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IN THE MATTER OF THEAPPLICATION FORAPPROVAL OF CAPITALPROJECTS WITH PRAYERFOR PROVISIONALAUTHORITY

ERC CASE NO. 2015-150 RC

CABANATUAN ELECTRICCORPORATION (CELCOR),

Applicant.)(- - - - - - - - - - - - - - - - - - - - - - )(

NOTICE OF PUBLIC HEARING

TO ALL INTERESTED PARTIES:

Notice is hereby given that on 07 August 2015, CabanatuanElectric Corporation (CELCOR) filed an application for approval of itscapital projects, with prayer for provisional authority.

In the said application, CELCOR alleged, among others, thefollowing:

1. CELCOR is a domestic corporation duly organized andexisting under and by virtue of the laws of the Republic ofthe Philippines, with principal office address at MaharlikaHighway, Barangay Bitas, Cabanatuan City, Nueva Ecija;

2. CELCOR is the authorized operator of the electric Jight andpower service in the City of Cabanatuan, Province of NuevaEcija;

..ERCCASENO. 2015-150 RCNotice of Public Hearing/07 January 2016Page 2 Of14 .

COSTS OF THE PROPOSED CAPITAL PROJECTS

3. CELCOR plays a big part in Cabanatuan City's economicdevelopment by providing a steady and reliable electricsupply to its industrial, commercial and residentialcustomers. It continuously improves its supply of electricityand increases the standard ofliving through the constructionof adequate electric facilities to serve the city's requirements;

4. Pursuant to the requirements of the Philippine Distributionand Grid Code (PGDC), the system must be designed,planned and upgraded so as to withstand a disturbance atany given time due to unexpected loss or failures, in amanner that will not degrade or affect the networkoperation;

5. CELCOR seeks authority from the Commission to install,construct, operate and maintain its major electrical and non-electrical capital projects. The Commission defined "capitalprojects' as follows:

"Those projects that are needed to serveforecasted future loads and to maintain goodelectric service to existing and future customerssatisfying the utility's technical criteria for capacity,reliability, quality and safety."

6. Capital projects are intended to maintain a reliable electricservice for the benefit of the existing and future customers ofthe distribution utilities (DUs). To achieve it, the DUs mustnot only rely on their existing distribution assets. They aremandated to make timely additions thereto and introduceimprovements thereon to be responsive to the demands oftheir customers;

7. Section 23, Chapter II of Republic Act 9136 (RA 9136),otherwise known as the "Electric Power Industry Reform Actof 2001" or "EPIRA",mandates a DU "to provide distributionservices and connections to its system for any end-userwithin its franchise area consistent with the distributioncode";

..ERC CASENO. 2015-150 RCNotice of Public Hearing/07 January 2016Page 3 Of14

8. Section 1.7.1 of the Distribution Services and Open AccessRules (DSOAR), promulgated by the Commission pursuantto the provisions of the EPIRA, provides that:

"The DU may increase, substitute or withdrawfrom service its authorized equipment andmachinery in accordance with the Rules for Approvalof Regulated Entities' Capital Expenditure Projects,RDWR, and other rules of the Commission. If suchundertaking is not covered by the RDWR or otherrules, authorization shall be secured from theCommission in accordance with the pertinentprovision of the Rules for Approval of RegulatedEntities' Capital Expenditure Projects."

9. CELCOR filed the application seeking the approval of theCommission of the following capital projects:

a. Construction of new 69 kV Sub-transmission Line(N-1 Provision);

b. Relocation and rehabilitation of 69 kV and 13.8/0.23kV lines and poles;

c. Installation of Cable Tray and Support (Primary linebridge attach); and

d. Restoration of its century old building into a newtwo-storey office building and construction of wingextension;

10. The total estimated cost of the project is One HundredFifteen Million Eight Hundred Seventy Thousand Eighty-Four and 89/100 Pesos (PhP115,870,084.89), broken downas follows:

