

In the said Application, CENPELCOalleged the following:

1. CENPELCO is an electric cooperative duly registered withthe National Electrification Administration (NEA) pursuantto Presidential Decree No. 269, as amended, with Princi~al .office ad.dress at Padilla str. eet, San Carlos City, Pangasinan.It holds a franchise to operate light and power services in th

ERCCase No. 2016-169 RCOrder /7 November 2016 Of24

City of San Carlos and in the Municipalities of Aguilar,Alcala, Basista, Bautista, Bayambang, Binmaley, Bugallon,Labrador, Lingayen, Malasiqui, Mangaldan, Mangatarem,Sual, and Urbiztondo, all in the Province of Pangasinan(Franchise Area). It shall also be herein referred to as the"Buyer";

2.

3.

LPPCis a corporation duly created and existing by and underthe laws of the Republic of the Philippines, with businessaddress at the No. 40 San Miguel Avenue, MandaluyongCity. It shall also be herein referred to as the "Seller";

The Joint Applicants may be served with the orders, noticesand other processes of the Honorable Commission throughtheir respective undersigned counsels at the addressesindicated herein;

Nature of the Application

4. The Joint Application for approval of the Power SupplyContract (PSC) dated 28 April 2016 entered into by andbetween CENPELCO and SMC Consolidated PowerCorporation (SCPC) which was subsequently assigned toLPPC, is being submitted to the Honorable Commission forits review and approval pursuant to Sections 25 and 45(b) ofRepublic Act No. 9136, otherwise known as the ElectricPower Industry Reform Act of 2001 or the EPIRA, Rules 5,Section 4(e) and 11,Section 5 of its Implementing Rules andRegulations (IRR), Rule 20(B) of its Rules of Practice andProcedure, and other pertinent rules and regulations;

Statement of Facts

5. Competitive Selection Process (CSP). Prior to theenactment of the Electric Power Industry Reform Act of 2001or the EPIRA, CENPELCO sources one hundred percent(100%) of its power supply requirements from the NationalPower Corporation (NPC);

5.1 On 29 October 2009, CENPELCOreceived a letterfrom the Power Sector Assets and LiabilitiesManagement Corporation (PSALM) informing itthat San Miguel Energy Corporation (SMEC) is theIndependent Power Producer Administrator(IPPA) for the NPC's Sual Coal-fired Power Plant;

5.2 On 6 November 2009, SMECnotified CENPELCOon the preliminary transfer/assignment of theNPC's existing Transition Supply Contracts (TSCs)pursuant to the privatization of the latter's assets.In this regard, the PSALM absolutely andunconditionally assigned, transferred andconveyed all its rights, interests, and participationin its existing TSCs/Contracts for ~UPPly ofElectric Energy (CSEEs) to SMEC; " ~

ERC Case No. 2016-169 RCOrder /7 November 2016 of 24

5.3 On 9 December 2009 and 14 December 2009,CENPELCO published its "Invitation to Bid" tosupply its power requirements for a period of five(5) years in the "PhilippineDailyInquirer";

5.4 On 14January 2010, CENPELCOconducted a Pre-Bid Conference wherein the following generationcompanies attended: SMEC, Trans-Asia Oil andDevelopment Corporation (TA-OIL), AboitizPower (AP), AES Philippines-Masinloc Power(AES), and First Gen Corporation (First Gen).Subsequently, on 10 February 2010, CENPELCOconducted the Opening of Bids;

5.5 On 14 April 2010, CENPELCO's Public Bids andAwards Committee (PBAC) recommended to theBoard to award the power supply contract SMECfor the supply of its power requirements for aperiod of five (5) years or from 2010 until 2015;

5.6 On 19 June 2010, CENPELCO's Board issuedResolution No. 98, Series of 2010 awarding thepower supply contract to SMEC;

5.7 While in the process offinalizing its power supplycontract with SMEC, CENPELCO had severalissues and concerns which remained unsettledwhich eventually caused the non-implementationof their contract. To avoid power supplyinterruption, CENPELCO and SMEC agreed thatthe original TSCbe renewed every two (2) to three(3) months. This arrangement continued until2014;

5.8 On 17 May 2014, CENPELCO's Board issuedResolution No. 63 approving the execution of anInterim Supply Agreement. (ISA)with SMEC; and

5.9 CENPELCO'sBoard also noted that since the SualPower Plant has been operating for a significantperiod, the power reliability thereof may no longerbe guaranteed. In this regard, CENPELCO's Boardissued Resolution No. 63-A approving theexecution of a PSCwith SCPC. In said Resolution,the contracted base load of 20 MW from SMECwill be sourced from SCPC upon its commercialoperations and the remaining 20 MW will besourced from SMEC. CENPELCO'sBoard deemedit necessary to execute the PSC with SCPC toensure its member-consumers a continuous andreliable power supply for the next ten (10) years;

