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IN THE ~TTER OFTHE APPLCATION FORAPPROVAL OF THE POWERSALES CONTRACT (PSC)BETWEEN ILOILO IIIELECTRIC COOPERATIVE,INC. (ILECO III) AND SPCISLAND , POWERCORPORATION (SIPC), WITHMOTION FOR THE ISSUANCEOF PROVISIONALAUTHORITY

ERC CASE NO. 2016-001 RC

ILOILO III ELECTRICCOOPERATIVE, INC. (ILECOIII) and SPC ISLAND POWERCORPORATION (SIPC),

Applicants.)(- - - -,- - - - - - - - - - - - - - - - - - - -)(

ORDER

On 05 January 2016, Iloilo III Electric Cooperative, Inc. (ILECOIII) and SPC Island Power Corporation (SIPC) filed their jointApplication for approval of their Power Sales Contract (PSC), withprayer for the issuance of provisional authority.

In support of said Application, .ILECO III and SIPC alleged,among others, the following:

1. Applicant ILECO III is a National Electrification Administration(NEA)-franchisee electric cooperative. Its principal office islocated in Brgy. Preciosa, Sara, Iloilo, Philippines. ILECO Ill'sfranchise area encompasses thirteen (13) municipalities, namelyAnilao, Banate, Barotac Viejo, San Rafael, Ajuy, Lemery, Sara,Concepcion, San Dionisio, Batad, Balasan, Estancia, and Carles .Copies of ILECO Ill's Certificate of Registration from NEA andits Constitution and By-laws are attached to the Application asAnnex" "F" ond"F~l'" ,e~PCCtiVcl~

ERC CASE NO. 2016-001 RCOrder/ 01 March 20160f18

2. Applicant SIPC is a generation company organized and existingunder the laws of the Republic of the Philippines, with officeaddress at the 1hfloor of the Citibank Center, 8741 Paseo deRoxas, Makati City. It is a wholly owned subsidiary of SPCPower Corporation (SPC). Copies of SIPe's amended Certificateof Registration, Amended Articles of Incorporation, AmendedBy-laws, General Information Sheet, and Audited FinancialStatements are attached to the Application as Annexes "A", "B","C", "D", and "E", respectively. The list of current stockholdersof SIPC, attested to as correct by its corporate secretary, isattached as "Annex D-l" of the Application. Also, attached asAnnex "D-2" is SIPe's Certificate of Compliance (COC), issuedby the Commission.

3. The Parties may be served with orders and other processes ofthe Commission through their counsel.

NATURE OF THE APPLCATION

4. The Application was filed pursuant to Rule 20(B) of the ERCRules of Practice and Procedure and other pertinent rules andregulations of the Commission. Meanwhile, the issuance of theProvisional Authority (PA) is being sought pursuant to Rule 14of the same Rules. A copy of the PSC is attached to theApplication as Annex "G".

COMPLANCE WITH PRE-FILNG REQUIREMENTS

5. In compliance with Rule 6 of the ERC Rules of Practice andProcedure, Applicants have furnished the legislative bodies ofthe Municipality of Sara in Iloilo, where ILECO Ill's principaloffice is located, and the Province of Iloilo with copies of theirApplication with all its annexes. The certifications attestingreceipts and postings thereof are attached to the Application asAnnexes "H" and "H-1", respectively. Applicants have causedthe publication of their Application in a local newspapercirculating within the franchise area of ILECO III. Copies of theAffidavit of Publication and the local newspaper are attached tothe Application as Annexes "I" and "1-1", respectively.

BACKGROUND

6. On 12 November 2008, the Power Sector Assets and LabilitiesManagement Corporation (PSALM) issued a Notice of Award toSPC, officially declaring the latter the winning bidder for theprivatization of the Dingle, Iloilo 146.5 MW Panay Diesel PowerPlant and the Tagbilaran City, Bohol 22 MW Bohol DieselPower Plant, for the bid price of US$5.7 Million (approxim~. y

ERC CASE NO. 2016-001 RCOrderf 01 March 2016 Of1S

PhP272.9 Million). The Certificate of Effectivity was issued toSPC on 08 December 2008.

7. On 24 March 2009, with consent and confirmation fromPSALM, SPC executed the .Assignment and AssumptionAgreement (AAA) in favor of SIPC for the assignment of theAsset Purchase Agreement (APA) and the Land LeaseAgreement (LLA) from SPC to SIPC. A copy of the AAA isattached as Annex "K" of the Application. SIPC started thecommercial operations of the Panay and Bohol Diesel PowerPlants on 26 March 2009.

