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IN THE MATTER OF THEPETITION FOR APPROVAL OFTHE RECLASSIFICATION' OFNEW CIP II SUBSTATION,BACNOTAN-MABANENGBENGLINES 1 AND 2 ANDMABANENGBENG-HOLCIM 69KV LINE INTO TRANSMISSIONASSETS

ERC CASE NO. 2015-019 MC

NATIONALCORPORATION OFPHILIPPINES (NGCP),

Petitioner. ')(- - - - - - - - - - - - - - - - - - - - - - - - )(

DECISION

Before the Commission for resolution is the petition filed on 30April 2015 by the National Grid Corporation of the Philippines(NGCP) for the approval of the reclassification of the New CIP IISubstation, Bacnotan-Mabanengheng Lines 1 and 2 andMabanengbeng-Holcim 69 kV Line into transmission assets.

In the said petition, NGCP alleged, among others, that:

1. It is a corporation created and existing under the laws of thePhilippines, with principal office address at NGCP Building,Quezon Avenue corner BIR Road, Diliman, Quezon City,where it may be served with notices, orders, resolutions andother issuances of the Commission through its Office of theGeneraLCounsel. It is the concessionaire which assumed thepower transmission functions of the National TransmissionCorporation (TRANSCO)pursuant to Republic Act No. 9136,

..ERC Case No. 2015-019 MCDECISION/19 April 20160f19

otherwise known as the Electric Power Industry Reform Actof 2001 (EPlRA)';

2. Under Republic Act No. 9511,2it was granted a franchise toconstruct, install, finance, manage, improve, expand,operate, maintain, rehabilitate, repair and refurbish thepresent nationwide transmission system of the Republic ofthe Philippines;

3. CIP II Power Corporation is a generation company existingunder and by virtue of the laws of the Republic of thePhilippines, with address at Brgy. Quirino, Bacnotan, LaUnion. It is a 100%-owned subsidiary of Trans-Asia Oil &Energy Development Corporation;

4. Hokim Philippines, Inc. - La Union, a company. existingunder and by virtue of the laws of the Republic of thePhilippines, is a directly connected customer of NGCP withaddress at 7/F Venice Corporate Center, #8 Turin St.McKinleyTown Center, Fort Bonifacio, Taguig City;

5. CIP II Power Corporation presently operates the 21 MWBacnotan Diesel Power Plant which is connected to theLuzon Grid via the New CIP II Substation. HokimPhilippines, Inc.- La Union likewise draws power from thegrid through the New CIP II Substation;

6. CIP II Power Corporation owns the New CIP II Substation;while the Bacnotan - Mabanengbeng Lines 1 and 2 andMabanengbeng - Holcim 69 kV line are classified asResidual Subtransmission Assets in the Sinclair Knight Merz2010 Valuation Report adopted by the HonorableCommission in NGCP's Final Determination for the third(3rd) Regulatory Period;

7. Illustrated below is the simplified diagram showing thepresent connection of Bacnotan Diesel Power Plant andHokim Philippines:

I Republic Act No. 9136 entitled, "An Act Ordaining Reforms in the Electric Power Industry,Amending for the Purpose Certain Laws and for Other Purposes."

2 Republic Act No. 9511 entitled "An Act Granting the National Grid Corporation of thePhilippines a Franchise to Engage in the Business of Conveying or Transmitting ElectricityThrough High Voltage Back-bone System or Interconnected Transmission Lines, Substations andRelated Facilities, and for Other Purposes."

" ERCCaseNo. 2015-019 MCDECISIONj19April 2016 of19

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As illustrated above, the New CIP II Substation, includingassociated equipment such as SCADA and Microwavesystem, Bacnotan - Mabanengbeng Lines 1 and 2 andMabanengbeng - Hokim 69 kV lines are used by both CIP IIPower Corporation and Hokim Philippines;

8, As such, these assets should be classified as transmISSIOnassets and turned over to NGCP in accordance with Section 9of the EPIRAwhich provides:

"A generation company maydevelop and own or operatededicated point-to-point limitedtransmission facilities that areconsistent with the TDP: Provided, Thatsuch facilities are required only forthe purpose of connecting to thetransmission system, and are usedsolely by the generating facility,subject to prior authorization by the ERC;Provided, further, That in the eventthat such assets are required forcompetitive purposes, ownership ofthe same shall be transferred to theTRANSCOat a fair market price:Provided, finally, That in the case ofdisagreement on the fair market price, theERC shall determine the fair market valueof the asset." (Emphasis supplied,)

.' ERC Case No. 2015-019 MCDECISIONj19 April 2016 0£!9

9. The Commission likewise issued resolutions in compliancewith the provisions of the EPIRA:

A. Section 2.0 of Resolution No. 16 Series of 20113 definedConnection Assets as "those assets that are put in placeprimarily to connect a Customerjs to the Grid and usedfor purposes of Transmission Connection Services forthe conveyance of electricity which if taken out of theSystem, will only affect the Customer connected to it andwill have minimal effect on the Grid, or other Customers."

B. Section 4.2 of Resolution No. 16 provides that "ageneration company may develop and own or operate adedicated point-to-point limited facilities provided, thatsuch facilities are required only for the purpose ofconnecting to the transmission system, and are usedsolely by the generating facility subject to priorauthorization by the ERC."

1O. Corollary, any asset, which is not solely used by either a loadcustomer or generator should be classified as transmissionasset;

11, The proposed reclassification of the subject assets totransmission are also in consonance with the followingdecisions issued by the Commission:

a. In ERC Case No. 2010-032 MC entitled "In the Matter ofthe Petition for Approval of the Reclassification of theNational Transmission Corporation SubtransmissionAsset to Full Transmission Asset Serving the Dingle-Passi Lines in Iloilo,"4the ERC ruled as follows:

"Section 2, Article III of the Guidelinesto the Sale and Transfer of theTRANSCO's Subtransmission Assets and theFranchising of Qualified Consortium reads:

"Technical and Functional Criteria -the assets shall be classified based on thetechnical and functional criteria enumeratedin Sections 4 and 6, Rule 6, Part II of the IRR

3 Entitled "Resolution Adopting the Amended Rules on the Definition and Boundaries ofConnection Asset for Customers of Transmission Provider,"

4 Decision dated 01 December 2010,

.'

ERC Case No. 2015-019 MCDECISIONj19 April 2016Pages oh9

of the Act, including, but not necessarilylimited to the following:

"a) Directly Connected Generators

Lines, power transformers and otherassets held by TRANSCO or its Buyeror Concessionaire, which allow thetransmission of electricity to a Gridfrom one or more Directly ConnectedGenerators, shall be classified asTransmission Assets.

xxx"WHEREFORE, the foregoing

premises considered, the petition filed byCentral Azucarera De San Antonio, Inc.(CASA)for approval of the reclassification ofthe National Transmission Corporation's(TRANSCO) Subtransmission Asset to fulltransmission . asset serving Dingle-PassiLines in Iloilo is hereby APPROVED subjectto the condition that CASA's bagasse powerplant should connect to the Dingle-Passi 69kV Line and only the portion of the said linewhere CASA's plant is connected shall bereclassified as transmission asset."

b. In ERC Case No. 201O-1S6RCentitled "In the Matter ofthe Approval of the Electric Power Purchase Agreementbetween Cebu 1 Electric Cooperative, Inc. and CebuEnergy Development Corporation,"s Case No. 2010-100RC entitled "In the Matter of the Approval of the ElectricPower Purchase Agreement between Mactan ElectricCompany, Inc. and Cebu Energy DevelopmentCorporation;"6 and Case No. 2010-095 entitled "In theMatter of the Approval of the Electric Power PurchaseAgreement between Bohol 1 Electric Cooperative, Inc.and Cebu Energy Development Corporation,"? the ERCruled as follows:

5 ERG Decision dated 01 August 20116 ERG Decision dated 03 October 20117 ERG Decision dated 26 September 2011

.'ERC Case No. 2015-019 MCDECISION/19 April 20160f19

"However, the Sangi to Talavera 138kV, 5,1-kilometer Double CircuitTransmission Line does not qualify as adedicated point-to-point limitedfacility considering that the same line is notsolely used to connect CEDC's plant to thegrid (NGCP Talavera Substation) but alsoused to transmit power to VECO throughthe 138 kV CEDC-Colon Line and anotherline to CEBECOIII and Balamban EnerzoneCorporation. x x x

"The Commission believes that the 5.1kilometer Sangi to Talavera Double Circuit138 kV Transmission Line should be owned,operated and maintained by the NGCP."