6. Assignment of the PSC to LPPC. Article 17.2(Assignability) of said PSC expressly states, that: "ThisContract shall be binding between the Parties, th.~i~Csuccessors-in-interestand assigns. A Party may not asrt

ERC Case No. 2016-169 RCOrder /7 November 2016Page40f24

this Contract or its rights and obligations therein to a thirdparty without the other Party's written consent. However,the BUYER acknowledges that the SELLER has, without theneed to secure the BUYER's consent, the right to a) assign ortransfer this Contract any affiliate of the SELLER and b) topledge, transfer, sell, encumber or assign this Contract orthe accounts, revenues or proceeds hereof in connectionwith any project financing or financial arrangements;provided that the assignee under (a) and (b) hereof shallagree in writing to assume and be bound by the terms andconditions of this Contract, and upon such assumption, theassignor shall be relived from any further liability underthis Contract. ";

6.1 On 23 December 2015, SCPC and LPPC executed aDeed of Assignment whereby the Assignor SCPCassigned and transferred all its rights, interests,and obligations under the PSC it executed withCENPELCO in favor of the Assignee LPPC. LPPC,likewise, agreed to acquire all of said rights andinterests and assumed all of said obligations underthe same PSC for the supply of electric energy toCENPELCO from its 2 x 150 MW CirculatingFluidized Bed Coal-Fired Thermal Power Plantlocated in Barangay Lamao, Limay, Bataan; and

6.2 CENPELCO is fully aware of the import of theaforementioned assignability clause under Article17.2 of the PSC it executed with SCPC. As such, itinterposed no objection to the implementation ofits PSC with LPPC as its new power supplierinasmuch as LPPC agreed to acquire all of therights and interests and assumed all of theobligations of SCPC under said PSC for the supplyof electric energy to CENPELCO;

7. Salient Features of the PSC.

7.1 Contract Capacity. The Contracted Capacity forthe duration of the PSC shall be 20,000 kW. TheBuyer shall maintain a minimum hourlynomination of at least forty percent (40%) of theContract Capacity for the duration of the said PSC.The Contract Capacity shall be subject to aseparate Nomination Protocol;

7.2 Generation Source. LPPC is constructing a 2 x150 MW Circulating Fluidized Bed Coal-FiredThermal Power Plant (the Plant) located inBarangay Lamao, Limay, Bataan, which isexpected to be commercially operational by the 3rdquarter of calendar year 2016;

7.3 Contract Term. The PSC shall take effectbetween the Parties on the date of sig~~n~(E><ffutionMe) ood ",.u =,in dfectiw ~

ERC Case No. 2016-169 RCOrder /7 November 2016Pagesof24

period of ten (10) years from CommercialOperations Date (COD). The supply of electricpower by the Seller shall commence on COD andshall continue until the end of the Contract Term;

7-4

7.5

Contract Charges. Under the PSC, the Buyershall pay the following Contract Charges for theduration of the Contract, subject to the applicablevalue-added tax (VAT),and computed as follows:

Unit Amount

PhP kW-month 1,371.2920

PhP/kW-month 383.8079

Fee 1, 55.0999

PhP/kWh 0.2831

PhP kWh 1.65661.9397

Other Charges. The Buyer shall bear all othercosts and charges including but not limited totransmission line losses, any interconnectioncharges, and site specific loss adjustments, amongothers;

Adjustment Formula. The Contract Chargesare adjusted on a monthly basis in accordance withthe following Adjustment Formula (Annex II-B ofthe PSC):

MONTHLY CONTRACT CHARGES = Capacity Chargesmonth+ Energy Chargesmonth

Where:

Capacity Charges

Energy Charges

= Capital Recovery Fee(CRF) + FixedOperation andMaintenance Fee(FOM)

= Variable Operation andMaintenance Fee(VOM) + Fuel Fee +Start-up Charge

I. CAPITAL RECOVERY FEE (CRFmonth)

CRFmonth = CRFadjusted x CC

Where:CRFadjusted (CRF(b~e) X 0.30) + (CRF(b~e) X 0.70 X

ERCCase No. 2016-169 RCOrder /7 November 2016 of 24

CRFbase

FXm

CC

= Capital Recovery Fee in PhP/kW-month contained in Annex II-Aofthe PSC

= The simple average of the dailyexchange rate of the PhilippinePeso to the US Dollar, as postedby the Bangko Sentral ngPilipinas (BSP) for the calendarmonth within which the start ofthe current Billing Period occurs

= Exchange rate of the PhilippinePeso to the US Dollar, Base =PhP44.00

= Contract Capacity in kW

II. FIXED OPERATIONMAINTENANCE FEE (FOMmonth)

AND

FOMmonth

Where:

