g- pproved for~ - erc.gov.ph · c-1 listofleyecovsboard members ... romualdez electric cooperative,...

IN THE MATTER OF THEAPPLICATION FORAPPROVAL OF THE POWERSUPPLY AGREEMENT (PSA)BETWEEN LEYTE IVELECTRIC COOPERATIVEINC. AND SAN MIGUELENERGY CORPORATIONWITH PRAYER FOR THEISSANCE OF PROVISIONALAUTHORITY

~GUIJ'.TOI'l~cG- 00/0/I WA '8>

Republic of the Philippines ~ pproved for ~ENERGY REGULATORYCOMMISSI N Posting

San Miguel Ave., Pasig City w"IM,e'iV'Ph

I ERCCase No. 2017-001 RC

LEYTE V ELECTRICCOOPERATIVE INC.(LEYECO V) AND SANMIGUEL ENERGYCORPORATION (SMEC),

Applicants.J(-------------------------------J(

NOTICEOF PUBUC HEARING I;

TO ALL INTERESTED PARTIES:

Notice is hereby given that on 5 January 2017, Leyte V ElectricCooperative, Inc. (LEYECO V) and San Miguel Energy Corporation(SMEC) jointly filed an Application dated 27 April 2016 (Application)for the approval of the Power Supply Agreement (PSA) with prayerfor the issuance of provisional authority.

,I

In the said Application, LEYECO V and SMEC alleged thefollowing:

1. Applicant LEYECOV is a non-stock, non-profit electriccooperative, duly organized and existing under and byvirtue of the laws of Ithe Philippines, with principal officeaddress at Brgy. S~n Pablo, Ormoc City, Leyte. It isauthorized to distribute and provide electricity services to I

ERC CASE NO. 2017-001 RCNOTICE OF PUBLIC HEARINGJ 23 MAY 2017PAGE20f21

its member-consumeirs in the Albuera, Merida, Isabel,Palompon, Villaba, T~bango, San Isidro, Calubian, Leyte-Leyte, Kananga, Matag-ob, and the city of Grmoe, all inthe Province of Leyte (collectively, the "Franchise Area").It has been authorized to file the instant Application asper Board Resolution, a copy of which is attached asAnnex "A'",

2. Applicant SMEC is a domestic corporation organized andexisting under the Philippine Laws, with office address atthe 2nd Floor, 808 Building, Meraleo Avenue corner Gen.Lim Street, Barangay San Antonio, Pasig City. It is theIndependent Power Producer (IPP) Administrator of the1,000 Net Contract~d Capacity of the Sual Coal-FiredThermal Power Plant located in Barangay Pangascasan,Sual, Pangasinan. It has been authorized to file theinstant Application as per Secretary's Certificate, a copy ofwhich is attached as Annex "B";

,

3. Environmental Compliance Certificate (ECC). On8 November 1994, the Department of Environment andResources (DENR) issued an ECC with Reference No.9406-003-206 to Pangasinan Electric Corporation (PEC)for the 1,200 MW Sual Coal-fired Power Project located atSitios Bangayao, Buyog and Paa of BarangayPangascasan, Sual, Pangasinan covering 280 hectaresland area; I

,4. Board of Investments (BOI) Certificate. On 26

January 2011, the Power Plant Project was registered withthe BOI which issued Certificate of Registration No. 2011-024;

5. Certificate of Compliance (COC). On 11April 2014,the Honorable Commission issued a COC registeredunder the name of Team Sual for its 1,294 MW Coal-FiredThermal Power Plant.

6. The following pertinent documents evidencing theregistration of LEYfCO V and SMEC are appendedhereto, as follows: I

Annex Documents/Information"C" LEYECOV's Articles of IncorporationC-1 List of LEYECOVs Board Members"D" LEYECOV's Bv-laws"E" LEYECOV's Certificate of Registration"F" LEYECOV's Certificate of FranchiseG SMEC's Articles of Incorooration

SMEC"s Certificate of Registration issuedH by the Securities and Exchange Commission

(SEC) iSMEC's information related to the ultimate

H-1 parent cdmpany, its subsidiaries and all itsaffiliates

ERC CASE NO. 2017-001 RCNOTICE OF PUBLIC HEARING/ 23 MAY 2017PAGE30f21

I SMEC's Latest General Information Sheet(GIS)

J SMEC's Certificate of Registration with theBOI

K ECC issued by the DENR for the the SualCoal-Fired Thermal Power Plant

7. Applicants may be served with orders, notices and otherlegal processes of this Honorable Commission throughthe address of the undersigned counsel;

8. By and pursuant to Sections 23, 25, 43 (u), and 45 (b) ofRepublic Act No. 9136, otherwise known as the ElectricPower Industry Reform Act of 2001 (EPlRA Law), itsImplementing Rules and Regulations, and otherpertinent rules and regulations, the instant Applicationfor the approval of the Power Supply Agreement (PSA)executed by and between Applicants LEYECO V andSMEC on 27 April 20;6 is herein respectfully filed.

I. STATEMENTOF FACfS

•

9. The aggregated uncontracted baseload demand of Region8 from the years 2015 to 2018 is continually increasing asshown in the table below:

Contract Contract AggregatedYear Duration Baseload2015 Dec. 26, 2014:'" Dec. 25, 2015 65MW2016 Dec. 26 2015 - Dec. 25, 2016 78MW'2017 Dec. 26 20',6 ' Dec. 25 2017

--_. --83MW

... - -- ,._- ,.

2018 Dec. 26, 2017 - Dec. 25 2018 Q3MW

10.

11.

Meanwhile, the contracts of most of the ElectricCooperatives (ECs) in Region 8 with the National PowerCorporation - Power Sector Assets and LiabilitiesManagement Corpor~tion (NPC-PSALM) expired on 25December 2014; .