12, Considering that these assets, including all of the associatedequipment, are used by both CIP II to deliver power to thegrid, and by Holcim Philippines in drawing power from thegrid, it is imperative that the subject assets be reclassified tofull transmission assets; and

13, It prays that the instant petition be granted and the and theNew CIP II Substation, Bacnotan - Mabanengbeng Lines 1and 2 and Mabanengbeng - Holcim 69 kV lines, and all ofthe associated equipment, be reclassified as TransmissionAssets, and its ownership and operation be turned over toNGCP.

Having found said application sufficient in form and insubstance with the required fees having been paid, an Order and aNotice of Public Hearing, both dated 17 August 2015, were issuedsetting the case for initial hearing on 15September 2015.

In the same Order, NGCPwas directed to cause the publicationof the Notice of Public Hearing, at its own expense, once (lX) in anewspaper of general circulation in the Philippines, with the date ofpublication to be made not later than ten (10) days before the date ofthe scheduled initial hearing. It was also directed to inform theconsumers within its franchise area, by any other means available andappropriate, of the filing of the instant application, its reasonstherefor and of the scheduled hearing thereon.

ERC Case No. 2015-019 MCDECISION/19 April 2016of19

The Office of the Solicitor General (OSG), the Commission onAudit (COA) and the Committees on Energy of both Houses ofCongress were furnished with copies of the Order and the Notice ofPublic Hearing and were requested to have their respective dulyauthorized representatives present at the initial hearing.

Likewise, the Office of the Mayor of Quezon City was furnishedwith copies of the Order and Notice of Public Hearing for theappropriate posting thereof on its bulletin board.

On 22 July 2015, CIP II Power Corporation (CIP) filed its"Petition In Intervention".

On 9 September 2015, CIP filed its "Pre-Trial Brief'.

On 10 September 2015, NGCP filed its "Pre-Trial Brief'.

During the 15 September 2015 initial hearing, NGCP and CIPappeared. '

At the said hearing, NGCP presented proofs of its compliancewith the Commission's posting and publication of noticerequirements which were duly marked as Exhibits "A" to "H",inclusive. Then, it conducted an expository presentation of itsapplication.

After the presentation, the Commission propoundedclarificatory questions and directed NGCP to submit, within fifteen(15) days from the said date of hearing, the following: 1) StructureList of the Bacnotan-Mabanengbeng Lines 1 and 2 andMabanengbeng-Ho1cim 69 kV Line; and 2) the list of structuresowned by CIP II that NGCP wants to be reclassified as transmissionassets.

CIP II also asked clarificatory questions and manifested that itis not interposing any objection to the application but prayed for therecovery of the cost of the substation and the improvements itincurred on the Mabanengbeng Ho1cimLine.

In the course of the hearing, it was revealed that the NationalTransmission Corporation (TRANSCO) and the La Union ElectricCooperative, Inc. (LUELCO)have a pending application for approvalof their lease purchase agreement under ERC Case No. 2013-179 RC.

.,'

ERCCase No. 2015-019 MCDECISIONj19 April 2016 of19

For this reason, the Commission ruled to defer the conduct of the pre-trial conference and evidentiary hearing to give time for TRANSCOand LUELCOto submit their respective comment on the instant case,

CIP II manifested that it will file a manifestation on the cost ofthe assets.

The Commission ruled to continue with the pre-trial conferenceand evidentiary hearing of this case on 4 November 2015. ,

On 30 September 2015, NGCP filed its "Compliance" incompliance with the directive of the Commission during the hearingon 15September 2015.

On 12 October 2015, the Commission issued an Order directingTRANSCO and LUELCO to submit, within fifteen (15) days fromreceipt of the said Order, their comment on the instant case.