ABSTRACT OF THE POWER SALES CONTRACTAND RELATED INFORMATION

8. Executive Summary (Annex "L"). Contract Quantity.Under the PSC, SIPC shall supply ILECO III a total ContractQuantity of 5,280,000 kWh for a period of 5 years or an annualcontract quantity of 1,056,000 kWh. The PSC is essentially apeaking power arrangement intended to supplement the powersupply requirements of ILECO III between the hours from 1701to 2100.

9. The Power Plant. The Panay Diesel Power Plant Complex(PDPPC), situated in Brgy. Tinocuan, Dingle, Iloilo, is SIPC'spower plant. The PDPPC has two generating facilities, namely:1) Panay Diesel Power Plant 1 (PDPP1), which is the originalgenerating facility of the National Power Corporation; and 2)Panay Diesel Power Plant 3 (PDPP3), which is the dieselgenerating sets transferred from the defunct Pinamucan DieselPower Plant in Pinamucan, Batangas, Luzon. The Description ofthe PDPPC and the technical specifications of the PDPP3 andPDPP1 are attached to the Application as Annexes "M", "M-1",and "M-2".

10. The current maximum deliverable capacity of SIPC's powerplant for all its buyers is 52,000 KW.Attached as Annex "N" ofthe Application is the latest three-year operational history of thepower plant. Also attached as Annexes "N-1" and "N-2" are theplant statistics as of 25 December 2012 and from 26 December2012 to 25 December 2013, respectively. Finally, attached asAnnex "0" are the plant statistics for the period 26 December2008 to 25 December 2009.

11. Term. The term of the PSC is five (5) years from the AgreedDate. Agreed Date, as defined in the PSC, is the start of thedelivery of electdc ene"" by tbe Sellee to the Buyee', f'Ciliy

ERC CASE NO. 2016-001 RCOrder/ 01March 2016Page40f18

12. Sale and purchase of power. The sale and purchase of theSIPC Contract Quantity shall be at a Basic Rate' ofPhP2.50/kWh, plus Fuel Fee based on the actual cost of fuelused during the billing period to deliver energy (Annex "B" ofthe PSC), computed as follows:

RATE COMPUTATION

Basic RateAdd: Fuel FeeEnergy Fee

PhP 2.50/kWhx.xx/kWh

PhP x.xx/kWh

13. Fuel Fee. Fuel Fee refers to the average monthly cost of fuelused to generate one (1) kWh of energy exported by the PowerPlant based on the actual amount of bunker-C and diesel fuelconsumed, computed at the weighted average price of therespective fuels during the BillingPeriod.

The Fuel Fee is computed as follows:

Fuel Fee (FF) = Fuel Oil Consumption Rate (FOCR)x Fuel Cost (FC)

FOCR (in L/kWh) is the average fuel consumption rate neededto generate one (1) kWh of energy during every billing periodbased on the actual total fuel consumption of the Power Plantused to deliver the total metered quantity (MQ), as measured intheWESM.

FC (in PhP/L) is the price at which the Seller acquired the fuelequivalent to the weighted average price of fuels (Bunker-C andDiesel) consumed for the month.

14. Sample Fuel Fee Computation. For presentation purposes,hereunder is SIPe's Sample Fuel Fee Computation (Annex "B"of the PSC) taking into account the specific FOCR of bothbunker-C and diesel fuels, based on actual plant performanceon 26 August to 25 September 2012, as follows:

I. Total Metered Quantity (MQ): 3,323,040.00 kWh

I The Basic Rate represents the fixed and variable costs incurred by the Seller in deliVe~ringenergy. to the Buyer including the capital recovery and profit margin, subject to the"'=',.oo'",,~l. y

ERCCASENO. 2016-001RCOrder/ 01 March 2016 Of1S

II. Fuel Consumption and Fuel Cost (FC):

u. For Bunker C (HFO):

Beginning Inventory:Deliveries:08/26/12 - 09/26/12Total Fuel Volume/Cost:

Less:g Balance PerPhysical Inventory(09/25/12)

Volume, L1,555,145.09

220,249.531,775,394.62

Price, PhP /L Total Cost, PhP29.1843 45,385,883.53

29.2866 6,450,352.0051,836,235.53

Actual Fuel Consumption08/26/12 - 09/25/12

Weighted Ave. Price (FCHFO)FCHFOFCHFo

891,918.06

Total Cost / Total VolumePhP 51,836,235.53 / 1,775,394.62 LPhP 29.1970/L

b. For Diesel (LFO):