On 07 November! 2013, the eleven (11) electriccooperatives of Region 8 composed of Don OrestesRomualdez Electric Cooperative, Inc. (DORELCO), LeyteII Electric Cooperative, Inc. (LEYECO II), Leyte IIIElectric Cooperative, Inc. (LEYECO III), Leyte IV ElectricCooperative, Inc. (LEYECO IV), Leyte V ElectricCooperative, Inc. (LEYECO V), Southern Leyte ElectricCooperative, Inc. (SOLECO), Biliran Electric Cooperative,Inc. (BILECO), Northern Samar Electric Cooperative, Inc_(NORSAMELCO), Samar I Electric Cooperative, Inc.(SAMELCO I), Samar II Electric Cooperative, Inc.(SAMELCO II), and Eastern Samar Electric Cooperative,Inc. (ESAMELCO) (collectively, the "Region 8 ECs"),participated in the bidding for PSALM's 200 strips ofenergy from the Unified Leyte Geothermal Power Plant.Unfortunately, they lost in said bidding;

,,


12. Even more unfortunate, typhoon Yolanda hit the regionon 08 November 2013 stalling any efforts to contractadditional power supply and shifting the focus instead onthe massive restoration efforts in the area;

'3. Thus, the Region 8 ECs decided to hid out their powersupply requirements for the period 2015 - 2018.Sometime in the middle of 2014, the Region 8 ECsconducted a Joint Power Supply Planning. Later, theRegion 8 ECs decided, through a Memorandum ofAgreement (MOA), to conduct a joint procurement oftheir short-term aggregated baseload requirement,specifically, their power supply requirements beginning26 December 2015 until 25 December 2018. FromSeptember 2014 to December 2014, the competitivebidding for the region's power requirements was held;

14. For such purpose, a Bids and Awards Committee(HAC)was created to conduct the Region 8 JointCompetitive Power Supply Procurement ("R8 JCPSP") asfollows:

'4.' The Region 8 ECs prepared their respective least-cost power supply plans and their aggregatedbaseload demands for competitive bidding;

'4.2 The competitive tender was published andannounced in the coverage areas of the Region 8ECs. In addition, prospective bidders(Generation Companies, IPP Administrators andWholesale Aggregators whose names are listedon the Department of Energy (DOE) website)were invited;

'4.3 The capacity offered by the winning bidder/s wasallocated among the eleven (11) Region 8 ECs inproportion to their declared demands. A bidderwas allowed to offer to supply capacity that is lessthan or equal to the aggregated baseloadrequirement in ,any or all of the contract years inincrements of 1 MW. In the event that somewinning bidders offered less than 11 MW, theloads were optimally allocated in such a way thatthe blended price of generation resulting fromthe R8 JCPSP transaction is almost the same forall ECs. In the event multiple bidders whocollectively satisfy the total baseload demand ofR8 RCs are declared winners for any contractyear) aU v'linningbidders entered into individualPSAswith each of the 11ECs;

'4.4 The bidders who signified their intention to joinby buying the bid documents, attended pre-bidconferences where they gave their comments andsought clarification on the bidding requirements

t

ERC CASE NO. 2017-001 RCNOTICE OF PUBLIC HEARING/ 23 MAY 2017PAGEsof21

and process. The BACissued bid bulletins andthe Final Instruction to Bidders;

14.5 The process followed the 2-envelope system - thelegal requirements and proof of financial andtechnical capability in the first, and thecommercial offer in the second. Bids wereevaluated based on an Evaluation Frameworkand Evaluation Methodology released to theBidders;

14.6 After evaluating the bids of each supplier, on 14November 2014, the BAC declared ApplicantSMEC as a winning bidder for a total of 83MWand 93MW for Contract Years 2017 and 2018,respectively;

14.7 On 25 April 2016, SMEC and the Region 8 ECscommenced the final negotiations for the othercommercial anq technical terms and conditionsof the PSA. LEYECO V negotiated for theincrease in capacity to 22 MW and 23 MW for2017 and 2018, t'espectively.

15. Accordingly, on 27 April 2016, LEYECOV and SMECexecuted the subject PSA, providing the terms andconditions for the supply of 22MW and 23MW baseloadpower for 2017 and 2:018, respectively, which will assurethe adequate and reliable supply of power to LEYECOV'sfranchise area. A copy of the PSA is attached as AnnexuL";

II. ABSTRACf OF THE PSA AND OTHER REIATEDINFORMATION

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

16.1 Term and Effectivity. This Agreement shall takeeffect on the date of signing ("Execution Date")and shall remain in force and effect until 12:00MN of December 25, 2018 ("Contract Term"),subject to extension of the Contract Term as maybe agreed upon by the Parties. In the event thatBUYERintends to extend the Agreement, it shallnotify SELLER no later than June 25, 2018.SELLER shall supply BUYER beginning 12:00AM of 26 December 2016 or the date of receipt ofERC final approval ("Supply Effective Date").

16.2 Security Deposit. BUYERshall provide a SecurityDeposit to SELLER equivalent to one hundredpercent (100%) of the estimated average monthlypower bill during the first Contract Year and shallbe updated annually based on ContractedCapacity and Associated Energy of the BUYER

,

i


subject to adjustments as may be necessary. Eachupdate shall be executed at least one (1) weekprior to the beginning of the ensuing ContractYear provided that all documents required fromSELLER to enable BUYER to establish theSecurity Deposit shall be made available at leastthree (3) months prior to the beginning of theensuing Contract Year. The updated SecurityDeposit shall be similarly calculated based on thenext twelve (12) months of the ensuing ContractYear.

Additional Secutity. BUYER also offers a secondfund in favor of SELLER and established by,RENAGMEC Power Corporation. This will serveas an additionallsecurity for the amounts payableby BUYERto SELLER. If the Security Deposit ofBUYER is insufficient for the amount payable byBUYER to SEl!LER, SELLER shall draw thebalance from the RENAGMEC Security Fundsubject to guidelines to be agreed upon by theParties.

