energyregulatorycommission in the matter of the ... · city, camarines sur. casurecoii has been...

Republic of the PhilippinesENERGY REGULATORYCOMMISSION

San Miguel Avenue, Pasig City

IN THE MATTER OF THEAPPLICATION FOR THEAPPROVAL OF THE POWERSUPPLY AGREEMENTBETWEEN MASINLOCPOWER PARTNERS CO. LTD.AND CAMARINES SUR IIELECTRIC COOPERATIVE,~TH PRAYER FORCONFIDENTIAL TREATMENTOF INFORMATION

ERCCASENO. 2015-192 RC

CAMARINES SUR IIELECTRIC COOPERATIVE(CASURECO II) ANDMASINLOC POWERPARTNERS CO. LTD (MPPCL),

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

NOTICE OF PUBLIC HEARING

TO ALL INTERESTED PARTIES:

Notice is hereby given that on 05 November 2015, CamarinesSur II Electric Cooperative ("CASURECO II") and Masinloc PowerPartners Co. Ltd. ("MPPCL") filed an Application for the Approval ofthe Power Supply Agreement (PSA) with Prayer for ConfidentialTreatment of Information.

Likewise, on 05 February 2016, CASURECOII and MPPCL filedtheir "Compliance" pursuant to the. Commission's directives tosubmit additional documents and information which are necessaryfor the evaluation of the instant Application.

ERC CASE NO. 2015-192 RCNOTICE OF PUBLIC HEARING/ 22 JULY 2016PAGE20F17

In their Application, CASURECO II and MPPCL alleged amongothers, the following:

I. THE APPLICANTS

1. CASURECO II is a non-stock non-profit electric cooperativewhich is registered under Presidential Decree No. 269, asamended, with principal office address at Del Rosario, NagaCity, Camarines Sur. CASURECO II has been granted afranchise or authority to distribute electric service in themunicipalities of Bombon, Calabanga, Canaman, Magarao,Milaor, Minabalac, Naga City, Pili, Siruma and Tinambac, all inthe province of Camarines Sur (collectively, the "FranchiseArea").

Copies of relevant documents proving the due incorporation,registration, and permit to operate of CASURECO II as adistribution utility are attached hereto as follows:

DocumentArticles 0 Incor orationB -lawsCertificate of Provisional Registration with theCoo erative Develo ment Authori 'Certificate of Franchise issued by the NationalElectrification Commission

AnnexABC

D

2. MPPCL is a limited partnership established in the Philippines toconstruct, develop, improve, operate, maintain, and hold powerproduction and electric generating facilities in the country, forthe production and sale of electricity. MPPCL's principal officeaddress is located at the Masinloc Coal-Fired Thermal PowerPlant, Bani, Masinloc, Zambales.

3. MPPCL is in the process of expanding its existing powergenerating facility in Zambales through the construction,operation, management and maintenance of a new 300 MWcoal-fired power generating facility (the "Plant") to supply,among others, the load requirement of CASURECOII.

Attached are copies of relevant documents proving MPPCL's dueregistration as a generation company, relevant permits tooperate the Plant and audited financial statements, as follows:

DocumentAmended Articles 0 Limited PartnershiCertificate of Registration with the Securities andExchan e CommissionBoard .of Investments ("BOr') Certificate ofRe istration as a Pioneer Enter rise No. BOr 2012-

AnnexEF

G

ERC CASE NO. 2015-192 RCNOTICE OF PUBLIC HEARING/ 22 JULY 2016PAGE 3 OF 17

221 dated 12 October 2012Environmental Compliance Certificate ("ECC")No. H1111-020, as amended on 23 April 2012, for theMasinloc Power PlantCertificate of Endorsement No. DOE COE2011-09- I01 issued by the Department of Energy ("DOE") on8 August 2011Latest Audited Financial Statements J

4. As the Plant will still be constructed, MPPCL has yet to obtainthe Certificate of Compliance ("COC") from this HonorableCommission, which covers the same. MPPCL undertakes toapply for and obtain the COC prior to the Plant's commercialoperations.

5. The Applicants may be served with copies of orders and otherprocesses through their respective undersigned counsels at theiraddresses indicated herein below.

