FEED-IN TARIFF ALLOWANCE RATE APPLICATION

for 2014-2015

September 16, 2014

Pasig City

Expository Presentation

by the National Transmission Corporation

ERC Case No. 2014-109RC

BACKGROUND

The Renewable Energy Act of 2008 (R.A. 9513)

encourages the development of renewable

energy resources in the country

• Minimize the country’s exposure to price

fluctuations in the international markets

• As tools to effectively prevent or reduce harmful

emissions and thereby balance the goals of

economic growth and developments with the

protections of health and the environment2

Incentives Under the RE Act

Renewable Energy Law (RA 9513)

Fiscal Incentives Non-Fiscal Incentives

Renewable Portfolio Std

FIT SchemeNet-

MeteringGreen Energy

Option

3

Source: NREB Presentation

FIT Coverage: Emerging RE Resources

Biomass

Ocean

Solar

Run-of-river HydroWind 4

FIT SYSTEM UNDER THE RE ACT

1. Priority Connection to the Grid

2. Priority purchase and transmission of, and payment for,

emerging RE generation by grid system operator

3. Determination of the fixed tariff to be paid for emerging RE

generation and the mandated number of years for the

application of such tariff, which shall not be less than 12

years

4. Application of the FIT to the emerging RE Resources to be

used in compliance with the RPS

5. ERC to promulgate other rules and mechanisms that are

deemed appropriate and necessary, in consultation with the

NREB, for the full implementation of the FIT system.

5

MECHANICS AND GUIDELINES

1. ERC Resolution No. 16 series of 2010 – Resolution

Adopting the FIT Rules, and as amended by ERC

Resolution No. 15 series of 2012 (where TransCo was

designated as FIT-All Fund Administrator instead of

NGCP)

2. ERC Resolution No. 24 series of 2013 – A Resolution

Adopting the Guidelines on the Collection of the Feed-

in Tariff Allowance (FIT-All) and the Disbursement of

the FIT-All Fund (“FIT All Guidelines”)

Among others, these ERC issuances provide for theestablishment of the FIT-All Fund and discuss the componentsthereof and their determination.

6

FEED IN TARIFF (FIT) SCHEME

1. Sets/Guarantees a fixed tariff for the different

emerging RE technologies applicable for 20 years

(subject to adjustment for inflation and forex only)

2. ERC-approved tariff for the first tranche (ERC

Resolution No. 10 series of 2012)

a) Hydro P/kWh 5.90

b) Wind P/kWh 8.53

c) Solar P/kWh 9.68

d) Biomass P/kWh 6.63

e) Ocean decision deferred

7

-

2.0000

4.0000

6.0000

8.0000

10.0000

Hydro Wind Solar Biomass

5.90 8.53 9.68 6.63

5.6708 5.6708 5.6708 5.6708

0.2292

2.8592

4.0092

0.9592

P/k

Wh

Fit Differential P/kWh

CRR/Market Rate P/kWh

FIT

ILLUSTRATION: Feed-in Tariff and the Market Rate

8

FEED IN TARIFF ALLOWANCE (FIT-ALL)

• Represents the difference between the FIT price

level and the prevailing/market prices (Cost

Recovery Rate or CRR), plus other components

• Will be charged to all end-users as a uniform P/kWh

charge

• Will be a separate line item in the power bill

9

COST RECOVERY RATE (CRR)

1. Where the RE Plant is in a Grid where WESM is

operational (Luzon and Visayas)

• Actual CRR is based on the nodal price while

Forecast CRR is the average LWAP for the last 36

months

2. Where the RE Plant is in a Grid where WESM is not

operational (Mindanao)

• Actual CRR is the blended generation cost of the

Host DU while Forecast CRR is the blended

generation cost of the Host DU for the past 12

months 10

FIT and FIT-All

FIT = Cost Recovery Rate + FIT Differential

ADMINISTRATION ALLOWANCE

(AA)

FIT DIFFERENTIAL

(FD)

WORKING

CAPITALALLOWANCE

(WCA)FIT-ALL RATE, P/

kWh

DISBURSEMENT ALLOWANCE

(DA)

FORECAST NATIONAL SALES

(FNS)