16.3 Contracted Capacity. Beginning Supply EffectiveDate, SELLER shall make available to BUYER,and BUYERshall take and accept the ContractedCapacity specifietl in Annex I at the Contract Pricespecified in Annbx II. The quantities specified inAnnex I shall dot be changed by either Partyexcept in cases provided for in this Agreement.The Contracted iCapacity shall be sourced fromthe Facility or from other electricity generators,including the WESM, provided that, if theContracted Capacity is sourced from otherelectricity generators, any difference betvveen theLine Rental incurred if sourced from othergenerating facilities and Line Rental incurred ifsourced from the Facility, shall be for the accountof the SELLER.

BUYER'sContracted Capacity shall be asfollows:

ContractYear

CY201CY2018

Duration

Dec. 26 2016- Dec. 2 201Dec. 26, 2017- Dec. 25, 2018

ContractedCa aci (kW)22,0002 000

BUYER shall maintain a minimum hourlynomination of at least fifty percent (50%) of theContracted Capacity for the duration of theAgreement.

Capacity Utilization Factor. BUYERshall purchasethe Contracted Capacity and pay for the Contracted


Capacity from seventy percent (70%) to onehundred percent (100%) Capacity UtilizationFactor (CUF), compnted per Billing Period, inaccordance with Annex II.

,

Unutilized Capacily. The unutilized capacity ofBUYER may be made available for utilization byother Region 8 ECs or sold to the WESM inaccordance with t4e Nomination Protocol.

Exchange of Contracted Capacities among Region 8ECs. In order to maximize capacity utilization,Region 8 ECs may exchange quantities of theirContracted Capacities in accordance with theNomination Protocol. Upon notice by BUYER,SELLER shall deliver to other Region 8 ECs theContracted Capacity or a portion thereof notutilized by BUYER;provided that BUYERshall stillbe responsible for the settlement and payment ofthe Contracted Capacities.

164 Replacement Power During Outages. The SELLERshall guarantee supply and provide BUYER withReplacement Power sourced from other generatingfacilities or third parties, including the WESM,during Scheduled Outage and Forced Outage of thePlant or Facility.

The BUYERshall pay the SELLER a ReplacementPower Charge for the total energy consumed that isassociated with the Forced Outage of the Plant inevery Billing Period as specified in Annex II;provided that the total number of cumulative hoursof Forced Outage does not exceed seven hundredtwenty (720) Equivalent Hours in a Contract Year.

If the cumulative number of Equivalent Hours ofForced Outage of the Plant in a Contract Yearexceeds seven hundred twenty (720) EquivalentHours, the Replacement Power Charge for theenergy associated with Forced Outage in excess ofseven hundred twenty (720) Equivalent Hours shallbe zero. i

16.5 Adjustments in cdntracted Capacily. BUYERmayapply in writing for an increase in the ContractedCapacity and SELLER may approve snch anincrease in writin1g,which approval shall not beunreasonably withheld. Any approved increaseshall be subject td the availability of capacity andthe technical c6nstraints of the Plant, thetransmission lines! substations and other facilities,at the same Contract Price as provided for in thisAgreement and un1dersimilar terms and conditionsthat the Parties m~yagree upon.

ERC CASE NO. 2017-001 RCNOTICE OF PUBLIC HEARING/ 23 MAY 2017PAGE 8 Of21 I

II

BUYER shall be allowed a reduction in itsContracted Capacity only upon prior writtenconsent of SELLER, which consent shall not beunreasonably withheld. The BUYERshall apply inwriting to the SELLER for a reduction of theContracted Capacity, and SELLER shall, withinthirty (30) calendar days from receipt of theBUYER's application, inform the BUYER of itsdecision. Upon approval of the request forreduction in Contracted Capacity, the other Region8 ECs may opt to assume the quantity of reductionin BUYER's Contracted Capacity, and shall beresponsible for said BUYER's obligations toSELLER. Any Contracted Capacity not assumed bythe other Region 8 ECs shall be sold to the WESM.SELLER shall sell the reduction in ContractedCapacity and Associated Energy to the WESM andany positive difference between the Total MonthlyCharge (if such energy was sold to BUYER) and thesales from WESM associated with such energy,shall be for the account of the BUYER.

BUYER shall be allowed to reduce its ContractedCapacity on account of the implementation ofRetail CompetitiOl\ and Open Access ("RCOA") , (a)any of its large ~nd-users with a monthly peakdemand of 750 kW or higher ceases to engage inbusiness or hecombs a Contestable Customer underRCOA or (b) anyl of its large end-users cease toengage in busiress or become ContestableCustomers due to further reduction of the thresholdfor contestability 'under RCOA; provided that, incase of (a) or (b) ,hereof, there is a proportionatereduction of bilateral contract quantities among allof BUYER's power suppliers.

16.6 Capacity Fees and Energy Fees. Beginning SupplyEffective Date and subject to the terms andconditions of this PSA, BUYER shall pay theCapacity Fees and Energy Fees as provided for inAnnex II.

