ENERGY REGULA'TORY COMMISSION Pasig City C THE xn t of... · ENERGY REGULA'TORY COMMISSION Pasig City C IN THE MATTER OF THE xn t _ ` APPLICATION FOR THE A ... December 2013 in ERC

i

Republic of the Philippines

ENERGY REGULA'TORY COMMISSION

Pasig CityC

IN THE MATTER OF THE xn

t _ `

APPLICATION FOR THE AAPPROVAL OF THE MM' KLETTERS OF AGREEMENT I T; i:;_ D E C i_Z ;.``LOAs) FOR THE SUPPLY 2, T;;_ _ ( 1: 2... ` !

OF ELECTRIC ENERGY ti. _ ccxf_ rao

WITH DISTRIBUTION T, iI

UTILITIES (DUs) LOCATEDr

N'`

IN THE MINDANAO GRID

WITH PRAYER FOR THF

ISSUANCE O

PROVISIONAL AUTHORITY

PA)

ERC Case No. 2oi- o6 RC

POWER SECTOR ASSETS

AND LIABILITIES

MANAGEMENTc c r z { 7

t r: . faJ J 2 _ Zai7CORPORATION (PSALM),

r,...a .._..___. _..._.....__._..._.Applicant.

x------------------------------------- x

NOTICE OF PUBLIC HF.ARING

TO ALL INTERESTED PARTIES:

Notice is hereby given that On 2 July 201, the Power Sector

Assets and Liabilities Management Corporation (PSALM) filed an

application for the approval of the Letters Of Agreement ( LOAs) for

the supply of electric energy with distribution utilities ( DUs) located

in the Mindanao Grid with prayer for the issuance of provisional

authority.

In the said application, PSALM alleged, among others, the

following:

1. This is an Application for the approval of theterms and conditions of the Letters of Agreement ( LOAs)

entered into by and between Applicant PSALM and

several Distribution Utilities (DUs) located in the

Mindanao Grid pursuant to Section 6 of Republic Act

9i36.

ERC Case No. 201- o6 RC

Notice of Public Hearing / i6 November 2oi

Page 2 of i2

2. On , July 2005, the Honorable Commission

issued Resolution No. 0 8, Series of 2005 approving andadopting the template for the Transition Supply ContractTSC). On 9 August 2005, said template for the TSC was

later on amended by the Honorable Commission in itsResolution No. i5, Series of 2005.

3. On separate dates, the National Power

Corporation ( NPC) filed applications for the approval ofthe Contracts for the Supply of Electric EnergyCSEEs)/ TSCs for the Mindanao Grid, which were

correspondingly approved by the Honorable Commissionon i9 October 2006 and o3 August 2009.

4. Applicant PSALM is a government-owned and

controlled corporation created by virtue of RA 9136 or theElectric Power Industry Reform Act of 200" ( EPIRA),

with principal offiice address at 3/ F National

Transmission Corporation (TransCo) Building, Power

Center, Quezon Avenue corner BIR Road, Diliman,

Quezon City.

5. Pursuant to Section 49 of the EPIR.A and theconsequent assignment on li May 2009 ( Annex " A") of

all power supply contracts of NPC to PSALM, NPC

assigned and transferred to FSALM all of NPC's rightsand obligations in, to and under its CSEE and other

similarly or substantially equivalent power supply

contracts with NPC power customers ( collectively referredto as Power Supply Contracts).

6. On and from 11 May 2009, the power supplycontracts are deemed amended as follows: (i) all

references to NPC in the supply contracts shall be treatedas references to PSALM; ( ii) PSALM shall be deemed theSUPPLIER under the Power Supply Contracts; and (iii)

the rights and obligations of the Parties shall be governed

by and construed in accordance with the Power SupplyContracts, as amended by the il May 2009 Letter

Agreement.

PSALM previously filed four ( 4) Applications

for the Approval of the terms and conditions of CSEEs of

the DUs located in the Mindanao Grid on 19 September2011, o October 2oi1, 2o January 2012 which wereapproved by the Honorable Commission on 25 February2oi3; and an application filed on 1 April 2oi3 which was


Notice of Public Hearing / i6 November 2oi7I Page 3 of i2

approved by the HonorablE Commission on 9 December2013.