Price, PhP /L Total Cost, PhP39.2608 143,242.68Beginning Inventory:

Deliveries:08/26/12 - 09/26/12Total Fuel Volume/Cost:

Less:Ending Balance PerPhysical Inventory'9/25/12)

Volume, L3,648-49

9,817.1413,465.63

11,139.37

43-4585 426,638.00569,880.68

Actual Fuel Consumption08/26/12 - 09/25/12

Weighted Ave. Price (FCLFO)FCLFOFCLFo

2,326.26

Total Cost / Total VolumePhP 569,880.68 / 13,465.63 LPhP 42.3211/L~

i

ERC CASE NO. 2016-001 RCOrder/ 01 March 2016 Of18

III. Fuel Oil Consumption Rate (FOCR):

a. For Bunker-C(HFO)

Actual Fuel ConsumptionTotal Metered QuantityFuel Oil Consumption Rate

FOCRHFO

b. For Diesel(LFO)

Actual Fuel ConsumptionTotal Metered QuantityFuel Oil Consumption Rate

. FOCRLFO

891,918.06 L3,323,040 kWh891,918.06 L/3,323,040 kWh0.2684 L/kWh

2,326.26 L3,323,040 kWh2,326.26 L/3,323,040 kWh0.0007 L/kWh

Therefore, computing for the Total FOCR:

Total FOCRTotal FOCRTotal FOCR

IV. Fuel Fee (FF):

FFHFoCinPhP/kWh)

FFLFO(in PhP/kWh)

Total FF (in PhP /kWh)

Where:

FOCRHFO+ FOCRLFO0.2684 L/kWh + 0.0007 L/kWh0.2691 L/kWh

FOCRHFOX FCHFO0.2684 L/kWh x PhP 29.1970/LPhP 7.8364/kWh

FOCRLFOX FCLFO0.0007 L/kWh x PhP 42.3211/LPhP 0.0296 /kWh

FFHFO+ FFLFOPhP 7.8364/kWh + PhP 0.0296/kWhPhP 7.866/kWh

FF (in PhP /kWh) is the Total Fuel Fees

FFHFO(in PhP /kWh) is the Fuel Fee for HFO (Bunker-C)

FFu", (in PhP/kWh) i,the Fuel Fee £0' LFO (Di~

ERC CASE NO. 2016-001 RCOrder/ 01 March 20160f18

FOCR (in L/kWh) is the Total Fuel Oil Consumption Rate

FOCRHFo(in L/kWh) is the Fuel Consumption Rate of HFO

FOCRLFo(in L/kWh) is the Fuel Consumption Rate of LFO

FCHFO(in PhP /L) is the Weighted Ave. Price of HFO (Bunker-C)for the Billing Period

FCLFO(in P/L) is the Weighted Ave. Price of LFO (Diesel) for theBilling Period

15. Breakdown of the PhP2.50/kWh Basic Rate. SIPC's BasicRate is equivalent to PhP2.6857/kWh. It, however, decided tooffer to the DDs a Basic Rate of PhP2.50/kWh as reflected inthe PSC. SIPC's Basic Rate is broken down as follows:

Capital Recovery Fee (CRF)Fixed Operation &Maintenance CostsVariable Operation &Maintenance Costs

TOTAL

PhPl.1502/kWhPhPO.7075/kWhPhPo.8280/kWh

PhP2.6857/kWh

16. SIPC's monthly capital recovery was derived by setting a ratethat will result in an annual cash flow over the estimated usefulLife of the PDPP assets (lO-year useful Life) and at the sametime yield the desired Internal Rate of Return. Likewise, the netpresent value of the net cash flow should equal the initial cost ofinvestment (represented by the acquisition cost of the PDPPassets) and the additional capital expenditures (CAPEX) neededto sustain the operations. The computed annuity wasPhP88,372,200.oo (or PhP7,364,350.00 per month) using arate of return of 15% and the lO-year asset Life as recoveryperiod. The computed annuity is then translated into kWhbased on the monthly billing determinant.

A breakdown of SIPC's Base Price, Monthly BillingDeterminant, Fixed O&M Costs and Variable O&M Costs, andNet Heat Rate Assumption is attached to the Application asAnnex "P".