On 27 October 2015, the Commission conducted an ocularinspection on the assets of NGCP subject of this case.

On 3 November 2015, TRANSCO filed its "Comment (on theApplication of NGCP)".

At the continuation of the hearing on 4 November 2015, NGCP,TRANSCO, and LUELCO entered their appearances. CIP failed toappear despite due notice.

TRANSCO manifested that last 3 November 2015, it filed itscomment on NGCP's petition and further manifested that it willsubmit to the discretion of the Commission considering that there arerules which would determine whether or not an asset should beclassified as a transmission asset.

On the other hand, LUELCO manifested that it received theCommission's Order on 27 October 2015 and stated that it is stillwithin the fifteen (15) days period that has been prescribed by theCommission to file its comment on NGCP's petition. LUELCOfurthermanifested that it will need a board resolution for the filing of itspetition for intervention.

The Commission ruled for LUELCO to submit its petition forintervention if it intends to intervene in the instant case, its pre-trial

ERC Case No. 2015-019 MCDECISIONj19 April 2016 of19

brief, and its comment on the instant case, within five (5) days fromtoday's hearing.

TRANSCO was likewise given the same period from today'shearing to submit its petition for intervention if it intends tointervene in the instant case and its pre-trial brief.

The Commission ruled to continue with the pre-trial conferenceand evidentiary hearing of this case on 23 November 2015.

On 9 November 2015, LUELCOfiled its "Comment".

At the continuation of the hearing on 23 November 2015, thefollowing entered their appearances: 1) NGCP; 2) TRANSCO; andCIP. LUELCOfailed to appear despite due notice.

TRANSCO manifested that it appeared in said hearing only asan observer.

It was clarified that TRANSCOfiled its comment to the petitionand interposed no objection to the same.

Subsequently, theconference where NGCPstipulations or admissionsresolved.

Commission conducted a pre-trialand CIP presented their proposedof facts and the issues to be tried or

Thereafter, NGCP presented Engr. Ernesto Lozada, Jr., Officer-in-Charge (OIC) Customer Account Officer of its Key AccountsPortfolio, Net Access Division of the Revenue and Regulatory AffairsDepartment, who testified in support of the application. In the coursethereof, additional documents were presented and duly marked asexhibits. The direct examination having been terminated, CIPmanifested that it had no questions for said witness. TheCommission propounded clarificatory questions on the said witness.

CIP also manifested that it will not be presenting any witness.

NGCPwas directed to submit the following, within five (5) daysfrom today's hearing: 1) the System Impact Study (SIS) it made forCIP; 2) the Transmission Service Agreement (TSA) between NGCPand Hokim Philippines, Inc. - La Union; 3) the Metering Services

)

ERC Case No. 2015-019 MCDECISION/19 April 2016 of 19

Agreement between NGCP and Hokim Philippines, Inc. - La Union;and 4) its Formal Offer of Evidence (FOE).

On the other hand, CIP was directed to submit the contractbetween CIP and Hokim Philippines, Inc. - La Union, within ten (10)days from today's hearing as well as its comment on NGCP's FOE,within ten (10) days from receipt of the FOE.

On 26 November 2015, NGCP filed its "Formal Offer ofEvidence" together with the documents required by the Commissionduring the 23 November 2015 hearing.

On 4 December 2015, CIP filed its "Manifestation/Submission"manifesting the following: 1) that it has not yet filed a limited point-to-point application for the assets subject of the present application;2) CIP cannot provide any purchase agreement between CIP andHokim Philippines, Inc. (Hokim) because CIP does not sellelectricity to Hokim; 3) CIP sells its entire electricity output to Trans-Asia Oil Energy Development Corporation; and 4) It submits a copyof the approved Single-Line Diagram of its assets in Bacnotan, LaUnion.

On 12 April 2016, the Commission issued an Order admittingthe exhibits that were enumerated in NGCP's "Formal Offer ofEvidence" and CIP's "Manifestation/Submission" and declaring thecase submitted for resolution.