8. Subsequently, on 2 December 2014, PSALM

filed an Application for the Approval of the terms andconditions of twenty-two ( 22) LOAs and a CSEE entered

into by and between Applicant PSALM and twenty-three23) DUs located in the Mindanao Grid docketed as ERC

Case No. 2oi4- i75 RC.

I 9. Recently, on i9 October 2016, PSALM filed a

similar Application for the Approval of the Letters of

Agreement and Contract for the Supply of Electric Energyentered into by and between Applicant PSALM and

twenty-six (26) DUs located in the Mindanao Grid

docketed as ERC Case No. 2oi6- i86 RC.

Iio. The LOAs are exe uted between the parties in

cases of changes in the provisions of the CSEE other than

the terms and conditions appearing in the template forthe TSC, approved by the Honorable Commission inResolution No. 08, Series of 2005. These changes mayinclude the extension of the duration or amendments to

the monthly contracted energy.

11. In the present Application, the LOAs were

executed for PSALM to continue to supply electricity ( an

amendment of Section 3. 1 or the Contract Duration) and

Annex I of the CSEEs ( contracted energy) pursuant to

Section 4. 1 of the CSEE which reserves the right of theSupplier (PSALM) to change the Contract Energy andEquivalent Demand annually due to change in the

projected available capacity of the Supplier's power

plants.

i2. As agreed upon by the contracting parties,PSALM shall file the necessary application for the

approval of the LOAs. Thus, this application.

Terms and conditions ofthe CSEE under ERC

Case No. 2oig-oS RC

i3. In ERC Resolution No. 33, Series of 2006,

Resolution Clarifying the Purpose of the Adoption of theTSC Template", the Honorable Commission clarified thatthe TSC Template should serve as a mere guide for the

ERC Case No. 201- o6 RC


Page 4 of i2

DUs and NPC and should not be construed as the contractcontemplated under Section 6 of the EPIRA.

i4. Notably, in ERC Case No. 2oi3- o55RC,

PSALM introduced the following revisions to the CSEEsexecuted with the DUs in the Mindanao Grid, which

CSEEs were submitted to and approved by this HonorableCommission:

1o. i CONTRACT DURATION — This

Contract consisting of the Transition SupplyContract shall remain in full force and effectfor a period of four C4) years from 26

December 2oi2 to 25 December 2016 or oneyear after the declaration of open access in

Mindanao by the DOE, whichever comes first.xxxl

10. 2. CONTRACT ENERGY — Contract

Energy and Equivalent Demand as indicatedin Annex I and Annex Ia may be changed bySUPPLIER annually due to a change in theprojected available capacity of SUPPLIER'spower plants and at any time during theIduration of the Contract due to the

privatization of any of the assets of SUPPLIERpursuant to the EPIRA.2

10. 3 AVAILABILITY OF SUPPLY — x

Supply of energy shall be available except forinterruption or reduction due to: a) causes

beyond the control of SUPPLIER despite the

exercise of due care, including but not limitedto the conditions stated in Section 4.1 of thisContract; x In case of excess in the

generation capacity of the SUPPLIER,

CUSTOMER shall be informed of the excess

and allocation of the excess available supply ofelectricity to the CUSTOMER shall beproportionate to the equivalent contract

demand as provided for in this Contract. TheCUSTOMER can increase its energyconsumption up to but not more than l000 ofthe allocated excess supply.3

Section 3. 1 of the CSEEz Section 4. 1, ibid3

Section 4.2, id.


Notice of Public Hearing / 16 November 2oi

Page 5 of i2

io.4 CONSUMPTION IN EXCESS OFCONTRACT ENERGY — Whenever available,

in accordance with good utility practice,

SUPPLIER may, but shall not be obliged toprovide electricity to CUSTOMER in excess ofContract Energy.4

io.5 ASSIGNABILITY — When a

CUSTOMER has been assigned by the

SUPPLIER to a Successor GeneratingCompany ( SGC) by virtue of the privatizationof the PSALM Generating Plant pursuant tothe EPIRA, the SGC has the option to

renegotiate this Contract with the

CUSTOMER within six ( 6) months from the

actual transfer of the CUSTOMER to the SGC.