= FOM PHCPIm x CCx PHCPIo

FOM

PHCPIm

PHCPIo

CC

= Fixed Operation andMaintenance Fee in PhP/kW-month contained in Annex II-Aofthe PSC

= Philippine Consumer Price Index(CPI) for All Income Householdsin the Philippines - All Items(2006=100), as posted by thePhilippine National StatisticsOffice (NSO) for the calendarmonth within which the start ofthe current Billing Period occurs

1= Philippine CPI for All IncomeHouseholds in the Philippines -All Items (2006=100), as postedby the Philippine NSO for thecalendar month of the COD


VOMmonth

III. VARIABLE OPERATION AND MAINTENANCEFEE (VOMmonth)

"o.",VOM, : • ~ • ,o.".vo", =7{"


Where:

VOM

USCPIm

USCPIo

FXm

PHCPIm

PHCPIo

AE

= Variable Operation andMaintenance Fee in PhP/kWhcontained in Annex II-A of thePSC

= United States (US) CPI for AllUrban Consumers - All Items(1982-84=100), as posted by theUnites States Bureau of LaborStatistics (USBLS) for thecalendar month within which thestart of the current Billing Periodoccurs

= US CPI for All Urban Consumers- All Items (1982-84=100) forthe calendar month ofthe COD

= The average daily exchange rateof the Philippine Peso to the USDollar, as posted by the BSP forthe calendar month within whichthe start of the current BillingPeriod occurs

= Exchange rate of the PhilippinePeso to the US Dollar,Base=PhP44.00

= Philippine CPI for All IncomeHouseholds in the Philippines -All Items (2006=100), as postedby the Philippine NSO for thecalendar month within which thestart of the current Billing Periodoccurs

= Philippine CPI for All IncomeHouseholds in the Philippines -All Items (2006=100), as postedby the Philippine NSO for thecalendar month of the COD

= Associated Energy in kWhdelivered to the Buyer by theSeller during the current BillingPeriod at the Delivery Pointsstated in Annex III of the PSC

The Parties agree to adopt changes in any of theinflationary indices subject to prior notification by theSeller to the Buyer for the occurrence of any of thefollowing events: a) shift made in the base year andother adjustments to such inflation index made b~~hiV1relevant authorized entity; or b) the inflation ind/ J


becomes unavailable, ii) is replaced by a newbenchmark rate as determined by the relevantauthorized entity or its successor-in-interest, iii)ceases to exist, or iv) in the reasonable determinationof either Party, fails to reflect the real costs and formsan integral part ofthis price adjustment formula;

IV. FUEL FEE (Fuelmonth)

FUELmonth = [( Fuel Cost + Freight Cost ) x CR x FXm ] x AE1,000

Where:

FuelCost = Base Fuel Cost, in

USD/MTxNewcastlemNewcastleo

Newcastlem

Newcastleo

= Average monthly coal price indexin USD/MT as posted by globalcoal on the websitewww.globalcoal.com for thecalendar month within which thestart of the current Billing Periodoccurs

= Coal price index equivalent toUSD74.oo/MT

Base Fuel Cost = Blended Cost equivalent toUSD62.69/MT

Freight Cost

CR

= Actual Transport Costs inUSD/MT which includes but notlimited to port charges, fuelinsurance, wharfage fees, excisetax, handling, customs brokeragefees, custom duties, stevedoresand arrastre costs, tuggage costs,survey fee, towage, pilotage, lightdues, mooring and unmooring,berthing and de-berthing, andtonnage dues and sundries on thecoal used during the currentBilling Period. Freight costs shallinclude all other existing andfuture taxes, fees, imposts andother charges that may beimposed on the transport of coal

= Consumption rate at O.7okg/kWhescalated annually by one and ahalf percent (1.5%) or the actua .plant fuel consumption ~ywhichever is lower I

http://www.globalcoal.com


FXm

AE

= The average daily exchange rateof the Philippine Peso to the USDollar, as posted by the BSP forthe calendar month within whichthe start of the current BillingPeriod occurs

= Exchange rate of the PhilippinePeso to the US Dollar,Base=PhP44.00

= Associated Energy in kWhdelivered to the Buyer by theSeller during the current BillingPeriod at the Delivery Pointsstated in Annex III of the PSC

The Parties further agree that when any or all of theabove components of the Fuel Cost no longer reflectthe Seller's actual cost of coal (including the FOBprice, coal indexation, premiums, among others), theFuel Cost shall be computed based on the Seller'sactual cost of fuel subject to the Seller's priornotification to the Buyer;

V. Start-up Charge (per Unit and per Start-up) - to be added on top of YOM& Fuelcharges

Cold Start-up - downtime of eight (8) hoursand above

CCStart Up Charge = 130,000 liters x LFOm x TPC

Warm Start-up - downtime of less than eight(8) hours

Start Up Charge = 36,000 liters x LFOmx

Where:

CCTPC

LFOm

CCTPC

= The actual price of diesel oil inPhP/liter as billed by supplier ofdiesel oil applicable for the BillingPeriod


= Total plant capacity (net) per unitinkW

7.7 Sources of Funds. SMC Global PowerHoldings Corporation, LPPC's parent company,advances the funds allowing for the on-gOi~~1//construction of the Plant. LPPC is working /' -i

i

ERC Case No. 2016-169 RCOrder /7 November 2016 Of24

having a financial close by March 30, 2015 with atarget Debt to Equity ratio of 70%:30%;

7.8 Discounts. The Seller provides for both PromptPayment Discount (PPD) and CollectionEfficiencyDiscount (CED);

a) PPD. The Buyer may avail of the PPDequivalent to one percent (1%) of the total ofthe Capacity and Energy Charges and othercomponents of the current power bill,provided that:

1. The Buyer has no arrears from previouspower billings including the SecurityDeposit or any unpaid charges orpenalties including VAT;

n. The Buyer has submitted all necessaryBureau of Internal Revenue (BIR) TaxCertificates for all taxes withheld;

iii. The Buyer pays the power bill in full onor before the 10th day of the calendarmonth following the current BillingPeriod; and

IV. The Buyer complies with other policiesand procedures as may be required bythe Seller, subject to prior notificationby the Seller to the Buyer;

b) CED. The Buyer shall be entitled to thefollowing CED:

Collection Efficiency Discount, PhP /kWhLevelsBelow 65% None66% to 75% 0.°576% to 85% 0.1086% to 95% 0.15

q6% and above 0.20

In order for the Buyer to avail of the CED, itmust comply with the following conditions:

1. The Buyer has no outstandingobligations to the Seller from previouspower bills including VAT;and

n. The Buyer shall submit to the Seller: aduly accomplished CED AvailmentForm; a copy of its Monthly Finan7;1cialand Statistical Report(MFSR)/Collection Efficiency Repo

ERC Case No. 2016-169 RCOrder /7 November 2016of 24

signed by its Finance Manager andGeneral Manager, stamped "received" bythe NEA; Audited Financial Statements(AFS) stamped "received" by the BIR (tobe submitted to the Seller within three(3) calendar days from receipt of theBIR; and zero (a)-rated VATcertificatesas updated monthly; and

7.9 Outages. The Seller shall not be obligated todeliver energy to the Buyer during the AnnualOutage Allowance of: seven hundred twenty (720)cumulative outage hours for each Contract Year foreach Unit of the Power Plant for ScheduledOutages, and four hundred thirty eight (438)cumulative outage hours for each Contract Year foreach Unit ofthe Power Plant for Forced Outages;

The Seller shall be allowed an additional MajorMaintenance Outage Allowance of seven hundredtwenty (720) cumulative outage hours once everyfive (5) years from the first Major Maintenance ofeach Unit of the Power Plant. The Seller is notobligated to deliver energy during the said MajorMaintenance Outage;

Unutilized Outage Allowance or MajorMaintenance Outage hours shall not be carriedforward to any subsequent Contract Year; and

7.10 Replacement Power. During the AnnualOutage Allowance or Major Maintenance Outagehours, the Seller may procure Replacement Powerfrom other sources, the cost of which shall bepassed-on to the Buyer;

Rate Impact on CENPELCO'sOverall Generation Rate

8. The indicative rate impact on CENPELCO's overallgeneration rate with and without the supply from LPPC areas follows:

Sual Base Load Limay Base Load

201 Lim Base En Cost Rate LF Base Ener Cost Rate LF

Janua 14,880,000 100.00% 9.494,960

14,880000 100,00% , 0, 6

1 0,000 100.00% .00%

5 , 62366 .0163 100.00%

00000 66 0,636 100.00% .00%

6,265,666 . 813 100,00% .10 2.00%

Jul 14,400,000 54.438,922 3.7805 100.00% 11,315,709 4.56 8 79.00%

Total 101 60000 01633 8 . 46 80608 85 52 7


;)~

Sual NPC Load Following BlendedEffective

Rate4-4504.52 54-45544.06804.04634.05724.18 2

4.2446

5.1678 2.74% 23,649,977 105,369,9154.4690 0.76% 28,1 0,433 114,677,4845.6360 7.59% 29,169,657 118,028,4225.8410 11.51% 30,433,052 123,473,122

. 8 1 6.60% 26, 06,0 3 111,82 ,

5.7321 186,994,942 793,726,653

LF

8 6

1,188,945356,501

6,698,079

4,625,957 26,516,545JulTotal

2015JanuaFebrua

MarchA rilMa

Jun 30,433,053.00Jul 26,706,043.00

Sual vs. WESM2015 Energy Cost Rate

Jan 24,465,206.00Feb 24,380,57 .00

23,390,076.0028,190,433.002 ,16 ,6 8.000 0 .00

Jul 26,706,0 3.00

Total 186

2015 Cost Rate

JanFeb

Total 186 35 043.00Increase (Decrease)