11

OVERVIEW OF THE COLLECTION AND PAYMENT UNDER THE FIT SYSTEM

12

a. File an application with the ERC for the approval of the FIT All Rate

b. Collect remittances of the “Collection Agents”

c. Disburse payments to the FIT Eligible RE Developers

d. Enter into a Trust Agreement with a GFI which shall maintain the FIT All Fund for the benefit of the FIT Eligible RE Developers

e. Enter into RE Payment Agreement (REPA) with FIT Eligible RE Developers

Main Functions of the Fund Administrator

13

FIT-ALL RATE 2014 AND 2015 DETERMINATION

14

15

Guidelines on the Collection of the Feed-in Tariff Allowance (FIT-All) and theDisbursement of the FIT-All Fund (“FIT-AllGuidelines”)

16

a. Considers a scenario of combined 2014 and 2015rate determination (17months) followingconsultation with ERC

b. No adjustment of the FIT Rates for 2015 – peggedat the initial approved levels applicable to theinitial implementation of the FIT system

c. Line-up of plants are for computation purposesonly; does not automatically entitle listed plants toFIT

d. Projected energy generation from FIT-eligiblerenewable energy projects capped at theinstallation target

I. FIT-ALL RATE DETERMINATION -ASSUMPTIONS

17

a. List of Projected FIT Eligible RE Developers andCapacities (DOE)

b. Installation Targets (DOE)

c. Forecast National Sales (DOE)

d. Approved FIT Rates (ERC)

e. Market Price and Blended Generation Cost(WESM/ERC)

f. Factor Rate in the Computation of WCA (NREB)

g. Collection Efficiency in the Computation of WCA(NEA, ERC and NGCP; UC data not available fromPSALM)

I. FIT-ALL APPLICATION FOR 2014-2015 – Data Sources

2014 2015 Installation Targets

(750MW)No. of Plants

Installed Capacity, MW

No. of Plants

Installed Capacity, MW

BIOMASS 8 65.35 11 112.15EXISTING 5 13.39 5 13.39

NEW 3 51.96 6 98.76 250

HYDROPOWER 3 12.60 11 48.25EXISTING 2 5.60 2 5.60

NEW 1 7.00 9 42.65 250

SOLAR 3 50.00 3 50.00NEW 3 50.00 3 50.00 50

WIND 4 200.00 4 200.00NEW 4 200.00 4 200.00 200

18

Installed Capacity for

FIT (MW)Grid CF Date of COC

2014 EXISTING

65.3513.39

1.2 MW Payatas Landfill Methane Recovery & Power Generation Facility .876 Luzon 72% 10/1/2014

14.8 MW Montalban Landfill Methane Recovery & Electricity Generation

2.175 Luzon 72% 10/1/2014

19 MW Bagasse-fired Cogeneration Power Plant (Isabela) 3 Luzon 56% 10/1/2014

3.6 MW Rice Husk-Fired Gasification Power Plant (Isabela) 3.24 Luzon 72% 10/1/2014

12.5 MW Bataan 2020 Rice hull-fired Cogen Plant 4.1 Luzon 72% 10/1/2014

NEW 51.96

8.0 MW HPCo Bagasse Cogeneration Plant (Neg Occ) 1.062 Visayas 36% 10/1/2014

24 MW (net) SJCi Power Rice Husk-Fired Biomass Power Plant Proj (NE) 9.9 Luzon 72% 10/1/2014

46 MW Bagasse-Fired Cogeneration Power Plant Project (Neg Occ) 41 Visayas 46% 12/01/2014

2015 46.80

20 MW Rice Husk-Fired Biomass Power Plant (Isabela) 18 Luzon 72% 10/1/2015

12 MW Rice Husk-Fired Biomass Power Plant (NE) 10.8 Luzon 72% 10/1/2015

20 MW SCBio Bagasse-Fired Power Generation Project (Neg Occ) 18 Visayas 72% 10/1/2015

BIOMASS, 112.5 MW

PROJECTED FIT ELIGIBLE PLANTS FOR 2014 & 2015

19

PROJECTED FIT ELIGIBLE PLANTS FOR 2014 & 2015Installed Capacity for FIT (MW)