If the CUSTOMER and the SGC fail to reach

an agreement, either Party shall have the rightto terminate this Contract.5

10. 6 CUSTQMER may assign, sell or

transfer a part or all of its Contract Energyand/ or Equivalent Demand either

permanently or for a certain number of billingperiods, x a) CUSTOMER has obtainedcertification from NGCP, that the

transmission, sub- transmission, substation

and other facilities can accommodate the

increase in the power requirements of the

assignee/ transferee. 6

io. BASIC ENERGY CHARGE — The

ERC- approved gene.ration rates, which are

attached as Annex III and other charges

exclusive of penalties, bonuses, shall be

applied to the CUSTOMER's contracted

monthly or hourly energy consumption. Priorto the commercial operation of the WESM,the basic energy charge to be applied shall bethe preuailing ERC approued rate and otheradjustments. Upon the commercial operation

of the WESM, the basic energy charge to be

4 Section 4.3, td.

5 Section 4.8, id.6 Section 4.9, id.

iERC Case No. 2oi- o6 RC

Notice of Public Hearing / i6 November 201i Page 6 of i2

Iapplied to the contr cted energy shall be inaccordance with Section 8. 1 of this Contract

0. 8 SERVICE INTERRUPTION

ADJUSTMENT — xxx the Contract Energyshall be adjusted to actual off-take below

contract level for all hours when service wascurtailed or interrupted based on declaration

of power curtailment issued by the NGCP.xxx8

10. 9 OVERDUE ACCOUNT — If the

account of the CUSTOMER is overdue formore than six ( 6) months, xxx a restructuring

agreement of the overdue account shall beexecuted by the CUSTOMER, with the

following salient terms and conditions, xxx

Section 6. 17.4 Non- renewal of contract forfailure to pay the monthly amortization,

current bill and other charges. xxx9

i5. The above revisions to the CSEEs were

introduced in consultation with the Department of EnergyDOE) and the National Electrification Administration

NEA) and with the approval of the DUs in the MindanaoGrid. The revisions addressed apparent issues that maynot have been considered in 2005. Likewise, the

amendments were proposed to clarify recurring issuesfrequently subject of dispute.

16. The Honorable Commission later approved

the above- mentioned provisions in its Decision dated o9December 2013 in ERC Case No. 2013- o55RC citing thatthe implementation of the CSEEs will ensure the

continuous supply of power at a fairly stable cost for thebenefit of the Mindanao end-users. l

Section 6. 1, id.

Section 6.4, id.9 Section 6. 17, id.10 The contract duration of these CSEEs are for four (4) years. The annual ERC

application for these CSEEs would cover only the change or revision in theContracted Energy and Equivalent Uemand depending on the changes in plantavailability as provided for in Sec. 4. 1


Notice of Public Hearing / 16 November 201

Page of 2

The LOA of tlxe

Distribution Utilities

located in the MindanaoGrid

1. Pursuant to Section 6 of the EPIRA, the

LOAs between PSALM and the DUs in the Mindanao Grid

are hereby submitted for the Honorable Commission'sapproval:

l. i Agusan del Sur Electric Cooperative,

Inc. (ASELCO) [ Annex "B- 1"];

1. 2 Bukidnon Second Electric Cooperative,

Inc. (BUSECO) [ Annex "B- 2"];

i7.3 Camiguin Electric Cooperative, Inc.

CAMELCO) [Annex "B- g"];

17.4 Cagayan Electric Power and Light

Company, Inc. (CEPALCO) [ Annex " B-

I 4„

i7.5 Cotabato Electric Cooperative, Inc.