The Total Monthly Charge, before taxes, for aBilling Period shall be computed according to thefollowing:

Total Monthly Charge= CapacityCharge + Energy Charge+ Replacement Power Charge

1. Capacity Charge

ERC CASE NO. 2017-001 RC .NOTICE OF PUBLIC HEARING/ 23 MAY 2017PAGE90f21

iCapacity Charge = max-((QACTUAI. J QFO). Q(1ll70%CUld •• Capacity FeeCUF

Q(JJ70,*,CUF =: 0.7. CC'" {1fr - BHFO-CUF = max {70% (Q,lCrUAL-Qw) )'• CC.(l/r-£HF'o -Po/lPM1

I,,. r' . F (LCR • c.OM J PIfCPln~' FCR Fall ex USCPI••_i)•.•apaclty ee = cUP + ...•.. CI F'" I'lIe"'" + cut' .•. <; n-t. USCPlo

C . F Ctlpaclty F~"'Ol/1to1,1 'CR l.CR,oo%opacIty eecup = CUF y.. CUF = ---cr;r.-

LFOM = LFOMlO9?t FeR = ~CUF "'F CUl cu,

Note: QFO = 0for energy associated with Forced Outage inexcess of 720 Equivalent HouJs.

2. Energy Charge

Hn.rgy Charge = (QACTU" - Q,o)' f.nergy Fee

IEnergy Fee;; LVOM .•PlI~PII'I_1 + FFC .• FOREXn_1 .• ~ + FVOM .•FOREXn_t .-PHCPJo FPlo

USCPln_1uSCPJo

Note: Qro = 0 for energy associated with Forced Outage inexcess 0/720 Equivalent Hour1.

I3. Replacement Power Charge

R I P Ch I Q RP PHCP1Hep acement ower arige = FO * BAse* ---I PHCPlFO

Note: QFO = 0 and therefore Replacement Power Charge = 0, forI

energy associated with Forced 0utage in excess of 720 Equivalent Hours.

Where,

Total I

Monthly Amount to be paid by BUYER to SELLER in a Billing Period, inPHP, to which VAT arid other applicable taxes will be applied.Charjte I

Capacity Monthly payment for bapaeity and fixed costs, in PHP.Charl!e IEnergy I

Charjte Monthly payment for fuel and variable costs, in PHP.I

Replacemen,

Monthly payment for Replacement Power procnred by SELLERtPower ,

Charjte for the BUYER duringiPlant Forced Outages, in PHP.

RPBASE ReDlaeement Power Fee (Base ~ March 2016) at

ERC CASE NO. 2017-001 RCNOTICE OF PUBLIC HEARING/ 23 MAY 2017PAGE 10 Of21

ACTIJAL

QFO

CUFCCHTEHFO

EHFM

LCRcuF

LFOMCUF

FCRcUF

PHCPIn_,

PHCPIo

PHCPIFo

USCPIn_,

USCPIo

FOREXn_1

LVOMFFCFVOM

FPln-1

FPIo

PhPS. 000 Wh.Total actual ener delivered b SELLER to the BUYER, in kWhEnergy supplied by SELLER to BUYER if dispatched at 70%CUF, in kWhTotal Energy supplied by SELLER to the BUYER during PlantForced Quta e for the Billin Period, in kWhCa aci Utilization Factor in ercent (%).Contracted Ca aci , in kW.Total number of hours in the Billin Period.The sum of the duration, in Equivalent Hours, of Forced Outagesin the Billin Period.The sum of the duration, in Equivalent Hours, of outages orreduced delivery of energy due to Force Majeure in the BillingPeriod.Local component of Capital Recovery Fee at CUF from 70% up to100%, in PHP kWh.Local component of Fixed Q&M Fee at CUF from 70% up to100% in PHP kWh.Foreign component of Capital Recovery Fee at CUF from 70% upto 100%, in usn kWh.Philippine Consumer Price Index of the calendar month withinwhich the start of the current Billing Period occurs, for AllIncome Households - All Items (2006~100), as published by thePhilippine Statistics Authority (PSA) (or its substitute orreplacement agency, as the case may be)(h : www.census. QV. h business rice-indices c i-index).Base Philippine Consumer Price Index for the month ofSeptember 2014 for All Income Households - All Items(2006~100), as published by the Philippine StatisticsAuthority (PSA) (or its substitute or replacement agency, as thecase rna be). PHCPIo ~ 140.90.Base Philippine Consumer Price Index for the month of March2016 for All Income Households - All Items (2006~100), aspublished by the Philippine Statistics Authority (PSA) (or itssubstitute or replacement agency, as the case may be). PHCPbo~ 142.60.US Consumer Price Index, All Items, Bureau of LaborStatistics (ELS) (201O~100) for the calendar month withinwhich the start of the current Billing Period occurs.(ht : www.bls. ov c i #tables)US Consumer Price Index, All Items, Bureau of LaborStatistics (ELS) (201O~100) for the month of September 2014.USCPIo = 10 .20Monthly Average of daily Philippine Peso (PHP) vs. US Dollar(USD) Reference Foreign Exchange Rate as published by theBangko Sentral ng Pilipinas (BSP) for the calendar month withinwhich the start of the current Billing Period occurs.(h : www.bs.ov.hstatisticskestatda99.htm)Local com anent of Variable Q&M in PHP kWh.Forei n Fuel Cost com anent of Ener Fee in USD kWh.Forei n com anent of Variable Q&M in USD kWh.Global Coal Newcastle index for the calendar month withinwhich the start of the current Billing Period occurs.(h s: www. lobalcoal.com ClientZone coalMarketRe ort JBase Fuel Price Index osted (Global Coal Newcastle Index) for

http://www.bs.ov.hstatisticskestatda99.htm

ERC CASE NO. 2017-001 RCNOTICE OF PUBLIC HEARING/ 23 MAY 2017PAGE U Of21

______ 1 the month of September 2014. FPlo = USD66.37/MT.

4. Schedule of Capacity Fees and Energy Fees for CY2017

Capacity Fee Price Components for CY 2017Local Components Foreign Component

C.U.F. (PHP/kWh) (USD/kWh)Capital Recovery FixedO&M Capital Recovery

(LCRcUF) (FOMcup) (FCRcUF)100% 1.4605 I 0.1457 0.0

'5'99% 1.4753 I 0.1472 0.0152

98% 1.4903 I 0.1487 0.015497% 1.5OS7 I 0.1502 0.015696% 1.5214 0.1518 0.015795% 1.5374 0.1534 0.015994% 1.5537 0.1550 0.0161