II. NATURE OF THE APPLICATION

6. Pursuant to Sections 23, 25 and 45 (b) of Republic Act No. 9136or the "Electric Power Industry Reform Act of 2001" ("EPIRA")III relation to Rule 20 (B) of the ERC Rules of Practice andProcedure, approved by the Honorable Commission on 22 June2006 in Resolution No. 38, Series of 2006, this Application issubmitted to the Honorable Commission for its review andapproval of the Power Supply Agreement ("PSA"), dated 23September 2015, executed by CASURECOII and MPPCL.

A,copy of the PSA is hereto attached and made an integral parthereof as Annex "K".

Also attached hereto as Annexes "L" and "L-l" are therespective board and partner's resolutions of CASURECOII andMPPCL approving the execution of the PSAby the parties.

III. COMPLIANCE WITH PRE-FILING REOUIREMENTS

7. In compliance with Rule 3, Section 4 (e) of the ImplementingRules and Regulations of the EPIRA and Rule 6 of the ERCRules of Practice and Procedure, Applicants have furnished therespective legislative bodies of the local government units withinthe Franchise Area, and the Sangguniang Panlalawigan ofCamarines Sur with copies of the instant Application and itsaccompanying documents.

Certifications from the Presiding Officer or Secretary of thelegislative bodies of the Franchise Area, the SangguniangPanlalawigan of Camarines Sur, or their duly authorized


representatives, attesting to the fact of such service will beattached hereto as follows:

Certification of Annex Certification AnnexPresiding of Presiding

Officer/Duly Officer/DulyAuthorized Authorized

Representative RepresentativeBombon M Naga City M-6Calabanga M-1 Pili M-7Canaman M-2 Siruma M-8Magarao M-3 Tinambac M-gMilaor M-4 Sangguniang M-1O

Panlalawigan ofCamarines Sur

Minabalac M-5

8. Furthermore, Applicants have caused the publication of thepresent Application in its entirety in a newspaper of generalcirculation in CASURECOII's Franchise Area.

The Affidavit of Publication and the newspaper issue containingthe published Application will be attached hereto as follows:

Document AnnexNN-1

N. STATEMENT OF FACTS

9. The EPIRA mandates that a distribution utility shall have theobligation to supply electricity in the least cost manner to itscaptive market, subject to the collection of retail rate dulyapproved by this Honorable Commission.' Towards this end, theEPIRA expressly allows distribution utilities to enter intobilateral power supply contracts, subject to review by thisHonorable Commission.2

10. In furtherance of the State policy to ensure the quality,reliability, security and affordability of the supply of electricpower and to protect public interest affected by the rates andservices of the electric utilities and other providers of electricpower, this Honorable Commission issued Resolution No. 21,Series of 2005 which directed all distribution utilities to enterinto future bilateral power supply contract with powerproducers to be subjected to a review by the ERC.

1Cf EPlRA, Sec. 23, par. 3.2Cf EPlRA, Sec. 45(b).


11. Consistent with these policies and regulations, CASURECOII~ndertook a search for a suitable generation company to supplyIts lO-year long term power requirements (subject to a lO-yearextension) in the least cost manner. In the course of its searchfor a supplier of reliable, efficient and stable electric power,CASURECO II learned about MPPCL's winning bid offer tosupply the aggregated contract capacity of the electriccooperatives in Region 1 and Cordillera Autonomous Region("R1+CAR ECs")3 following a successful competitive selectionprocess ("R1+CAR ECs CSP").

11.1. CASURECOII learned that the joint procurement of theR1+CAR ECs' aggregated long-term uncontracted baseload power supply requirement was pursued inaccordance with Section 234 of the EPIRA, through theconduct of a transparent, clear and fair competitiveselection process, with the assistance of transactionadvisors engaged by the Rl+CARECs.

11.2. It was also informed that several generation companies,including MPPCL, GN Power Ltd. Co., SoEnergyInternational Philippines, Inc., Global Business PowerCorporation, MERALCOPowerGen Corporation, Trans-Asia Oil and Energy Development Corporation and FirstGen Corporation, expressed their interest, and qualifiedto participate in the bid conducted by the Rl + CARECs.

11.3. After thorough evaluation of the bids, the R1+CAR ECdeclared MPPCL as having submitted the LowestCalculated Bid for the Rl +CAR ECs CSP, with a baseprice of PhP 3.7495fkWh and with a long-termlevelized price of PhP 5.4967/kWh.