Sual vs. Blended (Lima -Sual Base2015 Energy

Jan 24,465,206.00Feb 24,380,5 4.00MarA rMaJunJulTotal

2, 0,0 6.00

28,1 0,433.0029,169,658.0030, 33,053.0026,706,043.00

186,735,043.00

Sual Load Followin )Cost Rate

2015 Energy Cost Rate

Jan 24,465,206.00 lOQ,Q70,061.15 4-4950Feb 24,380,574.00 110,383,152.74 4.5275Mar 23,390,076.00 104,211,954.78 4-4554

I


A rMaJunJulTotal 186 35,043.00Increase (Decrease)

11,6 ,483.36118,028,425.0123,473,124.00111,824,497.76

792,568,698.83

4.05724.18724.2443(0.47°7)

9. Environmental Compliance Certificate (ECe). On 17September 2013, the Department of Environment andNatural Resources (DENR) has issued ECC No. ECC-CO-1305-0019 in favor of LPPC;

10. Board of Investments (BOI) Certificate. On 22January 2015, LPPCfiled an application for registration withBOIfor its Limay Power Plant Project;

11. Certificate of Compliance (COC). The Power Plant isstill under construction and the target/estimated COD issometime in March 2017. Hence, it is not yet covered by aCOCo Nonetheless, LPPC undertakes to file the necessaryapplication for a COC at least three (3) months before thetarget COD;

12. Further, LPPC's Power Plant is considered as a committedproject, and is in the process of securing a certification fromthe Department of Energy (DOE) that the same is consistentwith the Power Development Plan (PDP). It undertakes tosubmit the certification as soon as the same becomesavailable;

13. Furthermore, LPPC undertakes to submit a certificationfrom the National Power Corporation (NPC) on theinsufficiency of supply within the Luzon Region during theterm ofthe PSC;

Compliance with the Pre-filing Requirements

14. Copies of the foregoing documents and/or information areattached to the Joint Application as annexes and madeintegral parts hereof:

Annex Documents/InformationA LPPC'sArticles of IncorporationB LPPC's Certificate of Registration issued by the

Securities and Exchanl!eCommission (SEC)C LPPC's Latest General Information Sheet (GIS)D LPPC'sCertificate of Registration with the BOIE ECC issued by the DENR to the Circulating

Fluidized Bed Coal-Fired Thermal Power PlantProiect of LPPC

F PSC entered into by and between CENPELCOand LPPC

Gand Details ofthe PSC:Series

a. Executive Summary

I

ERCCase No. 2016-169 RCOrder /7 November 2016of 24

b. Sources of Funds/Financial Plans• Debt/Equity Ratio• Project Cost• Computation of Return on Investment

(ROI)/Weighted Average Cost ofCapital (WACC)

• Certification from the Bank/LendingInstitution specifying the principalamortization, term and interest duringthe cooperation period of the loanagreement

c. Purchased Power Rate• Breakdown of the base prices• Sample Computation of Power Rates

with the supporting documents on theassumptions taken

• Rate Impact Study/Simulation• Statement of impact on the overall

rates of CENPELCO once the contractis approved

• Basis/Rationale of indexation andlevel of indexation

d. Cash Flow• Initial Costs• Breakdown of Operating and

Maintenance expenses• Minimum Energy Off-take (MEOT)

H Details of the Power Rate Calculations andFinancial Model (Confidential)

I, 1-1 Contracts for the Supply, Construction andand 1-2 Supervision for the Power Plant

(Confidential)J Details of the Fuel Procurement ProcessK Transmission Service Agreement (TSA) between

the National Grid Corporation of the Philippines(NGCP) and CENPELCO

Land Acknowledgment receipts by the SangguniangSeries Panlalawigan of Pangasinan and the

Sangguniang Panlungsod of San Carlos Cityand Mandaluyong City, of copies of the JointApplication (including annexes)

15. Further, in compliance with Article VI, Sections 1 and 2 ofthe Honorable Commission's Guidelines for the Recovery ofCosts for the Generation Component of the DistributionUtilities' (DU) Rates, copies of the foregoing are, likewise,attached to the Joint Application as annexes and madeintegral parts hereof:

AnnexN

Documents InformationRelevant technical and economic characteristicsVof the eneration ca aci , installed ca aci ,1)

~..