93% 1.5704 0.1567 0.016292% 1.5875 0.1584 0.016491% 1.6050 0.1601 0.016690% 1.6228 0.1619 0.016889% 1.6410 0.1637 0.0170

88% 1.6597 0.1656 0.017287% 1.6787 0.1675 0.017386% 1.6983 0.1695 0.017585% 1.7182 0.'7

'4 0.0178

84% 1.7387 0.1735 0.018083% 1.7596 ; 0.1756 0.0182,

82% 1.7811 I 0.1777 0.018481% 1.8031 I 0.1799 0.018680% 1.8256 I 0.1822 0.018979% 1.8487 I 0.1845 0.0191

78% 1.8724 0.1868 0.019477% 1.8968 0.1893 0.019676% 1.9217 0.1918 0.019975% 1.9473 0.1943 0.0201

74% 1.9737 0.1969 0.0204

73% 2.0007 0.1996 0.0207

72% 2.0285 0.2024 0.0210

71% 2.057' 0.2053 0.021370% 2.0864 0.2082 0.0216

0.0015

Variable O&M(FVOM)

Fuel(FFC)

0.0382

Fee Price Com onents for CY201LocalComponent ForeignComponents(PHP kWh) (USD kWhVariableO&M(LVOM)0.0083

Ener

Energy Fee

I

ISchedule of Capacity Fees and En~rgy Fees for CY20185.


Capacity Fee Price Components for CY2018Local Components Foreign Component

C.U.F. (PHPjkWh) (USD/kWh)Capital Recovery FixedO&M Capital Recovery

(LCRcUF) I(FOMcUF) (FCRcUF)100% 1.4869 0.1457 0.015499% 1.5019 0.1472 0.015698% 1.5

'73 0.1487 0.0158

97% 1.5329 0.1502 0.015996% 1.5489 0.1518 0.016195% 1.5652 0.1534 0.016394% 1.5818 0.1550 0.016493% 1.5988 0.1567 0.016692% 1.6162 0.1584 0.016891% 1.6340 0.1601 0.017090% 1.6521 0.1619 0.0172

89% 1.6707 0.1637 0.017388% 1.6897 0.1656 0.017587%

,0.16751.7091 0.0177

86% 1.7290 0.1695 0.018085% 1.7493 0.'7'4 0.0182

84% 1.7701 0.1735 0.018483% 1.7915 0.1756 0.018682% 1.8133 0.1777 0.018881% 1.8357 0.1799 0.0191

80% 1.8586 0.1822 0.019379% 1.8822 0.1845 0.019578% 1.9063 0.1868 0.019877% 1.9311 , 0.1893 0.020176% 1.9565 I 0.1918 0.020375% 1.9826 I 0.1943 0.0206

74% 2.0093 I 0.1969 0.020973% 2.0369 I 0.1996 0.0212

72% 2.0652 ! 0.2024 0.021471% 2.0942 0.2053 0.021770% 2.1242 0.2082 0.0221

EneTVV Fee Price Comnonents for CY2018Local Component Foreign Components

(PHPjkWh) (USDjkWh)

Energy Fee Variable O&M Fuel VariableO&M(LVOM) (FFC) (FVOM)

0.0083 0.0381 0.0015


III.

'7.

18.

'9.

20.

,,

ADVANTAGE OF THE GENERATION RATE ANDIMPACf ON LEYECO V'S RETAIL RATES

LEYECO V, together lth the other Region 8 ECs, needsto address the insuffitiency of its power supply due to theincreasing demand Within its franchise area and theexpiration of its contrAct with NPC- PSALM;

Currently, LEYECO ~ receives a total of 26MW from itsexisting suppliers, out of its peak requirement of34.6MW. With an ahnual average growth rate of 3.3%,LEYECO V forecastS that its peak demand from 26December 2017 to 25 December 2018 will be 37MW;

IThe additional supply from SMEC will siguificantlyaugment the supply 'deficiency of LEYECO V and willdecrease the adverse ~ffects thereof by providing a stableand adequate source df electricity;,

I

Among the alternati~e suppliers capable of providingadditional energy to LEYECOV and the rest of the Region8 ECs, SMEC's rates proved to be more reasonable andcompetitive. While SMEC's offer is primarily intended forits base load requirements, the Capacity Factor Pricingunder the PSA provides flexibility in the DUs' utilizationofthe Contracted Capacity;

21. LEYECOV simulated a rate impact analysis, the details ofwhich are provided in Annex ffM", which ultimatelyresulted in a PhPo.6136/kWh decrease with the executionof the PSA with SMEC, to wit:

4.5373

WeightedAverege RateI-I

2C19Average~,./P/kWh)

4,17

4,77

3,63

RetultingCapecltyFactor (%)

'"'"

Percent Share1%1

Amount(Php,)

145,027,210.91 16.39%

727,316,«7.00 71.95%

89,763,075,53 11.66%

962,106,733.43 100%

,',-.,~",''-''iY'hll;'''hi'''~:~.AI!1I1l~_' "'i/', ,*tlI7;-'Fi1i;1~40ii~~.