11.4. On 25 May 2015, CASURECOII learned that the R1+CARECs issued a Notice of Award to MPPCL, informingMPPCL of its selection as the winning bidder for thesupply of power to Rl +CARECs.

Attached are copies of the relevant documents proving MPPCL'sselection and qualification as the winning bidder in the jointcompetitive selection process undertaken by R1+CAR ECs for

3 Electric cooperatives in Region 1 and the CAR, namely: Abra Electric Cooperative Inc.("ABRECO"), Benguet Electric Cooperative Inc. ("BENECO"), IIocos Norte Electric CooperativeInc. ("INEC"), IIocos Sur Electric Cooperative Inc. ("ISECO"), Kalinga - Apayao ElectricCooperative Inc. ("KAELCO"), La Union Electric Cooperative Inc. ("LUELCO"), MountainProvince Electric Cooperative Inc. ("MOPRECO") and Pangasinan III Electric Cooperative Inc.("PANELCO III").4 Section 23 provides that "(t)o achieve economies of scale in utility operations, distributionutilities may, after due notice and public hearing, pursue structural and operational reforms suchas but not limited to, joint actions between or among the distribution utilities, subject to theguidelines issued by the ERC. Such joint actions shall result in improved efficiencies, reliability ofservice, reduction of costs and compliance to the performance standards prescribed in the IRR ofthis Act.ll


the supply of their aggregated base load demand for the contractyear 2019 up to 2038.

Document AnnexNotice of Lowest Calculated Bid 0dated 11Mav 2015Notice of Award of Contract 0-1dated 25 Mav 2015

12. It bears stressing that the R1+CARECs CSP was well-structured,fair, and transparent, and thus resulted in a highly attractiveprice for the Rl +CARECs. In Department Circular No. DC2015-06-008, the Department of Energy ("DOE") cited withapproval, the results of the Rl +CAR ECs' competitive biddingprocess as evidence for achieving greater efficiencies throughthe conduct of competitive selection process in the aggregationof the uncontracted demand of distribution utilities.

13. Not long thereafter, MPPCL offered to supply CASURECO II'slO-year long term power supply requirements at the samecontract price, which MPPCL offered to the Rl +CAR ECs. Aftercareful and thorough evaluation of MPPCL's offered rate,CASURECO II has determined that MPPCL's offered rate willredound to the benefit of its consumers as it will not only assurea continuous, reliable and efficient power supply, but it will alsoprovide the most affordable power supply to CASURECO II'sconsumers in the long-term as MPPCL's rate offers the lowestgeneration rate available in the market as confirmed by theRl +CARECs' recently concluded competitive selection process.

14. Thus, on 23 September 2015, MPPCL and CASURECO IIexecuted the subject PSA, under the same contract price andsubstantially similar terms and conditions of the PSAs executedby MPPCL with each of the Rl +CARECs.

15. It is also worthy to note that the transparent competitiveselection process led to good faith negotiations between MPPCLand the R1+CAR ECs for the terms and conditions of the PSAs.All actions taken by MPPCL and CASURECOII leading to and inconnection with the execution of the CASURECO II PSA arecompliant with all applicable laws, including the u.S. ForeignCorrupt Practices Act and the Philippine Anti-Graft and CorruptPractices Act. CASURECO II and MPPCL hereby certify thatthey, or their respective employees, officers, directors, affiliates,agents and representatives did not, at any time, directly orindirectly offer, give, make, promise, pay or authorize thepayment of any money, gift or anything of value to anyemployee, officer or director of the other party to induce suchother party to sign or enter into the CASURECOII PSA.

v. ABSTRAcr OFTHE PSAAND RELATEDINFORMATION


16. The following are the salient features of the CASURECOII PSA:

16.1. Term. The PSA shall commence on the date of signing ofthe PSAby MPPCL and CASURECOII and shall expire at24:00 hours on the final Day of the 120th Billing Periodafter the Start of Supply Deliverys, subject to an extensionof 120 Billing Periods of such term and other extensionspursuant to the PSA provisions governing Excused DelayEvent6 and Force Majeure during Supply Delivery,7unless earlier terminated upon the occurrence of certainconditions for Termination Date.8

16.2. Volume. Under the PSA, MPPCL shall supplyCASURECO II a Contract Capacity of 10,000 kW whichshall be the maximum kW demand that CASURECO IImay nominate as Bilateral Contract Quantity in aWholesale Electricity Spot Market Trading Interval.