COTELCO) Annex "B-5"];

1. 6 Davao del Norte Electric Cooperative,Inc. (DANECO) [ Annex "B-6"];

i. Davao del Sur Electric Cooperative, Inc.DASURECO) [.Annex "B-"];

1. 8 Davao Oriental Electric Cooperative,

Inc. (DORECO) [ Annex "B- 8"];

17.9 Iligan Light and Power, Inc. (ILPI)

Annex "B_9„);

l. io Lanao del Norte Electric Cooperative,

Inc. (LANECO) [ Annex "B- o"];

i. il Misamis Occidental I Electric

Cooperative, Iric. (MOELCI I) [Annex

B- 11"



Page 8 of 2

1. 12 Misamis Oriental I Rural Electric

Service Cooperative, Inc. ( MORESCO I)

Annex "B- 12"];

1. 13 Siargao Electric Cooperative, Inc.

SIARELCO) Annex "B- i3"];

i. 14 South Cotabato I Electric Cooperative,i Inc. (SOCOTECO I) [ Annex "B- 14"];

i. i5 South Cotabato II Electric Cooperative,Inc. (SOCOTECO II) [Annex "B- 5"];

1. 16 Sultan Kudarat Electric Coperative , Inc.

ISUKELCO) [ Annex "B- 6"];

1. 1 Surigao del Sur II Electric Cooperative,

Inc. (SURSECO II) [Annex "B-"];

I

Ii. 18 Zamboanga City Electric Cooperative

ZAMCELCO) [ Annex "B- 18"];

1. 19 Zamboanga del Norte Electric

Cooperative, Inc. (ZANECO) [ Annex "B-

i9"]; and

1. 2o Zamboanga del Sur II Electric

Cooperative, Inc. (ZAMSURECO II)

Annex "B- 2o"].

18. Aside from the above, PSALM is submittingthe LOAs between PSALM and the following DUs in theMindanao Grid for the Honorable Commission' s

consideration inasmuch as these DUs are already beingserved by PSALM:

18. 1 Agusan del Norte Electric Cooperative,Inc. (ANECO) [ Annex "C-"];

i8.2 Cotabato Light and Power CompanyCLPC) [ Annex "C- 2"];

18. 3 Davao Light and Power Company Inc.DLPC) [ Annex "C- 3"];

i8.4 First Bukidnon Electric Cooperative,

Inc. (FIBECO) [ Annex "C-4"];


Notice of Public Hearing / i6 November 201

Page 9 of i2

I

18. 5 Maguindanao Electric Cooperative

MAGELCO) [ Annex "C- 5"];

18. 6 Misamis Occidental II Electric

Cooperative Inc. (MOELCI II) [Annex

C- 6"

18. Misamis Oriental II Rural Electric

Service Cooperative, Inc. (MORESCO II)

Annex "C-"];

i8.8 Surigao Del Norte I Electric

Cooperative, Inc.

SURNECO) [ Annex "C- 8"];

i8.9 Surigao Del Sur I Electric Cooperative,

Inc. (SURSECO I) [Annex "C- 9"];

18. 10 Zamboanga Del Sur II Electric

Cooperative, Inc. (ZAMSURECO II)

Annex "C- 10"];

19. The above LOAs reflect a change on the

Contract Energy and Equivalent Demand (Annex I) of the

CSEEs based on NPC' s forecast of an average decrease offour (4%) in the total plant available capacity of thePSALM- owned plants in Mindanao.

20. The demand allocation for the twenty (20)

customers with PSALM as sole supplier and with averagedemand requirement of one ( 1) mW each will be the sameas their 2oi6 allocation. The balance of the projectedavailable capacity for 201 is allocated pro rata to the

remaining thirty-three (33) customers ( includingindustries and DUs) with CSEEs effective until 25December 2oi6 through L( As extending the CSEE until I25 December 201.

2i. It is emphasized that the terms and conditions

of the above Mindanao DUs' CSEE/ TSC as approved bythe Honorable Commission in separate dates on 19October 2006, 03 August 2008, 25 February 2013, 09December 2013, and 2o June 201 remain applicable, and

have not been changed by these subsequent LOAs beingsubmitted.

i



Page io of i2

22. Finally, in corr pliance with Section 4( e) ofIRule 3 of the EPIR.A IRR and ERC Resolution No. 38-

2006, and in support of tlle instant Application for theapproval of the LOAs, a copy of the instant Applicationincluding Annexes) was furnished to the Sanggguniang

Panlungsod of Quezon City (Annex "D"). The Application

excluding Annexes) was also published in a newspaper ofgeneral circulation (Annex "E").