Grid CF Date of COC

2014 EXISTING

12.65.6

Commonal-Udlawan Hydroelectric Power Plant (NV) 1.8 Luzon 67% 04/1/2014

Irisan 1 Hydroelectric Power Plant (Benguet) 3.8 Luzon 36% 01/1/2014

NEW 7

Tudaya 2 Hydroelectric Power Project (Davao) 7 Mindanao 65% 04/1/2014

2015 35.65

Ibulao Hydro Power Project (Ifugao) 4.5 Luzon 64% 01/1/2014

Sabangan Hydroelectric Power Project (Benguet) 14Luzon

45%06/1/2015

Dupinga Hydro Power Project (NE) 3Luzon

56%10/1/2015

Igbulo Hydro Power Project (Iloilo) 5.10Visayas

59%01/1/2015

Loboc Hydroelectric Power Plant (Expansion) (Bohol) 1.2Visayas

91%06/1/2015

Hilabangan Hydroelectric Power Project (Upper Cascade) (Neg Occ) 4.8Visayas

59%08/01/2015

Hilabangan Hydroelectric Power Project (Lower Cascade) (Neg Occ)3

Visayas61%

08/01/2015

Pasonanca Hydroelectric Power Project (Zamboanga) .05Mindanao

66%12/1/2015

HYDRO, 48.25 MW

20

Installed Capacity for FIT (MW)

Grid CFDate of

COC

2014 50

San Carlos Solar PV Power Project (SACASOL) 13 Visayas 16% May 15, 2014

San Carlos Solar PV Power Project (SACASOL) 9 Visayas 16% June 15,2014

Cavite Economic Zone Solar Power Project (Majestic)

28 Luzon 17% July 30,2014

PROJECTED FIT ELIGIBLE PLANTS

FOR 2014 & 2015

SOLAR, 50 MW

21

Installed Capacity for FIT (MW)

Grid CF Date of COC

2014 200

Bangui Wind Power Project 18 Luzon 29% Jul 26,2014

Burgos Wind Power Project (Phase 1)87 Luzon 30% Aug 31, 2014

Caparispisan Wind Energy Project 81 Luzon 39% Sept 29, 2014

San Lorenzo Wind Power Project 14 Visayas 21% Dec 1, 2014

PROJECTED FIT ELIGIBLE PLANTS

FOR 2014 & 2015

WIND, 200 MW

22

23

ADMINISTRATION ALLOWANCE

(AA)

FIT DIFFERENTIAL

(FD)

WORKING

CAPITALALLOWANCE

(WCA)FIT ALL

RATE, P/kWh

DISBURSEMENT ALLOWANCE

(DA)

FORECAST NATIONAL SALES

(FNS)

• For combined application, FNS used is based on 5 months

FNS of 2014 (27,007,438,336 ) and 12 months of 2015

(68,016,055,191) equal to 95,023,493,528 kWh

ACTUAL ELECTRICITY SALES, kWh FORECAST ELECTRICITY SALES, kWh

2009 2010 2011 2012 2013 2014 2015 2016

Luzon37,859,434,000 41,388,794,000 41,706,246,000 44,063,677,000

Visayas6,309,113,000 7,036,059,000 7,224,369,000 7,646,701,000

Mindanao6,699,295,000 6,840,916,000 7,166,977,000 7,500,241,000

Total50,867,842,000 55,265,769,000 56,097,592,000 59,210,619,000 62,285,223,980 64,817,852,008 68,016,055,191 71,233,134,129

% Growth Rate 5.19 4.07 4.93 4.73 4.58

24

FIT DIFFERENTIAL

TOTAL FIT REVENUE( Forecast Annual RE

Generation x FIT Rate

FORECAST COST RECOVERY

REVENUE( Forecast Annual RE

Generation x CRR Rate

(OVER)/UNDER RECOVERY

DATA NEEDED SOURCE

FIT Eligible RE Forecast Annual Generation 2014-2016 DOE

FIT Rate ERC

CRR RateLuzon & Visayas (LWAP)Mindanao (Blended Rate of Host DU)