With SMEC PSA

Forecasted 2C1TAverage QuentityI-I

34,757,869,60

152,570,000.00

24,715,32514

212,043,194.74TOTAL

GMCP

SMECWESM

L' ':-",'I": .:!w. jfH;[1!~~~&,~.L~", I ,Without SMEC PSA ,.. >,~.';'. , ,I

Forecll5ted 2017Amount Percent Share

Resulting 2019 Aver.ge WeightedAverage Quantity Capacity Rate Average Rate

(kWh) (Php.) ('Ad Factor(%) (PlkWh) {kWh}

GMCP 34,757,669.60 145,027,210,91 16,39% '" 4.17

SMEC 000 0,00 0,00% 0% 000 5.1509WESM 947,196,117.44 947,196,117,44 , 44670% '00

TOTAL 981,953,987.04 1,092,223,328.35 483%

--. __ __~ _ ,L':J!," ~~.LI'".!~~~~~~';~!~'~~~';~;;~;~'T(0.6136)

Noles, L" •...•••.••--- "to :.,;;,:: .: .::::",;"=i'!-4" @,"Ollt:;.ge:$fI@#\ii@,;'#@i&j.-.='~:::"':l1.Analysis and slmulaUons I~ buedon LEVECOV$ fore<;a$wd2017hourly lind profile2, GItICP ",Ie is band on (I) Capacity Fee at Resulting Capttlly Factor; (II)Nowml>&r 14 coal find shipping pric.~;{m)FOREX~ 45,2092 from a••••"'ge price of March 2015 • Febroary 2011; (/II)PPD not Included

3. SMEC",te I~ based on (IJ CSlfMCilyFeBel Resulting C"peclty Fector; (II)FOREX= 45.2092 from """r~ge price of March2015. Febru~ry 2018; (III) PPD not Included4. WESItIPrlc,,~ I~ bMlrM/on 2015A••.••"'ge prices of Nodal Points of LEYECOVprices of WESMcan b" chang" bIilsed onstandard d"vlat!<m to much higher or lower '

ERC CASE NO. 2017-001 RCNOTICE OF PUBLIC HEARING/ 23 MAY 2017PAGE 140f21

22. In addition to the lower generation cost of the powersupply from SMEC, LEYECO V is also entitled to aPrompt Payment Discount (PPD), if conditions are met,equivalent to three percent (3%) of the total of theCapacity and Energy Charges and a Collection EfficiencyDiscount, again if conditions are met, equivalent to:

Collection EfficiencY Levels Disconnt, PhP/kWhBelow 65.99% ' None

66.00% to 75.99% 0.0576.00% to 85.99% 0,10

86.00% to 95.99% 0.1596.00% and above 0.20

23. In compliance with Rule 20 of the ERC Rules of Practiceand Procedure relative to the submission of supportingdocuments and infortnation for the approval of the PSAand the rate structiIre embodied therein, ApplicantsLEYECO V and SMEd: attach the following documents toform integral parts het-eaf:

IAnnex Documents/Information

Details of the PSA:

a. Executive summaryl

b. Sources of Funds/Financial PlansDebt/Equity RatioProject Cost

• Computation of Return on Investment (ROI)/WeightedAverage Cost of Capital (WACC)

• Certification from the Bank/Lending Institutionspecifying the principal amortization, term and interestduring the cooperation period of the loan agreement

Nandseries Purchased Power Rate

• Breakdown of the base prices• Sample Computation of Power Rates with the supporting

documents on the assumptions taken• Rate Impact Study/Simulation• Statement of impact on the overall rates of LEYECO V

once the contract is approved• Basis/Rationale of indexation and level of indexation

,Cash Flow ,

Initial Costs• Breakdown of Operating and Maintenance expenses• Minimum Energy Off-take (MEOT)

0 Details of the Power Rate Calculations and FinancialModel (Confidential)

P, P-l Contracts for the Supply, Construction and SupervisionandP-2 for the Power Plant (Confidential)

0 Details of the Fuel Procurement Process


R Transmission Service Agreement (TSA) between NGCPand LEYECOV, if applicable

Further, in compliance with Article VI, Sections 1and 2 ofthe Honorable Commission's Guidelines for the Recoveryof Costs for the: Generation Component of the,Distribution Utilities'I(DU) Rates, copies of the foregoingare, likewise, attached to the Joint Application as annexesand made integral parits hereof:

I,Annex Documents/Information

Relevant technical and economic characteristics of theS generation capacity, Installed capacity, mode of operation,

and deoendable caoacitvT Costs analysis of the proposed pricing provisions of the PSA

Details of the Competitive Selection Process (CSP)undertaken by leading to the selection of SMEC as itssupplier, including invitations to participate and submit

Uand proposals, Terms of Reference (TOR), proposals and/orseries tender offers received by R8 JCPSP, Joint Bids and Awards

Committee (JBAC) Evaluation Report; R8 JCPSP 's BoardResolution confirming the said JBAC Evaluation Report, andthe Notice of Award to SMEC (Confidential)

V and Details of the intercol1nection facility of the Sual Coal Firedseries Thermal Power PlantWand LEYECOV's latest Distribution Development Plan (DDP)seriesx and LEYECO V's Load Forecast Projections, Power Demand andseries Suoolv Scenario and Average Dailv Load Curve

LEYECO V's Demand Side Management (DSM) Program thaty could be implemented by EC if approved by the Honorable

CommissionSMEC's latest Audited Financial Statements (AFS), Balance

Z Sheet, Income Statement, and Statement of Cash Flows andOperating Expenses for the Power Plant and General andAdministrative Exoense

Z.1 Certification from the engine manufacturer or SMEC of thenet heat rate in liters Der kWh

Z-2 Updated Certificate of Compliance from the EnergyRegulatory Commissidn

26.

Furthermore, apPlicJnts LEYECO V and SMEC arereserving their right tb submit other documents, either inthe course of the heating or as may be required by thisHonorable Commissidn.

