(SEC-DASURECO) ERC Notice of Public Hearing d 8.22.14URECO) ERC Notice of Public Hearing d 8.22.14

8/11/2019 (SEC-DASURECO) ERC Notice of Public Hearing d 8.22.14URECO) ERC Notice of Public Hearing d 8.22.14

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Republic of the Philippines

ENERGY REGULATORY COMMISSION

San Miguel Avenue, Pasig City

IN

THE MATTER OF THE

APPLICATION FOR APPROVAL

OF THE POWER SALES

AGREEMENT PSA) BETWEEN

DAVAO DEL SUR ELECTRIC

COOPERATIVE, INC.

DASURECO) AND SARANGANI

ENERGY CORPORATION SEC),

WITH PRAYER FOR

PROVISIONAL AUTHORITY

DAVAO DEL SUR ELECTRIC

COOPERATIVE, INC.

DASURECO)

AND SARANGANI

ENERGY CORPORATION SEC),

Applicants.

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

ERC CASE NO. 2014-107 R

NOTICE OF PUBLIC HEARING

TO ALL INTERESTED PARTIES:

Notice is hereby given that

on

July

18,

2014, Davao

Del

Sur

Electric Cooperative,

Inc.

DASURECO) and Sarangani Energy

Corporation SEC) filed

an

application for the approval of their Power

Sales Agreement PSA), with prayer for provisional authority.

In

the said application, DASURECO and SEC alleged, among

others, the following:

1.

DASURECO is

an

electric cooperative duly organized and

existing under the laws of the Republic of the Philippines

with principal office at Cogan, Digos City, Davao Del

Sur.

It has a franchise to distribute electricity

in

the City o

Digos and the Municipalities of Bansalan, Don Marcelino,

Jose Abad Santos, Hagonoy, Kiblawan, Magsaysay,

~


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ERC CASE NO. 2014-107 RC

NOTICE OF PUBLIC HEARING/August 22 2014

Page 2 of 26

Malalag, Malita, Matanao, Padada, Sarangani, Sulop,

Sta. Cruz, and Sta. Maria, all

in

the Province of Davao Del

Sur.

A copy of its Certificate o Franchise is attached to the

joint application as Annex A ;

2. SEC

is

a generation company duly authorized and

existing under and by virtue of the laws of the e ~ u b l i c of

the Philippines, with principal address at 4

1

Floor,

Alphaland Southgate Tower, 2258 Chino Races Avenue

corner EDSA, Makati City.

Copies of its Certificate of Incorporation and Certificate of

Filing of Amended Articles of Incorporation issued by the

Securities and Exchange Commission, Amended Articles

o Incorporation

and

By-Laws, latest General Information

Sheet (GIS) and latest Audited Financial Statements

(AFS) are attached

to

the joint application as Annexes B

and series;

NATURE OF THE APPLICATION

3. Pursuant to Rule 20 (B) of the ERG Rules of Practice

and

Procedure, approved by the Commission

on

June 22,

2006 in Resolution No. 38, Series of 2006, the instant

application is submitted to the Commission for its review

and approval o their PSA dated March 29, 2014;

A copy o the PSA is attached to the joint application as

Annex C

COMPLIANCE WITH PRE-FILING REQUIREMENTS

4. In

compliance with Rule 6 o the

ERG

Rules o Practice

and Procedure, they have furnished the legislative bodies

o

each

o

the Local Government Units (LGUs) where

they principally operate a copy o the joint application with

all

its annexes

and

accompanying documents.

The corresponding proofs o receipt are attached to the

joint application as Annexes D and series;


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ERC CASE NO. 2014-107

R

NOTICE OF PUBLIC HEARING/August 22, 2014

Page 3 of 26

5

They caused the publication o the joint application

in

its

entirety, excluding its annexes,

in

a newspaper

o

general

circulation within DASURECO's franchise area.