16.3. Commissioning Energy. During Commissioning priorto the Start of Supply Delivery, MPPCL may offer to sellto CASURECO II the Commissioning Energy at a rateequivalent to the Contract Price and Associated Chargesless the Capital Recovery Fee and Fixed O&MFees.

16-4. Outages. The supply obligation of MPPCL shall besubject to an Outage Allowance of Twenty-One (21) daysfor Scheduled Outages and Fifteen (15) days for ForcedOutages per Contract Year. During Scheduled and ForcedOutages, MPPCL may provide reduced or no supply ofthe Contract Capacity to CASURECO II, provided thatMPPCL has not exceeded the relevant Outage Allowancefor a given Contract Year.

16.5. Contract Price. For electricity supplied by MPPCL,CASURECO II shall pay MPPCL a Monthly Power Billwhich is composed of the Contract Price, the AssociatedCharges9 and necessary adjustments resulting fromforeign currency conversion of the Dollar Payablescomponent of the Contract Price to Philippine Peso, ifany.

5 Under the PSA, the Start of Supply Delivery or the obligation of MPPCL to supply CASURECO IIthe Contract Capacity and Associated Energy and provisions related thereto shall commence notlater than the start of a Billing Period thirty six (36) months from the Commencement Date,unless extended in accordance with the PSA, provided that the Buyer shall have posted theSecurity Deposit required under Section 9.5.1 of the PSA.6 Cf Section 2.6 of Annex "K," hereof.7 Ibid., Section 13.3.2(b).8 Ibid. Section 14.10.9 Means the Governmental Charges, WESM Charges, and NGCP and Ancillary Services Chargesidentified in the PSA.


16.5.1.The Contract Price shall be composed of the sumof the Capacity Payment and the Energy Payment.

16.5.1.1. The Capacity Payment shall becomposed of the Capital RecoveryCharge, the Dollar Fixed O&M Chargeand the Peso Fixed O&MCharge.

a. Capital Recovery Charge: The CapitalRecovery Charge shall be calculated as theproduct of the Capital Recovery Fee and theAssociated Energy for the Billing Period.

The Capital Recovery Fee shall be determinedusing the tariff schedule below:

Capacity Utilization Capital Recovery FeeFactor US$/kWh

100% 0.039399% 0.039698% 0.040097% 0.040496% 0.040895% 0.041294% 0.041693% 0.042092% 0.042491% 0.042990% 0.043389% 0.0437 .

88% 0.044287% 0.044786% 0.045285% 0.045784% 0.046283% 0.046782% 0.047281% 0.047880% 0.048379% 0.048978% 0.049577% 0.050176% 0.050775% 0.051474% 0.052073% 0.052772% 0.053471% 0.054170% 0.0548


The Capacity Utilization Factor shall becalculated in accordance with the formulabelow:

CUF = AE / { CCx ( HT - EHTO) }

Where

CUF Capacity Utilization Factor

AE Associated Energy, which shall bethe sum of the Bilateral ContractQuantities declared by the Seller forthe Buyer in the WESM during theBilling Period, provided that theAssociated Energy shall not be lessthan the quantity which is 70%multiplied by the Contract Capacitymultiplied by the factor ( HT -EHTO).

CC Contract Capacity, stated in kW

Hr Total number of hours in theBillingPeriod

EHTOThe Equivalent Hours of ScheduledOutages and Forced Outages insuch BillingPeriod

The CUF shall be calculated up to the 4thdecimal place. When the calculationresults in a CUF lower than 70%, the CUFshall be deemed to equal 70%. When theCUF calculation does not result in a wholepercentage point, the correspondingCapital Recovery Fee shall be determinedusing the formula below:

CRF = 0.0608 x CUP -0.1547 x CUF+ 0.1332

If the Commencement Date occurs laterthan December 26, 2015, the Seller shallhave the right to increase the CapitalRecovery Fee in the foregoing table basedon the percentage increase, if any, in theUnited States Producers Prices CapitalEquipment Index [2010=100] reported in


the International Financial Statisticspublished by the International MonetaryFund immediately before theCommencement Date vis a vis the sameindex published on April 2015 (Le.,106.982)

b. Dollar Fixed O&M Charge: The DollarFixed O&M Charge shall be calculated as theproduct of the Dollar Fixed O&M Fee and theAssociated Energy for the Billing Period.