The Joint APPlicatiob is consistent and in accordancewith Section 2 of Republic Act No. 9'36, or EPlRA,declaring as a policy of the State, among others, [tQensure the quality, reliability, security and affordability ofthe supply of electric power;" and Section 23 thereof, that"To achieve economies of scale in utility operations,distribution utilities may, after due notice and public

ERC CASE NO. 2017-001 RCNOTICE OF PUBLIC HEARINGf 23 MAY 2017PAGE 16 Of21

hearing, pursue structural and operational reforms suchas but not limited to, joint actions between or among thedistribution utilities, 'subject to the guidelines issued bythe ERC (which) ... shall result in improved efficiencies,reliability of service, reduction of costs and complianceto the performance standards prescribed in the IRR ofthis Act" and that all distribution utilities shall have theobligation to supply electricity in the least-cost manner toits captive market subject to the collection of retail rateduly approved by the Energy Regulatory Commission;"

27.

2B.

The Joint Application is likewise consistent with DOEDepartment Circulat No. DC2015-06-000B whichmandates all distribution utilities to undergo CompetitiveSelection Process (CSP) in securing Power SupplyAgreements (PSAs) Iwhich will ensure security andcertainty of electricitY prices of electric power to end-users in the long term~ as well as with ERe Resolution No.13, series of 2015, which requires that "PSA shall beawarded to the winning Generation Company followinga successful transparent and competitive selectionprocess ... A CSP is successful if the DU receives at leasttwo (2) qualified bids from entities with which the DU isnot prohibited from entering into a contract for powersupply in accordance with Rule 11, Section 5 (b) of theEPIRA IRK"

The PSA with SMEC was made to ensure the continuoussupply of power to EC and due to the former's competitivepricing structure and other favorable terms of its contract,which will redound to the benefit of the latter and its end-consumers in terms of reliable and affordable powersupply;

COMPLIANCE WITH PRE-FILING REOUIREMENTS

29. Applicants manifest I compliance with the pre-filingrequirements mandated under the Implementing Rulesand Regulations of the EPIRA and Rule 6 of the ERCRules of Practice andiprocedure, to be established by thefollowing: i

29.1. Certifications acknowledging receipt of theApplication with annexes to be issued by theLegislative Bodies of Pasig City, City of Ormoc,and the Province of Leyte, to be appended asAnnexes "AA", "AA-l" and "AA-2",respectively;

29.2. Notarized Affidavit of Publication stating that theApplication was published in a newspaper ofgeneral circulation within LEYECO V'sFranchise Area, to be appended herein asAnnex "BB'" and-----,

ERC CASE NO. 2017-001 RCNOTICE OF PUBLIC HEARING/ 23 MAY 2017PAGE 170f21

29.3. Complete newspaper Issue where theApplication \\'as published, to be appendedherein as Annex "BB-1", and the relevant pagethereof where the Application appears, asAnnex "BB-2";

IV. MOTIQN FQR CONFIDENTIAL TREATMENTOF ANNEXES "0". uP". and "U"

30.

31.

32.

33.

Under Rule 4 of the ERG Rules of Practice andProcedure, a party to any proceeding before theHonorable Commission may request that certaininformation not be disclosed and be treated asconfidential, by describing with particularity theinformation to be treated as confidential, specifying theground for the clain1 of confidential treatment of theinformation and, if iapplicable, specifying the periodduring which the information must not be disclosed;

Applicant SMEC resJeetfullY moves for tbe confidentialtreatment of Annexe:s "0" and up", "P-l" and "P-2""bereof, consisting of SMEC's Sources of Funds andFinancial Plans with Cost Assumptions. These annexes,exclusively owned by Applicant SMEC, containinformation which are considered part of its business andtrade secrets. As subh, SMEC has the sole proprietaryinterest and will be lunduly prejudiced should they bedisclosed to the public;

These annexes coltain numbers, data, formula,methodology, and d.lculations involving valuable andsensitive commercial, financial information reflectingSMEC's business ope/rations and financial trade secrets.Therefore, SMEC's cdnfidential, proprietary, and privateinformation included lin the aforesaid annexes should beprotected from public dissemination. athernise, suchinformation can be Iillegally and unfairly utilized bybusiness competitors ~homay use the same for their ownprivate gain and to the irreparable prejudice of SMEC.Negotiations with prospective customers may also beaffected; I

ISimilarly, applicant I:EYECa V humbly requests for theconfidential treatmertt of Annexes "U and series"hereof, consisting of the MOA among Region 8 ECs, e-mails confirming participation of interested suppliers inthe bidding, Information Memorandum, FinalInstructions to BiddeJ;'s,Bid Forms, Bid Evaluation Slips,Comparison of Bids, "andNotice of Award, respectively.These annexes show the individual offers of the bidderswhich participated in the R8 JCPSP. The Region 8 ECs,LEYECa V included, are bound by their undertaking tosecure and keep in confidence the offers and the proposedterms of supply, so as not to prejudice or pre-empt anyfuture esPs in which these bidders will participate.

ERC CASE NO. 2017-001 RC I

NOTICE OF PUBLIC HEARING/ 23 MAY 2017PAGE 18 Of21 I

,,

Otherwise, LEYECO V and the rest of the Region 8 ECsmay be held liable for damages for breach ofconfidentiality, and eventually, risk their good relationswith the suppliers concerned;

34.

35.

v.36.

37.

38.

39.

Accordingly, it is respectfully submitted that Annex "0".Annex "P" and series and Annexes "U" and series,must be accorded confidential treatment. A5 such, theyare to be used exclusively by the Honorable Commissionand for the sole purpose of evaluating this Application,thereby protecting these data from unnecessary publicdisclosure;

In accordance with Section l(b), Rule 4 of the ERC Rulesof Practice and Procedure, Applicants LEYECO V andSMECsubmit one (1) copy each of Annex "0", Annex"P" and series and Annexes "U" and series insealed envelopes, with the envelope and each page ofthedocuments stamped With the word "Confidential".