PEMC-LWAPDASURECO & ZAMCELCO

25

2014 2015 2016

Biomass 56,813 387,727 547,268

Hydropower 52,658 174,909 293,298

Solar 34,123 72,559 72,559

Wind 104,616 491,895 491,895

Total 248,210 1,127,090 1,405,020

26

Biomass 6.6300

Hydro 5.9000

Solar 9.6800

Wind 8.5300

27

Month Luzon Visayas Month Luzon Visayas

Jun-11 3.8947 3.8640 Dec-12 6.1065 6.1578

Jul-11 4.4798 4.5126 Jan-13 3.0384 3.2487

Aug-11 3.6717 3.7797 Feb-13 2.7917 2.6268

Sep-11 3.7721 3.9381 Mar-13 4.8899 4.2261

Oct-11 6.9756 5.8952 Apr-13 6.9935 7.1583

Nov-11 5.0194 5.4610 May-13 6.0233 6.0143

Dec-11 5.0259 5.3220 Jun-13 4.3098 4.0549

Jan-12 5.2181 4.8837 Jul-13 2.8649 2.8762

Feb-12 3.3238 3.7341 Aug-13 3.2022 2.9497

Mar-12 4.4758 4.6248 Sep-13 2.6780 3.0279

Apr-12 3.7193 3.6603 Oct-13 6.6411 6.3195

May-12 6.8351 6.8450 Nov-13 16.1222 3.1819

Jun-12 9.1406 9.1711 Dec-13 18.1939 -

Jul-12 8.0682 7.8361 Jan-14 2.3089 -

Aug-12 2.3919 2.5949 Feb-14 2.4876 -

Sep-12 4.3011 4.7041 Mar-14 6.7882 -

Oct-12 6.4088 5.5557 Apr-14 9.9506 6.3772

Nov-12 5.3936 5.4958 May-14 6.6423 7.2200

Average 5.6708 4.9162

28

Month Dasureco Month Zamcelco

Apr-13 4.6605 Mar-13 3.7733

May-13 4.0481 Apr-13 4.0039

Jun-13 4.3324 May-13 3.6946

Jul-13 4.0825 Jun-13 4.1716

Aug-13 3.9709 Jul-13 4.0879

Sep-13 4.2791 Aug-13 3.4498

Oct-13 4.5029 Sep-13 4.0745

Nov-13 4.1492 Oct-13 4.4505

Dec-13 3.9610 Nov-13 4.2953

Jan-14 4.1272 Dec-13 3.8422

Feb-14 3.7458 Jan-14 3.8280

Mar-14 3.9786 Feb-14 3.9756

Average 4.1532 Average 3.9706 29

FIT Revenue 1,910,041,357 8,500,828,364 10,410,869,721

Less: Cost Recovery Revenue 1,324,144,450 6,084,385,488 7,408,529,938

FIT Differential 585,896,907 2,416,442,876 3,002,339,783

FIT Differential, P/kWh 0.02169 0.03553 0.03160

Combined

2014-201520152014

FIT DIFFERENTIAL

TOTAL FIT REVENUE( Forecast Annual RE

Generation x FIT Rate

FORECAST COST RECOVERY

REVENUE( Forecast Annual RE

Generation x CRR Rate

(OVER)/UNDER RECOVERY

30

II. C WORKING CAPITAL ALLOWANCE

1. Buffer to address any deficiency, default or delay in the

collection and remittance of the FIT All/ACRR and including, but

not limited to:

• Variations between the actual and forecasted (a) RE Generation

from Eligible RE Plants resulting from over- and under- generation,

(b) Annual National Sales, and (c) CRR

• Timing difference of the collection and billing cycle for the FIT All

and ACRR

• Any other collection or payment shortfall

2. Can be updated on a quarterly basis as may be needed but

subject to approval of ERC

3. Shall guarantee monthly payments in full to the RE Developers

4. Based on a factor of the Expected Annual Payout31

WCA t+1

Forecast Annual Payout

t+2

Factor Rate

WCA Ending Balancet

DATA NEEDED SOURCE

Forecast Annual Payoutt+2 As computed

Factor Rate NREB

32

FCRR* 1,199,778,477 6,084,385,488 7,592,507,005

FD 585,896,907 2,416,442,876 2,664,572,501

AA - - -

DA - - -

Forecast Annual Payout 1,785,675,384 8,500,828,364 10,257,079,505

* Includes only FCRR for the months of Aug-Dec. 2014

201620152014

33

COMPONENTS DATA SOURCE

Cost Recovery Revenue-WESM As computed

Total Annual Payout As computed

FactorRateWESM

1- PEMC Collection Efficiency NREB

FD,AA,DA, CRRNon-WESM As computed

Collection Efficiency*1. ECs – NEA 2. DUs – ERC3. Directly Connected – NGCP

*Notprovided by PSALM

Factor Rate

CRRWESM

Total Annual Payout

Factor RateWESM

FD,AA,DA,CRRNon-

WESM

Total Annual Payout

Factor RateFIT All

34

Collection Efficiency Weight

Electric Cooperatives 81.62% 21.88% 17.8573%

Private Distribution Utilities 91.10% 72.18% 65.7641%

NGCP-Directly Connected 96.65% 5.94% 5.7376%

Weighted Collection Efficiency 89.3590%

Collection Efficiency Weight

Ecs NEA Report ending December 31, 2012 PSALM Energy Sales Report (2012)

PrUs ERC Report ending 12/31/12 and updates for 12/2013 PSALM Energy Sales Report (2012)