ERCCASENO. 2015-150 RCNotice of Public Hearing/07 January 2016Page 4 Of14

40,689,711.30

12,000,000.0052 689, 11.30

Estimated Cost(PhP)

6.00

25,831,60 .16115 870 084.89

PROJECTSConstruction of new 69 kVSub-transmission Line (N-1Provision)Land Acquisition andDevelopment (Right ofWa)Sub-totalRelocation andRehabilitation of 69 kV and13.8/0.23 kV Lines andPolesInstallation of Cable Trayand Support (Primary linebrid e attach)Restoration of CELCOR'scentury old building into anew two-storey officebuilding and constructionof win extensionTOTAL

11. The proposed projects will be funded through its RetainedEarnings (Appropriate for Plant Expansion) amounting toOne Hundred Million Pesos (PhP100,000,000.00) and theremaining amount shall be taken from its Cash WorkingCapital;

DESCRIPTION OF THE 2015 PROJECTS

A. Construction of New 69 kV Sub-transmission Line (N-1Provisions)

The proposed project line will traverse an estimated length of10.6 kms from Bitas Substation passing through Emilio VergaraHighway up to the National Grid Corporation of the Philippines(NGCP) Nueva Ecija-Aurora Substation. The project providesCELCORwith N-1 capability in case of system contingency.

ERC CASENO. 2015-150 RCNotice of Public Hearing/07 January 2016Page 5 Of14

PROJECT CODEPROJECT TYPEPROJECT CODEPROJECT CATEGORY

PROJECT DURATIONPROJECT TYPE CLASSIFICATION:PROJECT FINANCING PLAN

PROJECT COST

TL-oOlReliabilityFirst PrioritySubtransmissionDevelopment2015-2018New AssetsRetained Earning -Appropriated for PlantExpansion/Cash WorkingCapitalPhP52,689,711.30

B. Relocation and Rehabilitation of 69 kV and 13.8/0.23 kV Linesand Poles

Based on the Memorandum of the Department of Public Worksand Highways (DPWH), the main road of Maharlika Highway(from Sta. Rosa-Cabanatuan boundary up to Cabanatuan-Talavera boundary), will be widened from 16 mts to 20 mts, whilesecondary road, Cabanatuan-Papaya Road, will be widened to astandard 15 mts, thus, affecting CELCOR's existing poles locatedin the area. The improvement of drainage and installation ofstone masonry along Nueva Ecija-Aurora road are also included.A total of 344 poles, specifically 67 sub-transmission poles and277 primary and secondary poles are affected by it.

PROJECT CODE

Location

Maharlika Highway, existing 69 kVSubtransmission lines

Mabini Extension to Mabini HomesiteMayapyap to CaalibangbanganSangitan Este to BitasDaan SarileValdefuenteNEUST to SelectGen. Tinio ExtensionCircumferential Road-BarreraCircumferential Road-H. ConcepcionLourdes to Bangad

Project ID

TL-002PL-OOIPL-002PL-003PL-004PL-005PL-006PL-007PL-008PL-009PL-OlO

ERC CASENO. 2015-150 RCNotice of Public Hearingj 07 January 2016Page 6 of 14

PROJECT COST

PROJECT lYrEPROJECT RANKPROJECT CATEGORY

ContingencyFirst PrioritySubtransmissionjPrimaryDistribution Project

PROJECT DURATION : 2015-2018PROJECT lYrE CLASSIFICATION: New AssetsPROJECT FINANCING PLAN Retained Earning -

Appropriated for PlantExpansionjCash WorkingCapitalPhP28,065,312-43

C. Installation of Cable Tray and Support (Primary line bridgeattach)

This project covers the laying of power cables at Cesar VergaraBridge complementing the approved capital expenditure for RY2014, extension of primary line from Gen. Tinio Avenue to Brgy.Cinco-Cinco. The hot dipped galvanized cable tray will beconstructed at the edge of the bridge that will connect lines fromGen. Tinio Avenue-Cesar Vergara Bridge to the entry point of theline extension going to Brgy. Cinco-Cinco.