DISCUSSION

NGCPsought the reclassification of the following:

• NewCIP II Substation;

• Bacnotan-Mabanengbeng Lines 1and 2; and

• Mabanengbeng-HOLCIM 69 kV Line into TransmissionAssets:

Section 9 (f) paragraph 3 of Republic Act NO.9136, otherwiseknown as the Electric Power Industry Reform Act of 2001 (EPIRA)provides that:

. '


"A generation company may develop and own oroperate dedicated point-to-point limitedtransmission facilities that are consistent with theTDP: Provided, That such facilities are requiredonly for the purpose of connecting to thetransmission system, and are used solely by thegenerating facility, subject to prior authorization bythe ERC; Provided, further, That in the event thatsuch assets are required for competitive purposes,ownership of the same shall be transferred to theTransCo at afair market price." xxx

Likewise, Rule 5, Section 5 of the Implementing Rules andRegulations of the EPIRA provides that:

"Section 5. Dedicated Point-to-Point LimitedTransmission Facility of a Generation Company.-

"(a) Subject to prior authorization from ERC,TRANSCO or its Buyer or Concessionairemay allow a Generation Company to develop,own and/or operate dedicated point-to-pointlimited transmission facilities: Provided,That:

(i) Such dedicated point-to-point limitedtransmission facilities are required onlyfor the purpose of connecting to the Gridwhich will be used solely by theGeneration Facility, and are not used toserve End-users or Suppliers directly;

xxx

(b) In the event that such assets are required forcompetitive purposes, ownership of the sameshall be transferred to the TransCo at a fairmarket price. In case of disagreement on thefair market price, the ERC shall determinethe fair market value of such asset, eitherdirectly or through such dispute resolutionmechanisms as ERC may specify."

ERC Case No. 2015-019 MCDECISIONj19 April 2016of1g

Some of the subject assets do not fall anymore under thecategory of subtransmission asset nor a dedicated point-to-pointlimited transmission facility since at present an end-user (HOLCIM),a distribution utility (LUELCO),and a generator (CIP II Power Plant)are connected to said assets as determined during the ocularinspection last 27 October 2015.

Shown below is the Single Line Diagram of CIP's assets forreclassification and the following were verified:

NewCI? II..........~....~ubstation " CIP II Power

PlantQuirino - CIP 69kV Line (CIP Owned)

,, ., ........•.......

Mabanengbeng -Quirino 69kV line Asset Boundary

CIP - HOLCIM 69kV Line(CIP Owned)

(Connection Assel)

NGCP'sBacnotan(Narra)

Substation

Bacnotan - Mabanengbeng line 1

Double Circuit Une

Bacnotan Mabanengbeng Line 2

STR>'

LUELCO Owned 69kV Line

Mabanengbeng-Bungol69kV line

To LUELCO'sBalaoan SIS

HOLCIM

To LUELCO'sBacnotan SIS

Bacnotan-Mabanengbeng 69 kV lines 1 and 2

There are 21 structures from the first structure in NGCP'sBacnotan Substation to the last structure number 21 in BarangayMabanengbeng, Bacnotan, La Union. Total circuit length is 2.00kilometers with double circuit configuration. The Bacnotan-Mabanengbeng Line 1is used by CIP while Line 2 is used by La UnionElectric Cooperative, Inc. (LUELCO). These lines were energized inyear 2000 and are currently classified as subtransmission asset. Withthe connection of a generator, these lines should be reclassified astransmission asset in accordance with Article III, Section 2(a) ofResolution No. 15,Series of 2011entitled, "AResolution Adopting theAmended Rules for the Approval of the Sale and Transfer of


TransCo's Subtransmission Assets and the Acquisition by QualifiedConsortiums" which provides that "Lines, power transformers andother assets held by TransCo or NGCP, which allows thetransmission of electricity to a grid from one or more directlyconnected generators, shall be classified as transmission assets."The said lines are still held or owned by TransCo/NGCP and agenerator is now directly connected, thus, should be reclassified astransmission assets.