NGCP Financia l Ratio Report ending 12/31/13 NGCP's 2013 Bi l l ing Determinants

Reference Data

35

COMPONENTS Computation

FactorRateWESM

1- PEMC Collection Efficiency

FactorRateWESM= 1 – 97% = 0.03

Factor Rate

CRR-

WESM

Total Annual Payout

Factor RateWESM

FD,AA,DA, CRRNon-

WESM

Total Annual Payout

Factor RateFIT All

36

2014 2015 Combined

2014-2015

Cost Recovery RevenueLuzon and Visayas 1,075,858,996 5,704,025,598 6,779,884,594

37

2014 2015

Combined

2014 & 2015

Cost Recovery RevenueMindanao 84,332,068 171,654,325 255,986,392

FIT Differential 628,072,499 2,625,148,441 3,253,220,939

Administration Allowance 8,593,587 18,052,497 26,646,084

Disbursement Allowance

Total 720,998,153 2,814,855,263 3,535,853,416

38

CRRWESM

FD,AA, DA,

CRRNon-WESM

Component of Annual Payout 6,779,884,594 3,535,853,416

Divided by: Total Annual Payout 10,315,738,010 10,315,738,010

Equals: Weighting Factor 0.6572 0.3428

X Factor Rate 3% 18.49%

Weighted Factor Rate 1.97% 6.34%

Effective Factor Rate 8.30973%

*per NREB Resolution No. 3 Series of 2014

Factor Rate

CRR-WESM

Total Annual Payout

Factor RateWESM

FD,AA,DA, CRRNon-

WESM

Total Annual Payout

Factor RateFIT All

39

Forecast Annual Payout 1,785,675,384 8,500,828,364 10,257,079,505

x Factor Rate 8.30973% 8.30973% 8.30973%

Equals: Portion of Annual Payout 148,384,750 706,395,634 852,335,310

WCA Annual Funding 706,395,634 145,939,676

WCA, P/kWh 0.02616 0.00215 0.00897

2014 2015 2016

WCA t+1Forecast Annual

Payout t+2Factor Rate

WCA Ending Balancet

40

II.D ADMINISTRATION ALLOWANCE (AA) , Php

TransCo has set the Administration

Allowance to zero (0) for the initial

setting of the FIT-All rate pending

approval of its proposed organizational

structure

41

II.E DISBURSEMENT ALLOWANCE

Based on the Trustee Service

Fee that will be approved by the

ERC under the Trust Agreement

42

Amount (P)Rate

(P/kWh)Share Amount (P)

Rate

(P/kWh)Share Amount (P)

Rate

(P/kWh)Share

FD 585,896,907 0.02169 45.34% 2,416,442,876 0.03553 94.30% 3,002,339,783 0.03160 77.89%

WCA 706,395,634 0.02616 54.66% 145,939,676 0.00215 5.70% 852,335,310 0.00897 22.11%

AA - - 0.00% - 0.00% - - 0.00%

DA - - 0.00% - - 0.00% - - 0.00%

Total 1,292,292,541 2,562,382,553 3,854,675,094

FNS 27,007,438,336 68,016,055,191 95,023,493,528

FIT-All, Php/kWh

2014 2015 Combined 2014-2015

0.03767 0.04785 0.04057

43

Without DA

AAFD WCAFIT ALL RATE,

P/kWhDA FNS

44

Amount (P) Rate (P/kWh) Share

FD 3,002,339,783 0.03160 77.89%

WCA 852,335,310 0.00897 22.11%

AA - - 0.00%

DA - - 0.00%

Total 3,854,675,094

FNS (kWh) 95,023,493,528

FIT-All, Php/kWh

Combined 2014-2015

0.04057

FIT-ALL APPLICATION FOR 2014-2015

45

a. To grant Provisional Authority to collect proposed FIT-All effectiveAugust 2014 billing period

b. To direct Collection Agents such as DUs, RES and NGCP to bill, collectand remit the FIT-All to the FIT-All Fund as provided in the FIT-AllGuidelines

c. To direct PEMC and Host DUs to remit the CRR to the FIT-All Fund asprovided in the FIT-All Guidelines

d. To approve NREB recommended Factor Rate and adopt the same inthe computation of the WCA and the FIT-All Rate for 2014 and 2015

e. To allow TransCo to make supplemental submission for the DA andadopt the same in the computation of the FIT-All Rate for 2014 and2015

f. To approve the FIT-All Rate for 2014 and 2015 as applied after duenotice and hearing

g. To waive the payment of ERC supervision fees, if any

END OF PRESENTATION

46