17. Project Cost and Cost Analysis in Support of theProposed Pricing. Attached to the Application as Annex "Q"is the power plant's acquisition cost which provides the amountof PhP235,366,824.o0 and the required CAPEX needed tosustain the operations of the power plant. Annex "Q-l" alsoprovides notes of the Cash Flow Specifying Initial andAdditionalCostsand SIPe's Computationof Levelizedcapy:

ERC CASENO. 2016-001 RCOrder/ 01 March 2016 Of18

Recovery Fee. The justification for the CAPEX to sustain theoperation of the power plant for the next ten (10) years isattached as Annex "Q-2" of the Application.

Based on SIPC's monthly capital cost recovery using the CashFlow schedule, it determined the Levelized Payment ofPhP88,055,721.00 per annum (or PhP7,337,977.00 per month)to recover its capital investment during the asset life of thepower plant at 15%Rate of Return.

18. Recovery of the Levelized Payment. The monthlylevelized payment of PhP7,337,977.00 shall be recovered fromWESM/PSC transactions and Ancillary Service ProcurementAgreement (ASPA) transactions in the amounts ofPhP4,285,608.00 and PhP3,076,742.00, respectively. TheBilling Determinants in computing the sharing of the LevelizedMonthly Payment for the WESM/PSC and ASPA transactionsare 3,725,920 kWh and 2,676,667 kWh, respectively (Annex "Q-1" of the Application).

19. Billing Determinants. The Billing Determinants used in therecovery of the Levelized Monthly Payment from WESM/PSCand ASPA transactions were computed as follows:

WESM/PSC ASPA TOTALRated Capacity, MW 66.2Dependable Output 52Capacity, MWAvailable Factor 80%Billing Determinant(kWh/month)Percent of dependable 12.27% 42.31% 54.58%output capacityEquivalent capacity, 6.38 22.00 28.38MWEquivalent kWh/month 3,725,920 2,676,667

(assuming average 6,402,5875hr/day utilization)

20. WESM Membership. Both Applicants are members ofWESM.

21. Sources of Funds. SIPC's purchase of the Panay Diesel Plantin 2009 was made with 100% equity of the company and wasfully paid on 25 March 2009. ~

Y

ERC CASENO. 2016-001 RCOrderj 01 March 2016 OflS

22. Computation of Return on Investment/WeightedAverage Cost of Capital. The average Return on Investment(ROI) is 15%. The Weighted Average Cost of Capital (WACC) isirrelevant in the Application since the project is 100% equity.

23. Cash Flow. The cash flow analysis related to the operations ofthe power plant is attached to the Application as Annex "Q".

PENDING APPLCATIONSANDACTUALCOSTOF GENERATION

24. On various dates, SIPC filed Applications for the approval of itsPSC with various electric cooperatives, namely: AKELCO (ERCCase No. 2013-091 RC), ILECO I (ERC Case No. 2012-030 RC),ILECO II (ERC Case No. 2012-031 RC), NOCECO (2013-168RC), NORECO I (2013-175 RC), VRESCO (ERC Case No. 2014-026 RC), and ANTECO (ERC Case No. 2014-114 RC). Hearingstherein were conducted on various dates and all of theApplicants have formally offered their evidence.

25. SIPC filed a Motion to Resolve all its Applications based on theapplied rate of PhP2.50jkWh. SIPC manifested that based on its2012 and 2013 Financial Statements, its true cost of operationsshowed that the applied rate of PhP2.50jkWh is way lower thanthe actual cost of generation, which were PhP2.9695 in Januaryto November 2014, PhP3.1069 in 2013, and PhP3.0572 in 2012.SIPC adopts as part of its evidence said Motion and thedocuments attached to the Application.

26. Environmental Compliance Certificate. In 2004, theDepartment of Environment and Natural Resources (DENR)issued an Environmental Compliance Certificate (ECC) for thepower plant (Annex "R" of the Application).

27. Details of the Procurement Process. SIPC follows itsstandard policy and procedure in the procurement of its fuel forthe Panay Diesel Power Plant 3. A copy of SIPe's procurementprocedure is attached to the Application as Annex "S".

28. ILECO Ill's Procurement Process (Annex "T"). ILECOIll's Transition Supply Contract (TSC) expired last 25 December2014. PSALM advised ILECO III (Annex "U" of the Application)that the TSC will no longer be renewed and that ILECO IIIshould explore contractin1~~s e~ requirements with powersuppliers in the Visayas Gr~~:/l_/

/

ERC CASENO. 2016-001 RCOrder/ 01March 2016 of 18

29. In compliance with the Commission's "Guidelines for theRecovery of Costs for the Generation Component ofDistribution Utility Rates," the Panay-Guimaras Power SupplyConsortium where ILECO III is a member, invited potentialofferors to submit offers for the supply of its electricityrequirements. The Invitation to Bid was published on 15 and 22August 2014.