The Dollar Fixed O&M Fee shall bedetermined using the formula below:

Dollar FOM = US$ O.0021/kWh xUSlndex / CUF

Where,

DollarFOM Dollar Fixed O&MFee

CUF as defined above

USlndex = USCPln / USCPlo

USCPIn the average US Consumer PriceIndex City Average for All UrbanConsumers - All Items for the lastthree calendar months prior to thestart of the Billing Period forwhich the invoice is beingprepared.

USCPIo the US Consumer Price IndexCity Average for All UrbanConsumers - All Items (1982-84=100) for September 2014 aspublished by the US Bureau ofLabor Statistics.

c. Peso Fixed O&MCharge: The Peso Fixed O&MCharge shall be calculated as the product of thePeso Fixed O&M Fee and the Associated Energyfor the Billing Period.

The Peso Fixed O&M Fee shall be determinedusing the formula below:

ERC CASE NO. 2015-192 RCNOTICE OF PUBLIC HEARING/ 22 JULY 2016PAGEnOF17

Peso FOM = PhP O.2330/kWh xRPlndex / CUF

Where,PesoFOM Peso Fixed O&MFee

CUF as defined above

RPlndex = RPCPln / RPCPlo

RPCPIn the average PhilippineConsumer Price Index for AllIncome Households in thePhilippines - All Items for the lastthree calendar months prior to thestart of the Billing Period for whichthe invoice is being prepared.

RPCPIo the Philippine Consumer PriceIndex for All Income Households inthe Philippines All Items(2006=100) for September 2014 aspublished by the Bangko Sentral ngPilipinas.

16.5.1.2. The Energy Payment shall consistof the Dollar Variable O&M Chargeand Fuel Charge.

a. Dollar Variable O&M Charge: TheDollar Variable O&M Charge shall becalculated as the product of the DollarVariable O&M Fee, and the AssociatedEnergy for the Billing Period.

The Dollar Variable O&M Fee shall bedetermined using the formula below:

Dollar VOM = US$ o.oo18/kWh xUSlndex

Where,

DollarVOM Dollar Variable O&MFee

USIndex as defined above

b. Fuel Charge. Fuel Charge shall becalculated as the product of the Fuel Rate

ERC CASE NO. 2015-192 RCNOTICE OF PUBLIC HEARING/ 22 JULY 2016PAGE 12OF 17

and the Associated Energy for the BillingPeriod.

The Fuel Rate shall be calculated inaccordance with the formula below:

The Fuel Rate shall be calculated III

accordance with the formula below:

FR = US$ O.0271/kWh x FuelIndex

Where

FRFuel RateFuelIndex = CIFn / CIFo

ClFn ClF Cost of Fuel for the BillingPeriod

ClFo Base ClF Cost of Fuel equal toUS$ 11.o617/Million kcal

17. MPPCL's foregoing Contract Price was the Lowest CalculatedBid with a base price of PhP 3.749S/kWh based on theparameters of the R1+CAR EC's competitive procurementprocess. The Contract Price calculated above does not yetinclude the relevant Value-Added Tax ("VAT"), and CASURECOII undertakes to pay in full the invoiced VATand any applicablelocal government unit Tax on the Contract Price, except realproperty tax.

It bears stressing that the Contract Price discovered by thesuccessful R1+CAREC's CSP is lower than those in all the otherPSAs with newbuild generators filed with the HonorableCommission in the recent past. Attached as Annex "P" is acomparison of these power rates.

Also attached as Annex "Q" hereof is a summary of themethodology used by MPPCL to arrive at the Contract Priceunder the PSA. It also contains information regarding the debtor equity ratio, capital costs, weighted average cost of capital,and fuel cost, among other information.

Moreover, attached as Annex "Q-1" hereof is a certification byMPPCL regarding the principal amortization, term and interestof its long-term loans.