Mabanengbeng-Quirino 69 kV line

There are 16 structures from the first structure located at thetapping point of the Bacnotan-Mabanengbeng 69 kV Line 1 (structure21) to the last structure number 16 in Barangay Quirino, Bacnotan, LaUnion. Total circuit length is 0.940 kilometers with single circuitconfiguration. This line was energized in 1977. The said line formerlyconnects HOLCIM only, thus, currently classified as subtransmissionasset. With the connection of a generator, this line should beclassified as a transmission asset in accordance with Article III,Section 2(a) of Resolution No. 15, Series of 2011 which provides that"Lines, power transformers and other assets held by TransCo orNGCP, which allows the transmission of electricity to a grid fromone or more directly connected generators, shall be classified astransmission assets." The said line is still held or owned byTransCo/NGCP and a generator is now directly connected, thus,should be reclassified as transmission asset.

Quirino-CIP 69 kV line

There are 28 structures from the first structure located at thetapping point of the Mabanengbeng-Quirino 69 kV Line (structure16) to the last structure number 28 inside the new CIP II Substationwhich is also located in Barangay Quirino, Bacnotan, La Union. Totalcircuit length is 2.790 kilometers. This line was energized in 2012,owned and constructed by CIP II Power Corporation. Based on thefunctional criteria, said asset serves both generator and end-user,thus, it is classified and function as a transmission asset from thestart. NGCP should have filed a Capital Expenditure (CAPEX)application for the construction of the said assets and may designateCIP as the main contractor for the said project. However, records ofthe Commission show that there is no application filed before theCommission for the construction of the subject asset, thus, there isnothing to reclassify.

ERC Case No. 2015-019 MCDECISIONj19 April 2016of19

New CIP II Substation

The new 30 MVA CIP II Substation is located inside the CIP IIPower Corporation Compound at Barangay Quirino, Bacnotan, LaUnion. At the time of the ocular inspection, the said substation is notoperational due to the damage caused by Typhoon Lando. There aretwo (2) lines connected to the subject asset, namely: (1) the Quirino-CIP 69 kV Line which connects the substation to the grid; and (2) theCIP-HOLCIM 69 kV Line serving only HOLCIM. Based on thefunctional criteria, said substation serves both generator and end-user, thus, it is classified and functions as transmission asset from thestart. NGCP should have filed a Capital Expenditure (CAPEX)application for the construction of the said assets and may designateCIP as the main contractor for the said project. However, records ofthe Commission show that there is no application filed before theCommission for the construction of the subject asset, thus, there isnothing to reclassify.

CIP-Holcim 69 kVline

There are 11 structures from the first structure located insidethe new CIP II Substation to the last structure number 11 insideHOLCIM compound which is also located at Barangay Quirino,Bacnotan, La Union. Total circuit length is 0.990 kilometers. Thisline is owned and constructed by CIP II Power Corporation.Resolution No. 16, Series of 2011 entitled, "Resolution Adopting theAmended Rules on the Definition and Boundaries of ConnectionAssets for Customers of Transmission Provider" provides thatConnection Assets (CA) are "Those assets that are put in placeprimarily to connect a Customer/s to the Grid and usedfor purposesof Transmission Connection Services for the conveyance ofelectricity which if taken out of the System, will only affect theCustomer connected to it and will have minimal effect on the Grid,or other connected Customer." The said line only connects HOLCIM,hence, it is classified and function as connection asset from the start.However, records of the Commission show that there is noapplication filed before the Commission for the construction of thesubject asset, thus, there is nothing to reclassify.

The related accessories and equipment located at NGCP'sBacnotan Substation, which is utilized by the Bacnotan-Mabanengbeng Line 1 and all related accessories and equipmentlocated at the New CIP II Switchyard, which is utilized by theBacnotan-Mabanengbeng-Quirino-CIP 69 kV Line segment areTransmission Assets.

. '

ERC Case No. 2015-019 MCDECISION/19 April 2016 of19

Likewise, all related accessories and equipment located at NewCIP II Switchyard utilized by the CIP-HOLCIM 69 kV Line segmentare connection assets.

In CIP's Petition for Intervention, it manifested that as owner ofthe assets sought to be reclassified by NGCP, it has direct andsubstantial interest in the proceedings. CIP also clarified that it doesnot oppose the petition for reclassification and in fact admits that thesubject assets performs transmission functions. CIP's mainintervention is to invoke the authority of the Commission todetermine the value of its assets as basis for NGCP's payment. CIPalso prayed that NGCP be required to make a one-time payment ofthe costs of the assets in the total amount of PhP92,940,374.22.