: TL-003CapacityFirst PriorityPrimary Distribution Project2015-2016New Assets

PROJECT CODEPROJECT lYrEPROJECT CODEPROJECT CATEGORYPROJECT DURATIONPROJECT lYrE CLASSIFICATION:

PROJECT FINANCING PLAN

PROJECT COST

Retained Earning-Appropriated forPlant expansionjCash Working Capital

: PhP9,283A56.00

D. Restoration of century-old building into a new two-storey officebuilding and construction of wing extension

Presently, its employees are housed in a three-decade oldbuilding which was originally designed and used as a parkingbuilding of its service vehicles. It is currently being utilized tocater its valued clienteles.

ERC CASE NO. 2015-150 RCNotice of Public Hearing/o? January 2016Page 70f14

PROJECT CATEGORY : Non-network requirementPROJECT DURATION : 2015-2016PROJECT TYPE CLASSIFICATION: New AssetsPROJECT FINANCING PLAN : Retained Earning-

Appropriated forPlant expansion/Cash Working Capital

PROJECT COST : PhP25,831,605.16

JUSTIFICATION OF THE PROPOSED PROJECTS

The proposed capital projects of CELCOR aim to comply withthe requirements under the existing ERC Rules and Procedure withrespect to safety, reliability, capacity, quality and growth of thedistribution system, as stated in CELCOR's Distribution DevelopmentPlan (DDP), particularly:

A. Construction of New 69 kV Sub-transmission Line (N-1Provisions)

1. Project Purpose

The new 69 kV Sub-transmission Line will be utilized as aredundant asset serving as a reserved lines in case the other linesalong Maharlika Highway undergoes maintenance, subjected to faultor sustains damage due to fortuitous events and other causes. As anasset reserved for future use-under the lO-year developmentprogram, a new substation will be proposed in the area covering theeastern side of the city consisting several barangays from Bangad,Camp Tinio, Kalikid, Patalac up to adjacent barangays of Cabu andMacatbong.

The area has a spark growth for subdivisions and has ideallocations for livestock production such as poultry and piggerybusiness. It is also being developed as a location for medium-sizedindustrial processing businesses such as concrete aggregate businessand medium-sized stone crusher complex. Its proposed project willbe utilized to serve the future expansion plan in the event that. theexpected growth in the said area will materialize.

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II. Impact if Project Not Implemented

The existing 69 kV sub-transmission line is being fed on a singlebus scheme. It is not flexible to provide continuous power in case ofloss or failure. The only option is thru FCVC generating stationconnected through a step up transformer of 25 MVA capacity to theend of the 69 kV line at Bitas Substation. The normally openinterconnections at 13.8 kV network level provide a partial N-lcapability between substations. However, the power plant hasinsufficient capacity to fully supply CELCOR's demand duringcontingency.

B. Relocation and Rehabilitation of 69 kV and 13.8/0.23 kV Linesand Poles

1. Project Purpose

The project is being implemented based on the guidelinesissued by DPWH. CELCOR is thus constrained to undertake therelocation of its poles and lines to be affected by the road wideningprojects. However, simultaneously with its compliance with DPWHrules and regulations, the right of way clearances under existing laws,rules and regulations will be observed to minimize accidents as wellas to ensure smooth flow of traffic in the area.

Based on the guidelines, a new design will be used since thearea is now populated with commercial buildings. The design willaddress the clearance tolerance between structure and live lines, thuseliminating the exposure of live lines relative to the buildingstructures.

Its 69 kV lines was constructed more than 18 years ago andconsisted of creosoted wooden poles. The expected life service isestimated at 20 years based on the Valuation Hand book of theCommission. It could no longer use the old wooded creosoted polesfor relocation and rehabilitation because it is already near thestandard service life. By using the new steel and concrete poles willaddress the following: a) safety clearance between live lines andstructure; and b) the safe and reliable steel and concrete poles willsupport its lines.