Power suppliers Green Core Geothermal Inc., Solexas EnergyInternational, NV Yogt Philippines, SIPC, and Panay EnergyDevelopment Corporation responded to the invitation andsubmitted their offers on 24 September 2014. After evaluatingthe economic and financial impact of each proposal, thetechnical working group of the consortium decided to award thesupply of peaking power requirements of ILECO III to SIPC.

RATE IMPLCATIONS OF THEPOWER SALES CONTRACT

30. The following table (shown in Annex "Y" of the Application)shows the impact of the PSC on the generation rates paid by theprospective Buyers of SIPC in the Yisayas:

WESM Prices During Peak (Panay) vs. PSC Price Offer(1800H - 2100H; January to December 2012)

BILLNG MAXIMUM WESM PRICE PROPOSED PRICEPERIOD HOUR DATE PRICE PSC NET PRICE DIFFERENCE

1800H 1O-Jan-12 34.09 10.83 23.26From: Dec. 2011 1900H 1O-Jan-12 38.72 10.83 27.90To: Jan. 2012 2000H 25-Jan-12 11.20 10.83 0.37

2100H 30-Dec-11 9.89 10.79 -0.901800H 12-Feb-12 10.83 10.83 0.00

From: Jan. 2012 1900H 2-Feb-12 12.66 10.83 1.83To: Feb. 2012 2000H 12-Feb-12 10.83 10.83 0.00

2100H 30-Jan-12 10.65 10.83 -0.171800H 24-Mar-12 5.27 11.59 -6.32

From: Feb. 2012 1900H 2-Mar-12 13-48 11.23 2.25To: Mar. 2012 2000H 2-Mar-12 11.12 11.23 -0.11

2100H 2-Mar-12 11.23 11.23 0.001800H 21-Apr-12 4.61 11.31 -6.71

From: Mar. 2012 1900H 21-Apr-12 11.42 11.31 0.11To: Apr. 2012 2000H 21-Apr-12 10-41 11.31 -0.90

2100H 25-Apr-12 11.31 11.31 0.001800H 1O-MaY-12 7.99 11.43 -3-44

ERC CASE NO. 2016-001 RCOrder/ 01March 2016Of18

From: Apr. 2012 1900H 9-MaY-12 32-42 11.43 21.00To: May 2012 2000H 30-Aor-12 13.83 11-40 2-42

2100H 9-MaY-12 32.93 11.43 21.501800H 9-Jun-12 14.70 11.43 3.27

From: May 2012 1900H 1O-Jun-12 35.26 11.43 23.83To: Jun. 2012 2000H 20-Jun-12 45.86 11.44 34-42

2100H 21-Jun-12 43.30 11.44 31.861800H 5-Jul-12 12.98 11.07 1.91

From: Jun. 2012 1900H 8-Jul-12 22.18 11.07 11.11To: Jul. 2012 2000H 11-Jul-12 20.84 11.01 9.83

2100H 7-Jul-12 16.09 11.07 5.021800H 27-Jul-12 7.30 10.61 -3.31

From: Jul. 2012 1900H 26-Jul-12 11.95 10.61 1.34To: Aug. 2012 2000H 26-Jul-12 11.10 10.61 0-49

2100H 26-Jul-12 9.82 10.61 -0.791800H 25-Sep-12 32.63 10.10 22.53

From: Aug. 2012 1900H 25-Sep-12 63.63 10.10 53.53To: Sep. 2012 2000H 25-Seo-12 17.84 10.10 7.74

2100H 25-Sep-12 24.07 10.10 13.971800H 19-0ct-12 28.72 10-43 18.29

From: Sep. 2012 1900H 9-0ct-12 31.34 10.32 21.03To: Oct. 2012 2000H 18-0ct-12 17.55 10-43 7.12

2100H 18-0ct-12 10.74 10-43 0.311800H 23-Nov-12 24.74 10.53 14.21

From: Oct. 2012 1900H 26-0ct-12 18.60 10.41 8.20To: Nov. 2012 2000H 26-0ct-12 17.12 10-41 6.71

2100H 20-Nov-12 17.17 10.53 . 6.641800H 1O-Dec-12 29.00 10.37 18.63

From: Nov. 2012 1900H 3-Dec-21 36.08 10.39 25.69To: Dec. 2012 2000H 3-Dec-12 18-46 10.39 8.06