The Commission concurs with CIP's position in Section 9 CDparagraph 3 of R.A. 9136 (EPlRA) which provides that:

xxx "That in the event that such assets are requiredfor competitive purposes, ownership of the same shallbe transferred to the TRANSCO at a fair marketprice: Provided, finally, That in case ofdisagreement on the fair market price, the ERC shalldetermine thefair market value of the asset."

However, it is premature to raise the issue on the fair marketvalue considering that the petition on hand is for thereclassification of the subject assets. The Commission believesthat after the reclassification, NGCP and CIP would negotiate forthe fair market value of the subject assets and in the event that theparties disagree, NGCP and CIP would file with the Commission adispute resolution. Section 43(u) of R.A. 9136 (EPlRA) providesthat:

"(u) The ERC shall have the original and exclusivejurisdiction over all cases contesting rates, fees,fines and penalties imposed by the ERC in theexercise of the abovementioned powers, functionsand responsibilities and over all cases involvingdisputes between and among participants orplayers in the energy sector."

TRANSCO manifested in its comment that the assets forreclassification are among the assets for sale to LUELCO under ERC

ERC Case No. 2015-019 MCDECISIONj19 April 2016 of 19

Case No. 2013-179 RC entitled, "In the Matter of the Application forthe Approval of the Sale of Various Subtransmission Lines/Assets ofthe National Transmission Corporation (TRANSCO) to La UnionElectric Cooperative, Inc. (LUELCO)as Covered by a Lease PurchaseAgreement dated 02 June 2009". The Bacnotan (Narra)-Mabanengbeng Line 2 and Mabanengbeng-HOLCIM (UCC) 69 kVLine are among the assets under the Lease Purchase Agreement(LPA) with LUELCO. TRANSCO acknowledges that under the OATSRules, any line to which a generation facility is connected should beclassified as a transmission asset, thus, TRANSCO interposes noobjection to the instant application.

On the other hand, LUELCOprayed for the dismissal of NGCP'spetition for the reclassification of the said assets since these assets arecovered by an LPAwith TRANSCOdated August 16, 2006. LUELCOmanifested that at the time of the execution of the LPA, no generatorwas connected to the said assets, thus, it was a subtransmission assetat the time the LPA was executed. However, LUELCO hasacknowledged that NGCPand CIP appeared as intervenors during thehearing of ERC Case No. 2013-179 RC on the ground that the CIPPower Plant is connected to the subject assets.

Section 2, Article III of Resolution No. 15, Series of 2011entitled, "Amended Guidelines Covering the Sale & Transfer ofSub transmission Assets and Franchising of Qualified Consortiums"provides that:

..."Lines, power transformers and other assets held byTransCo or NGCP, which allows the transmission ofelectricity to a grid from one or more directlyconnected generators, shall be classified astransmission assets."

TRANSCO acknowledges that the subject assets do not fallanymore on the category of a subtransmission asset nor a dedicatedpoint-to-point limited transmission facilities of a GenerationCompany, since at present, an end-user (HOLCIM), a DistributionUtility (LUELCO), and a Generator (CIP II Power Plant) areconnected to the said assets.

Considering the reclassification of the Bacnotan (Narra)-Mabanengbeng Line 2 and Mabanengbeng-HOLCIM (UCC) 69 kVLine into transmission assets, said assets should not be included inthe LPAunder ERC Case No. 2013-179 RC. It is worthy to note thatsaid assets are just a few of the subject assets of the LPA.

ERC Case No. 2015-019 MCDECISIONj19 April 2016of19

Based on the documents submitted and the ocular inspectionconducted, the Commission finds merit in the proposedreclassification of the assets. Thus, the subject assets should beclassified as transmission assets consistent with Resolution No. 15,Series of 2011and Resolution No. 16,Series of 2011.