ERC Case No. 2016-169 RCOrder /7 November 2016PagelS of 24

mode of oneration, and dependable capacity0 Costs analysis of the proposed pricing

! nrovisions ofthe PSCPand Details of the Competitive Selection ProcessSeries (CSP) undertaken by CENPELCO leading to the

selection of LPPC as its supplier, includinginvitations to participate and submit proposals,Terms of Reference (TOR), proposals and/ortender offers received by CENPELCO,CENPELCO's Special Bids and AwardsCommittee (SBAC) Evaluation Report;CENPELCO's Board Resolution confirming thesaid SBAC Evaluation Report, and the Notice ofAward to LPPC

Qand Details of the interconnection facility of theSeries LPPC Power PlantR CENPELCO's latest Distribution Development

Plan (DDP) and Load Forecast ProiectionsS Demand Side Management (DSM) Program that

could be implemented by CENPELCO ifannroved bv the Honorable Commission

T LPPC's latest Audited Financial Statements(AFS), Balance Sheet, Income Statement, andStatement of Cash Flows

T-l Bank Certification of Long-term Loans,including Schedule of Original Loan (principalamount, interest payable and term of the loan)and Updated Balances (principal amount,interest payable and penalties, if any andremaining term of the loan)

T-2 Operating Expenses for the Power Plant andGeneral and Administrative Expense

T-3 Certification from the engine manufacturer orLPPC of the net heat rate in liters per kWh

T-4 Simulation on the number of operating unitsnecessary to meet the MEOT and/or additionalenergy/demand requirements of CENPELCO

T-S Potential Cost (absolute amounts and PhP /kWh)of Ancillary Services as and when LPPC orCENPELCO is connected to the main grid

U Deed of Assignment between SCPC and LPPC

16. Furthermore, the Joint Application is consistent and inaccordance with the first (1st) and fifth (5th) "Whereasclauses" of the DOE Circular No. 2003-12-11 which arequoted hereunder:

"WHEREAS, Section 2 of Republic Act No.9136, also known as the Electric Power IndustryReform Act of 2001 or EPIRA, declared as a policyof the State, among others, [to ensure the quality,reliability, security and affordability of the supplyof electric power;" (first "whereas clau~se'"Department of Energy Circular No. 2003-12-

11.Underscoring supplied.)

ERC Case No. 2016-169 RCOrder /7 November 20160f24

"WHEREAS, pursuant to Section 23 ofEPIRA, all distribution utilities, as defined in thelaw, SHALL HAVE THE OBLIGATION TOSUPPLY ELECTRICITY IN THE LEAST COSTMANNER TO ITS CAPTIVEMARKET subject tothe collection of retail rate duly approved by theEnergy Regulatory Commission;" (fifth "whereasclause", ibid. Underscoring supplied.)

17. The Joint Application is, likewise, consistent with Section 1of the same Department Circular which declares as Statepolicy, that:

"All distribution utilities musthenceforth take cognizance and assume fullresponsibility to forecast, assure and contractfor the supply of electric power in therespective franchise areas to meet theirobligations as a distribution utility."(Underscoring supplied.)

18. Byway of emphasis, Resolution No. 21, Series of 2005 of theHonorable Commission dated 19 October 2005 had directedall Distribution Utilities (DUs) "to enter into future bilateralpower supply contract with power producers to be subjectedto a review by the Commission." (Underscoring supplied.)

19. The PSC with LPPC was made to ensure the continuoussupply of power to CENPELCO and due to the former'scompetitive pricing structure and other favorable terms of itscontract, which will redound to the benefit of the latter andits end-consumers in terms of reliable and affordable powersupply;

Allegations in Support ofthe ConfidentialTreatment of Annexes "H". and "I". "1-1". and "1-2"

20. Rule 4 of the Honorable Commission's Rules of Practice andProcedure provides that CENPELCOand LPPC may requestthat information may not be disclosed;

21. LPPCprays for the confidential treatment of the informationcontained in the following annexes, and not disclosed exceptto the officers and staff of the Honorable Commission and itsstaff:

AnnexH

1,1-1 and 1-2

Documents and or InformationDetails of the Power Rate Calculationsand Financial Model (Con dential)Contracts for the Supply, Constructionand Supervision for the Power Plant(Con dential)

22. Annex "H" contains the details of LPPC's power ratecalculations and financial model as well as the mannen

ERC Case No. 2016-169 RCOrder /7 November 2016of 24

which these were derived. These information are proprietaryin nature and should be protected as trade secrets ascontemplated by law and jurisprudence. In the case of AirPhilippines Corporation vs. Pennswell, Inc.', the SupremeCourt defined a trade secret, as follows:

"A trade secret may consist of any formula,pattern, device, or compilation of informationthat: (1) is used in one's business; and (2)gives the employer an opportunity to obtainan advantage over competitors who do notpossess the information. Generally, a tradesecret is a process or device intended forcontinuous use in the operation of the business,for example, a machine or formula, but can be aprice list or catalogue or specializedcustomer list. It is indubitable that trade secretsconstitute proprietary rights. The inventor,discoverer, or possessor of a trade secret or similarinnovation has rights therein which may be treatedas property, and ordinarily an injunction will begranted to prevent the disclosure of the tradesecret by one who obtained the information "inconfidence" or through a "confidentialrelationship". American jurisprudence has utilizedthe following factors to determine if aninformation is a trade secret, to wit:

(1) the extent to which the information isknown outside of the employer'sbusiness;

(2) the extent to which the information isknown by employees and othersinvolved in the business;

(3) the extent of measures taken by theemployer to guard the secrecy of theinformation;

(4) the value of the information to theemployer and to competitors;

(5) the amount of effort or moneyexpended by the company mdeveloping the information; and

(6) the extent to which the informationcould be easily or readily obtainedthrough an independentsource."(citations omitted, emphasissupplied)

23. The interest of the consuming public is sufficiently protectedby the review and evaluation of the rates under the PSC by

, G.R. No. 172835, December 13, 2007


the Hanarable Cammissian, withaut the need to.disclase thecantents af Annex "H". The reasanableness andtransparency af the prices af electricity is to. be assured bythe Hanarable Cammissian thraugh its awn review andverificatian af LPPC'saperating casts and expenses;

24. Mare impartantly, LPPC's campetitars, shauld they abtainthe infarmatian in Annex "H", will gain undue advantagetherean and have the apportunity to. use the same in theiraperatians. The negatiating pawer af LPPC with parties itplans to. cantract with ar who.it is currently daing businesswith, will clearly be thwarted if it is campelled to. disclasesuch infarmatian;

25. Further, Annexes "I", "1-1", and "1-2" pertain to. theSupply, Canstructian, and Supervisian Cantracts,respectively, far the Pawer Plant. These cantracts havecaunter-parties who.are nat parties to.the Jaint Applicatian.They cantain highly technical designs, drawings and atherinfarmatian which are the intellectual praperty and tradesecrets af the caunter-parties, and therefare shauld nat bedisclased to. the public. CENPELCO and LPPC, likewise,pray far the canfidential treatment af Annexes "I", "1-1",and "1-2", under the same premises abave; and

26. Accardingly, CENPELCOand LPPCsubmit ane (1) capyeachaf Annexes "H", "I", "1-1", and "1-2", in a sealedenvelape, with the said envelape and each page af thedacuments and/ar infarmatian stamped with the ward"Confidential".

Prayer

WHEREFORE, the faregaing premises considered, theJaint Applicants Central Pangasinan Electric Cooperative,lncorparated (CENPELCO)and LimayPremiere Pawer Carporatian(LPPC)mast respectfully pray that after due notice and hearing, theHanarable Cammissian:

1. ISSUE an Order treating Annexes "H", "I", "1-1",and "1-2", and all the infarmatian cantained thereinas canfidential, directing their nan-disclasure to.persans ather than the afficers and staff af theHanarable Cammissian, continuously protectingthe said information from public disclosure bymaintaining the same separate and apart fromthe records of the case, and ensuring that these arenat divulged to. unautharized persans, pursuant to.Rule 4 af its Rules af Practice and Procedure; and

2. ISSUE a Decisian appraving the Jaint Applicatianand the PSC between CENPELCO and LPPC, andautharizing CENPELCOto.charge and call/jfeesth,rein [<omit. m,mb'NOMum~. / i

ERCCase No. 2016-169 RCOrder /7 November 2016of 24

Other reliefs just and equitable under the premises are,likewise, prayed for.

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 ofevidence on 11 January 2017 (Wednesday) at ten o'clock inthe morning (10:00 A.M.) at the CENPELCO'sMain Office inPadilla Street, San Carlos City, Pangasinan.

CENPELCO and LPPC are hereby directed to cause thepublication of the attached Notice of Public Hearing in two (2)newspapers of general circulation in the Philippines at their ownexpense, twice (2X) within two (2) successive weeks, the dates ofpublication not being less than seven (7) days apart, with the date oflast publication made at least ten (10) days before the date of thescheduled initial hearing. They are also directed to inform theconsumers within the franchise area of CENPELCO, by any othermeans available and appropriate, of the filing of the instantApplication, its reasons therefor, and of the scheduled hearingthereon.

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 Governor,the City and Municipal Mayors, and the Local Government Unit(LGU) Legislative Bodies within CENPELCO's franchise area for theappropriate posting thereof on their respective bulletin boards.

CENPELCOAND LPPC are hereby directed to furnish all thosemaking requests therefor with copies of the Application and itsattachments, subject to reimbursement of reasonable photocopyingcosts.