~lOoH 9-Dec-12 13.71 10.39 3.31

31. ILECO Ill's Load Forecast. Also attached to the Applicationas Annex "W' is ILECO Ill's power requirements with supplierallocation as follows:

MAXIMUMDEMAND

+'HfST0R1CA1JjJJJMi'cA~6WI!()nE{SYST£MI)2008 2009 2011 2012 2013 2014

MW 12.499 12.026 13.729 13.731 14.535 15.180

ERC CASE NO. 2016-001 RCOrder/ 01 March 2016 Of18

FORECASTED DATA (WHOLE SYSTEM)20 20 20 20 20 20 20 20 20 20 20 20 201 16 1 18 1 20 21 22 2 2 25 26 216 16. 18 19 20 22 23 25 27 29 31. 33 36.0 97 .0 .2 .5 .0 .6 .4 .31.3 56 .0.4 .020 0 50 60 0 0 60 10 0 60 0 0 0 00

32. ILECO Ill's Rate Impact Analysis (Annex "X" of theApplication), is summarized in the Table hereunder, as follows:

RAW DATAOFCONTRACTEDENERGY

SALC WESMPurchased PEDC GCGI ON

BASE LOAD BASE LOAD PEAKING PURCHASED Actual rate Cost

Hour 1 8,418.00 4,000 Fl,FlOO (1,082) 2.11 (2,27q)Hour 2 8,136.14 4,000 5,500 (1,364) 2.20 (3,117)Hour 3 7,951.93 4,000 5,500 (1,548) 2.30 (3,559)Hour 4 7,649.26 4,000 5,500 (1,851) 2.29 (4,247)Hour 5 7,821.0" 4,000 5.500 (1,678) 2-49 (4.170)Hour 6 8,015.25 4,000 5,500 (1,485) 2.55 (3,780)Hour 7 7,289.84 4,000 5,500 (2,210) 1.77 (3,905)Hour 8 7,699.61 4,000 5,500 (1,800) 3.79 (6,832)Hour 9 q.162.51 4,000 5.500 (337) ~.q6 (1.335)Hour 10 9,866.00 4,000 5,500 366 3-48 1,274Hour 11 10,711.36 4,000 5,500 1,211 11.93 14,448Hour 12 10,014.82 4,000 5.FlOO 1,415 17.2q 24,45QHour 13 10.031.65 4,000 ","00 1,432 26.56 38,010Hour 14 11,172.81 4,000 5,500 1,673 26.65 44,572Hour 15 8,770.95 4,000 5,500 (729) 32.67 (23,816)Hour 16 10,685.53 4.000 ",':;00 1.186 20.86 24,728Hour 17 10.685.53 4,000 5,500 1.186 6.62 7.8Fl~Hour 18 10,005.11 4,000 5,500 505 6.73 3,402Hour 19 9,283.06 4,000 5,500 1,000 (1,217) 28.34 (34,486)Hour 20 12.2Q8.60 4,000 5.500 1.000 1,7QQ 2Q.51 53,075Hour 21 14,475.69 4,000 5,500 1,000 3,976 27.12 107,828Hour 22 14,695.83 4,000 5,500 1,000 4,196 25.50 107,009Hour 23 13.356.17 4,000 5.500 ~,8Fl6 25.00 96,390Hour 24 11.071:;.24 4,000 5,500 1,575 3.74 5,886

TOTAL 241.073 Q6.000 132.000 4.000 Q.073 437.407

AVE. RATE 13.1468

ERC CASE NO. 2016-001 RCOrder/ 01 March 2016 OflS

Power Supply PEDC GCGI SALCON WESM TotalBASE BASE PEAK

PRICE 6.334 5.050 10.968 13.147KWH PURCHASED 96,000.00 132,000.00 4,000.00 9,072.92 241,072.92

TOTAL COST 608,064.00 666,600.00 43,873.20 119,279.83 1,437,817.03Note: withl

AVERAGE RATE 5.964 SALCON

33. SIMULATION OF THE NUMBER OF OPERATINGUNITS NECESSARY TO MEET THE ENERGYREQUIREMENTS OF SIPC's CUSTOMERS. Attached tothe Application as Annex "Y" is the simulation of the number ofoperating units necessary to meet the energy requirements ofSIPC's customers.

34. Connection and Grid Projects/Agreements. The PDPPCthat will supply electric power to SIPC's customers is an existingpower plant and is already connected to the Visayas Gridthrough the National Grid Corporation of the Philippines(NGCP) prior to its privatization and was transferred to SIPC on25 March 2009. There is no grid connection project associatedwith the instant PSC. Copies of the Connection Agreement,Transmission Service Agreement, and Metering ServiceAgreement, all between NGCP and SIPC, are attached to theApplication as Annexes "Z", "AA", and "BB", respectively.