WHEREFORE, the foregoing premises considered, thepetition filed by the National Grid Corporation of the Philippines(NGCP) for the approval of the reclassification of the New ClP IISubstation, Bacnotan-Mabanengbeng Lines 1 and 2 andMabanengbeng-Holcim 69 kV Line into transmission assets is herebyAPPROVED with modification.

Accordingly, the following Subtransmission Assets are herebyreclassified as Transmission Assets:

• Bacnotan (Narra) Substation equipment and all relatedaccessories utilized by Bacnotan-Mabanengbeng Lines 1 and2;

• Approximately 2.00 kilometer Bacnotan-MabanengbengLines 1 and 2 69 kV line segment (double circuit) fromstructure 1to 21; and

• Approximately 0.94 kilometer Mabanengbeng-Quirino 69kV line from structure 1to structure 16;

On the other hand, the following ClP II Power Corporation'sassets remain to be Transmission Assets since they were designed andconstructed to operate and function as Transmission Assets from thestart:

• All related accessories and equipment located at NGCP'sBacnotan Substation utilized by Bacnotan-MabanengbengLine 1;

• Approximately 2.79 kilometer Quirino-ClP 69 kV line fromstructure 1to 28 (ClP owned line); and

• A portion of the New ClP II Substation up to the 69kV busbar utilized by the Bacnotan- Mabanengbeng-Quirino - ClP69kV Line segment and all its related accessories andequipment.

ERC Case No. 2015-019 MCDECISION/19 April 2016 af19

Further, the fallawing CIP II Pawer Carparatian's assets remainto. be Cannectio.n Assets since they were designed and canstructed to.aperate and functian as Cannectian Assets fram the start:

• Appraximately 0.99 kilameter CIP-HOLCIM 69 kV line fromstructure 1 to. 11(CIP awned line); and

• A partian af the New CIP II Substatian fram to. the 69kV busbar utilized by the CIP-HOLCIM 69kV Line segment and allrelated accessaries and equipment.

• The Pawer Transfarmer and all related access aries lacated atthe New CIP II substatian utilized by the pawer plant.

SO ORDERED.

Pasig City, 19April 2016.

(On Leave)JOSEVlCENTEB.SALAZAR

Chairman

(} n "I./V;:~~~GiQRiA VICTO C. YAP-TARDCComm' sioner

JOSEFINA PAT~. MAGPALE-ASIRIT~~~~ioner

~~NGCP IERC CASENO. 2015-019 MC-Decision

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1/)3NIMO D. STA. ANACommissioner

ERCCase No. 2015-019 MCDECISION/19 April 2016 Of19

Copy Furnished:

1. Attys. Luis Manuel U. Bugayong, Ronald Dylan P.Concepcion, Mark Anthony S. Actub, Raycell D.Baldovino and Raina Anfrea Quibral- FerreraCounsels for ApplicantNational Grid Corporation of the Philippines (NGCP)NGCP Building, Quezon Avenue cor. BIR RoadDilirnan, Quezon City, Metro Manila

2. MR. RAMON C. POSADAS, Ph.D.General ManagerLA UNION ELECTRIC COOPERATIVE, INC.(LUELCO)Sta. Rita, Aringay, La Union

3. Atty. Lawrence M. MijaresCounsel for LUELCOc/o LA UNION ELECTRIC COOPERATIVE, INC.(LUELCO)Sta. Rita, Aringay, La Union

4. Attys; Alan T. Ascalon and Martessa E. Nuylan-RodriguezaCounsels for CIP II POWER CORPORATIONLevel 11,PHINMA Plaza, 39 Plaza DriveRockwell Center, Makati City

5. HOLCIM PHILIPPINES, INC. - LAUNION7IF Venice Corporate Center#8 Turin St., McKinleyTown CenterFort Bonifacio, Taguig City

6. NATIONAL TRANSMISSION CORPORATIONTRANSCO Main Building, Quezon Avenue corner BIRRoad, Dilirnan, Quezon City

7. OFFICE OF THE CITYMAYORQuezon City

8. OFFICE OF THE MUNICIPAL MAYORBacnotan, La Union

9. OFFICE OF THE GOVERNORProvince of La Union

energy regulatory commission ,y::', j

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