On the date of the initial hearing and Pre-trial Conference,CENPELCOand LPPCmust submit to the Commission their writtenCompliance with the jurisdictional requirements attaching therewith,methodically arranged and duly marked, the evidence of the actualposting and publication of the Notice of Public Hearing consisting


certifications issued to that effect, signed by the aforementionedGovernor, Mayors, and LGU Legislative Bodies, or their dulyauthorized representatives, bearing the seals of their offices, and theaffidavit of the Editors or Business Managers of the newspaperswhere said Notice of Public Hearing were published, together with thecomplete issues of the said newspapers, and such other proofs ofcompliance with the requirements of the Commission.

CENPELCO, LPPC, and all interested parties are directed tosubmit, at least five (5) days before the date of initial hearing and Pre-trial Conference, their respective Pre-trial Briefs containing, amongothers:

a) A summary of admitted facts and proposed stipulationoffacts;

b) The issues to be tried or resolved;

c) 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, tobe attached to the Pre-trial Brief.

Failure of CENPELCO and LPPC to submit the required Pre-trial Brief and Judicial Affidavits of their witnesses within theprescribed period shall be a ground for cancellation of the scheduledhearing, and the resetting of which shall be six (6) months from saiddate of cancellation. .

As part of the Pre-trial Conference, CENPELCO and LPPCmustalso be prepared to make an Expository Presentation of theirApplication, aided by whatever communication medium they maydeem appropriate for the purpose, in order to put in plain words andexplain, for the benefit of the consumers and other concerned parties,what the Application is all about and the reasons and justificationsbeing cited in support thereof/

SO ORDERED. / i


Pasig City, orh day of November, 2016.

FOR AND BY AUTHORI'IYOF THE COMMISSION:

LS:~/~NJM: ERC CASE NO. 2016-169 RC I;,R~Chairman\mll~nl~IRR;I~IIDla~~~K-2016-004-0C-05827


Copy furnished:

1. Atty. Jeremiah D. FranciscoCounsel for CENPELCODechaves and Evangelista Law OfficesUnits 1609-1610, Tycoon Center, Pearl DriveOrtigas Center, Pasig City

2. Central Pangasinan Electric Cooperative, Inc. (CENPELCO)Padilla Street, San Carlos City, Pangasinan

3. Office of the Solicitor General134 Amorsolo Street, Legaspi VillageMakati City, Metro Manila

4. Commission on AuditCommonwealth AvenueQuezon City, Metro Manila

5. Senate Committee on EnergyGSIS Bldg. Roxas Blvd., Pasay CityMetro Manila

6. House Committee on EnergyBatasan Hills, Quezon City, Metro Manila

7. Office of the Provincial GovernorProvince of Pangasinan

8. Office of the City MayorSan Carlos City, Pangasinan

9. Office of the Sangguniang PanglungsodSan Carlos City, Pangasinan

10.Office of the Municipal MayorAguilar, Pangasinan

11. Office of the Sanguniang BayanAguilar, Pangasinan

12.Office of the Municipal MayorAlcala, Pangasinan

13.Office of the Sangguniang BayanAlcala, Pangasinan

14.Office of the Municipal MayorBasista, Pangasinan

15.Office of the Sangguniang BayanBasista, Pangasinan

16.Offi<:eof the M.unicipal Mayov1Bautista, Pangasman 7i

ERC Case No. 2016-169 RCOrder /7 November 2016 Of24

17.Office of the Sangguniang BayanBautista, Pangasinan

18.Office ofthe Municipal MayorBayambang, Pangasinan

19.Office of the Sangguniang BayanBayambang, Pangasinan

20.0ffice of the Municipal MayorBinmaley, Pangasinan

21.Office of the Sangguniang BayanBinmaley, Pangasinan

22.Office of the Municipal MayorBugallon, Pangasinan

23.Office of the Sangguniang BayanBugallon, Pangasinan

24.Office of the Municipal MayorLabrador, Pangasinan

25.Office of the Sangguniang BayanLabrador, Pangasinan

26.Office of the Municipal MayorLingayen, Pangasinan

27.Office of the Sangguniang BayanLingayen, Pangasinan

28.Office of the Municipal MayorMalasiqui, Pangasinan

29.Office of the Sangguniang BayanMalasiqui, Pangasinan

30.Office of the Municipal MayorMangaldan, Pangasinan

31.Office of the Sangguniang BayanMangaldan, Pangasinan

32.Office of the Municipal MayorMangatarem, Pangasinan

33.Office of the Sangguniang BayanMangatarem, Pangasinan

34.Office of the Municipal MayorSual, Pangasinan

35.Office ofthe Sangguniang Baya~Sual, Pangasinan / ~

\

II

,ERCCase No. 2016-169 RCOrder /7 November 2016 of 24

36.Office of the Municipal MayorUrbiztondo, Pangasinan

37.Office of the Sangguniang BayanUrbiztondo, Pangasinan

38.PSA-TWG2Energy Regulatory Commission, _ ~,/Pacific Center, San Miguel Avenue, pasi~~

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