35. Delivery Point. SIPC shall deliver or cause the delivery of thetotal energy as prescribed on the Contract Quantity inaccordance with good utility practice and in compliance withappropriate rules and regulations.

36. The Electricity Delivery Requirements as provided in Annex "A"of the PSC are as follows:

Electricity Delivery Requirements:

a) The Seller shall deliver the electricity at the high voltageside of its main transformer.

b) The active power delivered to the Buyer must be withinthe system frequency range of 59.7 to 60.3Hz and areactive power output under steady state conditionswithin the voltage range of + 5% of the nominal value atthe connection point. ~

V

ERCCASENO. 2016-001 RCOrder/ 01 March 2016 Of1S

The Seller shall cooperate with the NGCP and the Buyer inestablishing emergency plans including, but not limited to,recovery from local or widespread electrical blackout, voltageregulation to effect load curtailment, and such other plans asmay be necessary.

37. Payment. Commencing on the Agreed Date and continuingthroughout the Term, ILECO III shall pay to the SIPC anamount (Monthly Payment) calculated in accordance with theformula set forth in Annex "D" of the PSC, after reconciliationand settlement, including Value-Added Tax (VAT). TheComputation of the Monthly Payment provides:

COMPUTATIONOFMONTHLYPAYMENT

TOTALENERGYFEE:

Energy Fee (in P/kWh) = [(BCQ)x (Basic Rate + FF)] +VAT

Where:

1) BCQ is the total Bilateral Contract Quantity in kWh(either the Monthly Contract Quantity or theaccumulated confirmed Final HCQ within the BillingPeriod, whichever is higher)

2) FF is the Fuel Fee in PhP/kWh, as determined inAnnex "B"

3) Basic Rate is set at PhP2.50/kWh (subject to ERCapproval)

4) VATis 12%

38. Board Approval of the PSC and the Filing of theApplication. The Board of Directors of ILECO III hasapproved the PSC through a Resolution (Annex "CC" of theApplication). Also attached as Annex "CC-1" is ILECO III'sResolution on the joint filing of the subject Application and theappointment of a counsel to handle the same. The secretary'scertificate attesting to the approval of the PSC for SIPC islikewise attached as Annex "DD" of the Application.

39. DOE Certificate of Endorsement. A Certificate ofEndorsement from the Department of Energy (DOE) is nolonger needed for the PDPP since this power plant waspreviously issued a Certificate of Compliance from this

ERC CASE NO. 2016-001 RCOrder/ 01March 2016 Of18

Commission. DOE's confirmation letter dated 02 May 2011 isattached to the Application as Annex "EE".

MOTION FOR THE ISSUANCE OFPROVISIONAL AUTHORITY

40. ILECO Ill's TSC with PSALM has expired on 25 December2014. The latter advised the former that the TSC will not berenewed and that ILECO III should explore contracting itsenergy requirements with power suppliers in the Visayas Grid.The subject PSC is technically, economically, and financiallycompliant. Due to the urgency of the situation, Applicants seektemporary relief allowing the parties to buy and sell electricitypursuant to their PSC during the pendency of the proceedingson the Application.

PRAYER

41. ILECO III and SIPC pray that the Commission grants theirrequest for a provisional authority allowing SIPC to sellelectricity to ILECO III prior to the final approval of theApplication, at the rate being applied for, and approves thesubject PSC.

Finding the said Application to be sufficient in form and insubstance with the required fees having been paid, the same is herebyset for hearing for the determination of compliance with jurisdictionalrequirements, expository presentation, pre-trial conference, andpresentation of evidence on 19 April 2016 (Tuesday) at eighto'clock in the morning (8:00 A.M.) at ILECO III Main Office,Barangay Preciosa, Sara, Iloilo.

ILECO III and SIPC are hereby directed to cause the publicationof the Notice of Public Hearing in two (2) newspapers of generalcirculation in the Philippines at their own expense, twice (2X) withintwo (2) successive weeks, the dates of publication not being less thanseven (7) days apart and the date of last publication made not laterthan ten (10) days before the date of the scheduled initial hearing.They are also directed to inform the consumers within ILECO Ill'sfranchise area, by any other means available and appropriate, of thefiling of the Application, their reasons therefor, and of the scheduledhearing thereon.