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11. Impact if Project Not Implemented

The project should be undertaken simultaneously with theongoing road widening projects of the DPWH since pole relocationcauses interruption. If this will not be implemented, the future costand reliability will be a factor. The correction of construction shouldcomply with the required clearances between structures and powerlines and has to be undertaken to ensure the safety and reliability.

C. Installation of Cable Tray and Support (Primary line bridge attach)

1. Project Purpose

In ERC Case No. 2009-043 RC dated March 8, 2010, theCommission approved the installation of the power cable underneaththe Cesar Vergara Bridge (Project code BB-006 Extension of primarylines along Gen. Tinio Avenue to Cinco-Cinco under cash flowprogram for 2014). However, the project did not materialize due toseveral factors that were observed during the implementation. Thehole provision for power cable is small. Thus, the factor of unduestress during the pulling procedure was considered due to the tightspace for the cable. As the length of the pulled wire increases, theweight of the cable becomes heavier. Pulling the wire under thecondition without any provision for space will result to cabletightening. Thus, the problem of undue stress will be a concern. Itwill compromise the insulation capability of the cable to insulate thelive wires from the outer diameter of the power cable and worstcondition scenario will be the breakage of the power cable during thepulling process.

In order to ensure the safe operation of the said cable, itproposes the use of cable trays in order to support the cable along thebridge. The condition where the cable will experience undue stressduring the pulling procedure will be eliminated. Inspection andmanagement program can be performed regularly because it will beinstalled at the edge of the bridge where access to the cable can bemade without compromising the safety of personnel.

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n. Impact if Project Not Implemented

All possible options were considered for the project such asutilizing the existing manhole (designed for utility line) which wastaken into consideration during the post construction period of thebridge, installation of overhead structure under the bridge whichrequires acquisition of land and much taller poles in a flood pronearea or overhead structure at the bridge girder which all proved to benon-viable, the only plausible engineering solution is to install theprimary line at the edge of the bridge using a cable tray to link the RY201 approved capital project from which it will extend a primary linealong a 8 km Felipe Vergara Highway.

D. Restoration of century-old building into a new two-storey officebuilding and construction of wing extension

1. Project Purpose

CELCOR is confronted with aging office facilities that areinadequate, even with significant renovation, to support its strategicplans and programs for the promotion of customer satisfaction. Itproposes to restore its century-old building into a new two-storeyoffice building and construction of wing extension.

This project will benefit the following: the company - Theproposed modern building shall be the new face of the company, areflection of innovative services and commitment to its customers;the employees - the new building for employees will provide aconvenient, stimulating and dynamic working environment that willdefinitely enhance their efficiency. It will also boost their morale andimprove their productivity in the workplace. Also, the proposed officebuilding will improve the workflow within the office considering thatat present, the various departments are scattered in different areasand some are even do not have enough space to accommodate itsstaff; the valued customers/consumers - the cutting-edgefacilities of the building will create an impact to the consumersespecially those who frequently visit the office. It shall give the clientsa new customer service experience which promotes a much moreguaranteed customer service satisfaction. The modern building willreduce safety risks to all concerned parties since the new structurewill introduce modern safety features.

•ERC CASENO. 2015-150 RCNotice of Public Hearing!07 January 2016Page 11 Of14

These valuable benefits to the whole company and its treasuredcustomers are vital in enhancing its goodwill and improving itsperformance as a distribution utility.

12. Section 3.5 of the Commission's Resolution No. 26, Series of2009, which provides that there are expenditure projectsthat may occur at any given period which may be resultingfrom unexpected significant new load that will be connectedto the Distribution System. A Regulated Utility shall file aformal application prior to the start of implementation ofsuch project and shall be supported by documents similar tothe usual requirements of network asset capitalexpenditures.