Considering the confidential nature of Annexes "Q" and "Q-1" as the numbers, methodology, and calculations contained


therein would provide valuable information reflecting thebidding strategy of MPPCL, not only for distribution utilitiesundertaking competitive process for their power supplyrequirements, but also for MPPCL's trading in the WESM,MPPCL respectfully requests that Annexes "Q" and "Q-1" betreated as confidential documents. In accordance with Section1(b), Rule 4 of the ERC Rules of Practice and Procedure,Applicant MPPCLhereby submits one (1) copy of Annexes "Q"and "Q-1" in a sealed envelope, with each page of the documentstamped with the word "Confidential."

18. Characteristics of the power capability and connectionfacility. The Plant will be a coal-fired power generating facilitywith a capacity of 300 MW. The Plant's generation capacity isconsistent with the DOE's Philippine Development Plan asshown by Certificate of Endorsement No. DOE COE 2011-09-01issued by the DOE on 8 August 2011.10

MPPCLwill expand or modify its existing switchyard to connectthe Plant to the 230kV grid system of the National GridCorporation of the Philippines ("NGCP"). CASURECO II islikewise connected to the Luzon grid.

All relevant technical and economic characteristics of the Plantare described in Annex "R". The relevant technicalspecifications of the transmission and delivery facilities arelikewise specifically described in Annex "R-1."

19. Rate Impact. An analysis was conducted to determine theimpact of the implementation of the PSA on CASURECO II'sgeneration costs once the PSA is approved. Without the PSA,CASURECO II may be exposed to the WESM, whose averageprice in 2014 was PhP 4.6051/kWh. The PSA Contract Priceenables CASURECO II to save about PhP 1.2740/kWh fromwhat otherwise would be its exposure in the WESM without thePSA.

CASURECOIIAmount RatePhP PIP/kWh

Contract Price" 291,942,458 3.3327WESM Exposure'2 403,546,423 4.6067Savings 111,603,965 1.2740PSA Associated 87,600,000 kWhEnenrl/

A copy of the foregoing analysis is attached hereto and made anintegral part hereof as Annex "S."

W Cf Annex "I," hereof." Calculated using Base Price."Calculated using 2014 Hourly Luzon Ex-Ante LWAP.


20. Other Documents. In compliance with the ERC Rules ofPractice and Procedure, the following documents are likewisesubmitted:

Document AnnexTransmission Service Agreement between NGCP Tand CASURECOIIProcurement process of coal UDistribution Development Plan of CASURECOII V

MPPCL and NGCP are in the process of negotiating theirConnection Agreement, Transmission Services Agreement andMetering Services Agreement for the Plant. MPPCL undertakesto submit copies of these documents once it has signed theseagreements with NGCP.

VI. CONFIDENTIAL TREATMENT OF ANNEX "0"and "0-1"

21. As earlier mentioned, Annex "Q" contains numbers,methodology, and calculations which provide valuableinformation and insight on how MPPCL arrives at the ContractPrice and would accordingly reflect MPPCL's bidding strategyfor distribution utilities undertaking competitive process for theselection of their power suppliers and MPPCL's trading in theWESM.

Pursuant to MPPCL's agreement with its lenders, Annex "Q-1"likewise contains certain non-public information involving itslenders' financial trade secrets. The information contained inAnnex "Q-1", when disclosed together with Annex "Q" wouldprovide an indication of MPPCL's bidding strategy fordistribution utilities undertaking competitive process for theselection of their power suppliers and MPPCL's trading in theWESM.

It is submitted therefore that Annexes "Q" and "Q-1" fallwithin the bounds of proprietary "trade secrets" which areentitled to protection under the Constitution, statutes, and rulesand regulations of this Honorable Commission.

22. Under Rule 4 of the ERC Rules of Practice and Procedure, theHonorable Commission may, upon request of a party anddetermination of the existence of conditions, which wouldwarrant such remedy, treat certain information submitted to itas confidential. Pursuant to such provision, Applicant MPPCLrespectfully requests for the issuance of a protective orderdeclaring Annexes "Q" and "Q-1" as confidentialinformation, as the Applicants intend to present them asevidence in the instant Application.


2g. Even though these Annexes will be treated as confidentialdocuments and a protective order will be issued, the rules do notpreclude the parties of record or their lawyers access to suchconfidential information after agreeing to be bound by the termsof the protective order.