ALLEGATIONS IN SUPPORT FOR THE

ISSUANCE OF PROVISIONAL AUTHORITY

23. PSALM acknowledges that the continued andefficient operation of the Distribution Utilities is

indispensable to the economic efficiency of the franchisearea they service, not to mention the ripple effect of that

efficiency to the economic growth of the entire country. Inorder for these Distribution Utilities to continue

delivering sufficient supply and stable cost of electricity toits customers, it is imperative that the LOAs be executedand implemented.

24. The price of the contracted energy under theabove LOAs is based on the approved TOU rates which islower than the price of other generators.

25. Accordingly, the grant of provisional authorityto execute the LOAs will benefit the DUs and will

ultimately redound to the benefit of the end consumers.

26. Attached herewith is the Affidavit of EngineerAbner B. Tolentino, Acting Department Manager,

Electricity Trading Department, under the Office of theVice President — Asset Management Group of PSALM insupport of this prayer (Annex " F").

2. Pursuant to ERC rules of practice and

procedures, the Honorable Commission may exercise itsdiscretion by granting provisional authority or interimrelief prior to a final decision.

28. It is understood that the interim relief soughtby Applicant PSALM that may be granted by the

Honorable Commission, shall be subject to adjustments

and other conditions that the Honorable Commission mayimpose after hearing and final determination thereof.

i

I


Notice of Public Hearing / i6 November 201

Page ii of i2

RELIEF

IWHEREFORE, Applicant PSALM most

respectfully prays that the Honorable Commission:

i. Approve the duly negotiated LOAs forPSALM to continue to supply electricityand for the change in the contracted

energy and equivalent demand;

2. Issue a Provisional Authority authorizingPSALM to implement the subject LOAs

with the concerned DUs in the Mindanao

Grid.

Other reliefs just or equitable under the premises

are likewise prayed for.

The Commission has set the said Application for initial hearingfor the determination of compliance with the jurisdictional

requirements, expository presentation, Pre- Trial Conference, and

presentation of evidence on 6 January 20 8 ( Tuesday) at nine

o'clock in the morning (9: 0o A.M.) at the ERC Mindanao

Field Office, Mintrade Building, Monteverde Avenue cornerSales 5i., Davao City.

All persons who have an interest in the subject matter of the

proceeding may become a party by ling, 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 Commission

giving the docket number and title of the proceeding and stating: ( 1)

the Applicant's name and address; ( 2) the nature of Applicant's

interest 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 conclude the

presentation 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 statement

of the opposition or comment and the grounds relied upon.

All such persons who wish to have a copy of the Applicationmay request the Applicant, prior to the date of the initial hearing, that



Page i2 of 2

they be furnished with a copy of the Application. The Applicant is

hereby directed to furnish all those making a request with copies ofthe Application and its attachments, subject to reimbursement of

reasonable photocopying costs. Any such person may likewise

examine the Application and other pertinent records filed with theCommission during the standard off'ice hours.

WITNESS, the Honorable Officer-in-Charge of the Energy

Regulatory Commission ( ERC) ALFREDO J. NON, and Honorable

Commissioners GLORIA VICTORIA C. YAP-TARUC and

GERONIMO D. STA. ANA, Energy Regulatory Commission, this

i6th day of November 201 in Pasig City.

JOSEFINA PATRIC MAGPALE-ASIRIT

Com 'ssioner

I I I'!rKTB/ RFM/ APV

Documents

ENERGY REGULA'TORY COMMISSION Pasig City C THE xn t of... · ENERGY REGULA'TORY COMMISSION Pasig City C IN THE MATTER OF THE xn t _ ` APPLICATION FOR THE A ... December 2013 in ERC