In support of the application and in compliance with thefiling requirements of the Commission, CELCOR submitted,as Annex "B", the following documents:

a. Options! Alternatives considered in lieu of the proposedprojects;

b. 5-year forecast and historical planning data;c. Technical Analysis;d. Economic Analysis;e. Conceptual Engineering Design and Drawings;f. Project Cost Estimates;g. Project Financing Plan;h. Proposed Gantt Chart Schedule;i. Board Resolution approving the proposed CAPEX; andJ. Sworn Statements executed by Engr. Rommel Hemal

attesting to the fact that CELCOR's application isconsistent with its (DDP).

13. Public interest and welfare demand the immediate approvalof the application;

ERC CASENO. 2015-150 RCNotice of Public Hearing/07 January 2016Page 12 of 14

ALLEGATION IN SUPPORT OF THE PRAYER FORPROVISIONAL AUTHORITY

14. CELCOR replead all the allegations in support of the prayerfor the immediate issuance of provisional authority toimplement its additional capital expenditures for 2014.

The following are the estimated duration of the proposedcapital projects:

PROJECT NAME DURATION OF THEPROJECT

Construction of New 69 kV sub-transmission line 7 monthsRelocation and Rehabilitation of69 kVand 13.8/0.23 kV lines and 2 years and 7 monthspolesInstallation of Cable tray 5 months and 3 weeksRestoration of CELCOR's centuryold building into a new 2-storey 1year and 4 monthsoffice building and constructionof wing extension

15. As of to-date, CELCOR will need at least three and a half (3.5)years to complete the aforementioned capital projects. Thus,with the grant of a provisional authority, it would be able toimmediately proceed with the project to meet its customer'srequirements;

COMPLIANCEREQUIREMENTS

WITH THE PRE-FILING

16. CELCOR has furnished the local legislative body of the Cityof Cabanatuan with copy of its application and its annexes.The copy of the Certification issued by the aforementionedlegislative body attesting to the fact of service and itsannexes is attached to the application and marked asAnnexes "D'",

17. CELCOR had also caused the publication of the application ina newspaper of general circulation in the Philippines. Thecopies of the Affidavit of Publication and the newspaperissue where the said application was published are attached

J.

ERCCASENO. 2015-150 RCNotice of Public Hearingj07 January 2016Page 13 Of14

to the application and marked as Annexes "E" and "F",respectively; and

18. CELCORprays that the Commission:

a) Issue, immediately upon filing of the application, aprovisional authority for the approval of theimplementation of its capital expenditure projects;

b) Approve, after notice and hearing, the application andrender judgment making provisional approvalpermanent; and

c) Include in the next regulatory period rate calculationsandj or rate case application the aforementioned projectsas a deferred amount.

The Commission has set the application for jurisdictionalhearing, expository presentation, pre-trial conference and evidentiaryhearing on June 3, 2016 (Friday) at ten o'clock in themorning (10:00 A.M.) at the campus of Nueva EcijaUniversity of Science and Technology (NEUST) located atMaharlika Highway, Brgy. Sumacab Este, Cabanatuan City.

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 applicant concludes thepresentation of its 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.

J •..• ~

ERCCASENO. 2015-150 RCNotice of Public Hearing/07 January 2016Page 14 of 14

All such persons who may wish to have a copy of the applicationmay request the applicant that they be furnished with the same, priorto the date of the initial hearing. The applicant is hereby directed tofurnish all those making such request with copies of the applicationand its attachments, subject to reimbursement of reasonablephotocopying costs. Any such person may likewise examine theapplication and other pertinent records filed with the Commissionduring standard office hours.

WITNESS, the Honorable Chairman, JOSE VICENTE B.SALAZAR, and the Honorable Commissioners, ALFREDO J.NON, GLORIA VICTORIA C. YAP-TARDC, JOSEFINAPATRICIA A. MAGPALE-ASIRIT, and GERONIMO D. STA.ANA, Energy Regulatory Commission, this 7th day of January,2016 at Pasig City.

J. MARASIGANC of Staff

Office of the Chairman and CEO