24. The data contained in Annexes "Q" and "Q-l" constitute"trade secrets" of Applicant MPPCL; thus, MPPCL has actualand valuable proprietary interest to protect with respect to suchinformation. The Supreme Court, in the recent case of AirPhilippines Corporation us. Pennswell, Inc.'3, had theopportunity to discuss the definition of "trade secrets" and thegreat extent to which the same are protected under our laws. Inother instances, the Supreme Court has held that theconfidential nature of trade secrets protects such fromdisclosure even in the face of the right of inspection given tostockholders14or the constitutional right to information1s.

25. In ERC Case No 2008-ogo, the National Power Corporation's("NPC") application for revised basic generation rates, theHonorable Commission had an occasion to rule on theconfidentiality of NPC's results of operation per power plant forcalendar years 2005 to 2007. The Honorable Commissiondeclared such information as confidential, in this wise:

"Upon review of the documents submitted by NPC,the Commission found that the results of operationper plant of NPC for years 2005 to 2007 contain vitalinformation necessary in the calculation of itsproduction costs in P/kWh per plant and thecorresponding revenues. This information will serveas initial inputs to NPC's decision-making. As such,disclosure of this information will give the otherparties, particularly the other generation companies(Gencos) and the distribution utilities (DUs) withGenco counterparts, undue advantage in the pricing ofelectricity in the market over NPC and other Gencosby using its production costs as benchmark. Thus, theCommission deems the information as confidential,which may not be made public, as it may affectadversely the competitive position of NPC and othergeneration companies."

26. Information which falls within the definition of a trade secret asdefined by jurisprudence is clearly information which merits theconfidential treatment provided for under Rule 4 of the ERCRules of Practice and Procedure. Annexes "Q" and "Q-l"should therefore be entitled to the protection of confidentialinformation provided under Rule 4 of the ERCRules of Practiceand Procedure.

'3 540 SCRA 215 [2007].'4 Philpotts vs. Philippine Manufacturing Company, 40 Phil. 471 (1919).'5 Garcia vs. Board of Investments, G.R. 88637 (1989).

ERCCASENO. 2015-192 RCNOTICEOFPUBLIC HEARING/ 22 JULY 2016PAGE160F17

27. In view of all the foregoing, Applicants respectfully submit theinstant Application for the approval of the Power SupplyAgreement between MPPCL and CASURECO II for theHonorable Commission's urgent and utmost consideration.

28. CASURECOII and MPPCLprayed that the Commission will:

a. Issue an Order treating Annexes "Q" and "Q-l" asconfidential information pursuant to Rule 4, Section 1ofthe ERC Rules of Practice and Procedure and prescribingthe guidelines for the protection thereof; and

b. After, due notice and hearing, issue a final approval of thePSA dated 23 September 2015 entered into betweenCASURECOII and MPPCL.

c. Grant such other just and equitable reliefs.

The Commission has set the Application for initial hearing,expository presentation, pre-trial conference and evidentiary hearingon 29 September 2016 (Thursday) at one o'clock in theafternoon (1:00 P.M.) at CASURECOII's Principal Office atDel Rosario, Naga City, Camarines Sur.

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 concise statementof the opposition or comment and the grounds relied upon.

All such persons who wish to have a copy of the Applicationmay request from the Applicants that they be furnished with thesame, prior to the date of the initial hearing. The Applicants are

ERC CASENO. 2015-192 RCNOTICE OF PUBLIC HEARING/ 22 JULY 2016PAGE 170F17

hereby directed to furnish all those making such request with copiesof the Application and its attachments, subject to the reimbursementof reasonable photocopying costs. Any such person may likewiseexamine the Application and other pertinent records filed with theCommission during the standard office hours.

WITNESS, the Honorable Chairman JOSE VICENTE B.SALAZAR, and the Honorable Commissioners ALFREDO J. NON,GLORIAVICTORIA C. YAP-TARUC,JOSEFINA PATRICIAA.MAGPALE-ASIRIT, and GERONIMO D. STA. ANA, EnergyRegulatory Commission, this 22nd day of July, 2016 at Pasig City.

ATTY.NAT~IGANChief of Staff

Office of the Chairman and CEO

~lB~ / APV. ERC CASE NO. 2015-192 RC.NPH