Let copies of the Application, this Order, and the attachedNotice of Public Hearing be furnished the Office of the SolicitorGeneral (OSG), the Commission on Audit (COA)and the commit~

ERC CASE NO. 2016-001 RCOrder/ 01March 2016 Of1S

on Energy of both Houses of Congress. They are hereby requested, ifthey so desire, to send their duly authorized representatives at thescheduled hearing.

Likewise, let copies of this Order and the attached Notice ofPublic Hearing be furnished to the Office of the Governor of theProvince of Iloilo and to the Offices of the Mayors of theMunicipalities within ILECO Ill's franchise area for the appropriateposting thereof on their respective bulletin boards.

ILECO III and SIPC are hereby directed to furnish all thosemaking requests therefor with copies of the Application and itsattachments, subject to reimbursement of reasonable photocopyingcosts.

On the date of the initial hearing and pre-trial conference,ILECO III and SIPC must submit to the Commission their writtenCompliance with the jurisdictional requirements attaching therewith,methodically arranged and duly marked, the evidence of the actualposting and publication of the Notice of Public Hearing consisting ofcertifications issued to that effect, signed by the aforementionedGovernor and Mayors or their duly authorized representatives,bearing the seals of their offices, and the affidavits of the Editors orBusiness Managers of the newspapers where said Notice of PublicHearing were published, together with the complete issues of the saidnewspapers, and such other proofs of compliance with therequirements of the Commission.

ILECO III and SIPC, and all interested parties are directed tosubmit, at least five (5) days before the date of initial hearing and pre-trial conference, their respective Pre-trial Briefs containing, amongothers:

(a)

(b)

(c)

(d)

A summary of admitted facts and proposed stipulation offacts;

The issues to be tried or resolved;

The documents or exhibits to be presented, stating thepurposes thereof and proposed markings therefor; and

The number and names of the witnesses, with theirwritten testimonies in an individual affidavit form, to beattached to the Pre-trial Brief.

ERC CASE NO. 2016-001 RCOrder/ 01 March 2016of 18

Failure of ILECO III and SIPC to submit the required Pre-trialBrief and Judicial Affidavits of their witnesses within the prescribedperiod shall be a ground for cancellation of the scheduled hearing andthe resetting of which shall be six (6) months from said date ofcancellation.

As part of the pre-trial conference, ILECO III and SIPC mustalso be prepared to make an expository presentation of theirApplication, aided by whatever communication medium that theymay deem appropriate for the purpose, in order to put in plain wordsand explain, for the benefit of the consumers and other concernedparties, what the Application is all about and the reasons andjustifications being cited in support thereof.

SO ORDERED.

Pasig City, 01 March 2016.

FORANDBYAUTHORITYOF THE COMMISSION:

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\1\\\\1~~1\l\'~\... C_2016_01-0C-01550

&< ••..•••..•• -'5JOSE VICENTE B. SALAZAR

ChairmanandCEOy

Copy furnished:

1. Atty. Russel AlabadoCounsel for SIPC and ILECO III3/F, Builder's Center Building170 Salcedo St., Legaspi Village, Makati

2. Office ofthe Solicitor General134 Amorsolo Street, Legaspi Village, Makati City

3. Commission on AuditCommonwealth Ave., Quezon City

4. The Senate Committee on EnergyGSIS Building, Roxas Boulevard, Pasay City

5. The Committee on EnergyHouse of RepresentativesBatasan Hills, Quezon City

__ l_

ERC CASE NO. 2016-001 RCOrder/ 01March 2016 of 18

6. The Municipal MayorAnilao,Iloilo

7. The Municipal MayorBanate, Iloilo

8. The Municipal MayorBarotac Viejo, Iloilo

9. The Municipal MayorSan Rafael, Iloilo

10. The Municipal MayorAjuy, Iloilo

11. The Municipal MayorLemery, Iloilo

12. The Municipal MayorSara, Iloilo

13. The Municipal MayorConcepcion, Iloilo

14. The Municipal MayorSan Dionisio, Iloilo

15. The Municipal MayorBatad, Iloilo

16. The Municipal MayorBalasan, Iloilo

17. The Municipal MayorEstancia, Iloilo

18. The Municipal MayorCarles, Iloilo

19. The GovernorProvince of Iloilo

20. National Grid Corporation of the Philippines (NGCP)Quezon Avenue corner BIR Road, Diliman, Quezon City

21. Philippine Chamber of Commerce and Industry (PCCl)3rd Floor, ECC Building, Sen. Gil PuyatAvenue /'/Makati City . / / /.

in the ~tter of the applcation for approval of the …

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