PRAYER FOR PRbVISIONAL AUfHORITY

All the foregoing alle~ations are re-pleaded by referencein support of herein Prayer for the issuance of ProvisionalAuthority to implement the subject PSA;

LEYECO V and SMEC pray for the issuance of aProvisional Authority or interim relief prior to finaldecision pursuant to Rule 14 of the ERC Rules of Practiceand Procedure, to wit:

"Section 3. Action on the Motion. - Motions forprovisional authority or interim relief may be actedupon with or without hearing. The Commission shall acton the motion on the basis of the allegations of theapplication or petition and supporting documents andother evidences that applicant or petitioner hassubmitted and the comments or opposition filed by anyinterested person, ijthere be any."

In recognition of the' fact that a substantial amount oftime is customarily heeded to evaluate the documentssubmitted to support Ithe approval of herein Application,Applicants LEYECO V and SMEC seek the kindconsideration of the Honorable Commission to approvethe instant Application, immediately, albeit,provisionally; I

Owing to the short term of the contract, which is only fora period of two (2) years, a Provisional Authority is all themore imperative to allow the timely delivery of energy bySMEC to LEYECOV, which is set to start on 26 December2016 at 12:00 A.M. in order to avoid their exposure to theWESM;


40. The additional power from SMEC is needed to curtail anypower interruptions that may be experienced by LEYECOVs member-consumers due to inadequate power supplyin the Region;

41. To further support the Prayer for Provisional Authority,an affidavit emphasizing the necessity thereof is attachedhereto as Annex "CC", to form an integral part hereof;and

42. Finally, the following annexes are attached in compliancewith the additional requirements of the TechnicalWorking Group for write-ups on subjectdocuments/information:

Annex Documents/Information00 SMEC Shareholders Agreement

00-1 Renewable Energy Service/Operating Contract from theDeoartment of Energy (DOE)Certificate of Registration or Certificate of Confrimation

00-2 of Commerciality by an RE Developer and after dueconfirmation bv the DOE

00-3 Explanation on the non-applicability of potential cost ofancillarv service~

00-4 Consistency/inconsistency of the Sual Coal Fired PowerStation with the DOE's PDP

00-5 SMEC as an IPpA oroiect

00-6 Explanation on the non-applicability of the MEOTprovision on the 'SMECcontract

00-7 Status of the ECs' Transition Supply Contract with theNPC/PSALM 'Non-applicabilitY to electric cooperatives of document

00-8 showing list ofbbard of directors and board membersrelated to the ultimate parent company, its subsidiariesand all its affiliates

00-9 Write-up on SMEC's IPPA A.reement

PRAYER

WHEREFORE, the foregoing premises considered, the JointApplicants Leyte V Electric Cooperative, Inc. (LEYCO V) and SanMiguel Energy Corporation (SMJlC) most respectfully pray that theHonorable Commission:

L Pending l)earing, ISSUE an Orderprovisionally approving the Joint Application and thePSC thereby authorizing LEYECO V and SMEC toimmediately implement the rate structures therein;

2. ISSUE an Order treating Annexes "0","P" "P-l" and "P-2" and "u and series" and all" ,. ,the information contained therein as confidential,directing their non-disclosure to persons other than theofficers and staff of the Honorable Commission,continuously protecting the said informationfrom public disclosure by maintaining the same

ERCCASENO. 2017-001 RCNOTICE OF PUBLIC HEARING/ 23 MAY 2017PAGE200f21

separate and apart from the records of the case,and ensuring that these are not divulged tounauthorized persons, pursuant to Rule 4 of its Rules ofPractice and Procedure; and

3. After due lotice and hearing, ISSUE aDecision approving the Joint Application and the PSCbetween LEYECO V and SMEC, and authorizingESAMELCOto charge and collect the fees therein fromits member-consumers.

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

The Commission has set the Application for determination ofcompliance with jurisdictional requirements, expository presentation,Pre-Trial Conference, and presentation of evidence on 17 August2017 (Thursday) at ten o'clo~kin the morning (10:00 A.M.)at LEYECOV's Main Office in Brgy. San Pablo, Ormoc City,Leyte.

All persons who have interest in the subject matter of theinstant case may become a party by filing with the Commission averified Petition to Intervene at least five (5) days prior to the initialhearing and subject to the requirements under Rule 9 of the 2006Rules of Practice and Proced~re, indicating therein the docketnumber and title of the case and stating the following:

i. The petitioner's name aJd address;

u. The nature of petitioner's interest in the subject matter of theproceeding and the way and manner in which such interest isaffected by the issues involved in the proceeding; and

iii. A statement of the relief desired.;

All other persons who m~y want their views known to theCommission with respect to the Isubject matter of the case may filetheir Opposition or Comment thereon at any stage of the proceedingbefore Applicant rests its case, subject to the requirements underRule 9 of the 2006 Rules of Practice and Procedure. No particularform of Opposition or Comment is required, but the document, letter,or writing should contain the following:

1. The name and address of such person;

ERC CASE NO. 2017-001 RCNOTICE OF PUBLIC HEARING/ 23 MAY 2017PAGE 21 of 21

2. A concise statement of the Opposition or Comment; and,I,

3. The grounds relied upon.

,All such persons who wish to have a copy of the Application

may request from Applicants that they be furnished with the same,prior to the date of the initial hearing. Applicants are hereby directedto furnish all those making such request with copies of theApplication and its attachments, subject to the reimbursement ofreasonable photocopying costs. Any such person may likewiseexamine the Application and other pertinent records filed with theCommission during the standard .officehours.,

i,WITNESS, the Honorable Officer-in-Charge of the ERC

ALFREDO J. NON, and Commissioners GLORIA VICTORIA C.YAP-TARUC, and GERONIMO D. STA. ANA, Energy RegulatoryCommission, this 23,d day of May:2017 in Pasig City.

II,,

FO~AND BYAUTHORITYOF THE COMMISSION:

JOSEFINA PATRICOversight Com

I

AGPALE-ASIRITioner for Legal