Copies of the newspaper and the corresponding Affidavit

of Publication are attached to the joint application as

Annexes E and E-1, respectively;

STATEMENT OF FACTS

6 Shortage of Power Supply in the Mindanao Grid. The

Mindanao Grid has

long been suffering from a deficit in its

power supply. The generating capacity

in

the grid is

no

longer sufficient to meet the power requirements o

Mindanao;

7

As a result, Mindanao, including the franchise area

o

DASURECO, has experienced and is at risk o suffering

power outages adversely affecting local businesses and

the daily lives of all electricity consumers. The lack of

sufficient and reliable power supply has long been a

barrier to much needed capital investment that would spur

the local economy not only in the franchise area o

DASURECO but

in

greater Mindanao as well;

8 Drastic Reduction

in

the National Power

Corporation/Power Sector Assets and Liabilities

Management Corporation s (NPC/PSALM) Supply.

The main power supplier in Mindanao significantly

reduced its allocations to distribution utilities, further

aggravating the power shortage.

8 1 PSALM, which took over all the power generation

assets

o NPC

pursuant to Republic Act

No

9136,

otherwise

known

as the Electric Power Industry

Reform Act of 2001 (EPIRA), supplies the bulk of

the power requirements of Mindanao.

NPC/PSALM, likewise, supplies majority o

DASURECO's current power supply;


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Page 4 of 26

8.2 Recently, NPC/PSALM reduced by about one-third

(1/3) its firm supply commitments to distribution

utilities in Mindanao, inCluding DASURECO. This

has resulted

in

further widespread power shortages;

and

8 3

NPC/PSALM Certification.

DASURECO has

requested NPC/PSALM for a certification

on

whether it will have available capacity and energy to

supply DASURECO during the term o the PSA.

DASURECO undertakes to submit the certification

to this Honorable Commission once it is obtained.

A copy o

the said request

is

attached to the joint

application

as

Annex F ;

9 Necessity for a Long-term Power Supply Solution.

It

is necessary for a distribution utility, like DASURECO, to

ensure that the power supply requirements within its

franchise area are adequately covered by supply

contracts;

10 DASURECO's power demand is expected to increase

steadily in the coming years. Hence, there is a need for it

to procure sufficient long-term power supply so that the

long-term power requirements

o

its customers are

adequately addressed;

11. In 2012, DASURECO started rece1vmg offers from

Independent Power Producers (IPPs) for the supply

o

baseload and peaking power, among them, SEC;

12.

After an assessment

o

the offers and to ensure sufficient,

reliable and long-term power supply in its franchise area,

DASURECO executed the subject PSA with SEC for the

supply of up to fifteen (15) MW

o

baseload power over

the long-term;

13. Under the law, no contract for the supply

o

power can

become legally effective unless approved by the

Commission. Hence, the instant joint application;


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Page 5 of

6

ABSTRACT OF THE POWER SALES AGREEMENT

AND RELATED INFORMATION

14.

The Generation Facilities. To

supply power under the

PSA, SEC shall construct,

own

operate, manage and

maintain a 2x120 MW Circulating Fluidized Bed

Combustor Boiler Coal-Fired Power Plant

in

the

Municipality of Maasim, Sarangani (SEC Power Station);

14.1 The SEC Power Station is being implemented in

two (2) phases, each for one (1) unit with a net

generating capacity of 105 MW;

14.2 The power to be supplied under the subject PSA

shall be sourced from the second phase of the SEC

Power Station (SEC Phase II Plant).

A copy of the Certification on the Plant's Heat Rate

is attached to the joint application as Annex G ;

and

14.3 Expected Commercial Operations. The SEC

Phase II Plant is scheduled to commence

commercial operations within thirty-six (36) months

from the effectiveness o the PSA, as discussed

below, or such later date as may be agreed by the

Parties;

15.

Salient Features

of

the PSA:

15.1 Contracted Capacity. Under the PSA, SEC shall

supply or cause to supply to DASURECO the

latter's baseload electric power requirements up to

the Contracted Capacity

in

accordance with the

following schedule and the Dispatchable Energy as

indicated

in and

subject to the terms and conditions

o

the PSA:


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ERC CASE NO. 2014 107 RC


Page 6 of 6

Contract Year

Contracted Capacity

1 to 2

1 MW

3 to

25 15

MW

15.2 Within twenty-four (24) months after the Effective

Date,

DASURECO may increase the Contracted

Capacity for the first and second contract years to

15 MW subject to an adjustment of the Capital

Recovery Fee (CRF);

15.3 Term. The term of supply and purchase under the

PSA shall

be

for twenty-five (25) years commencing

on

the date the SEC Phase

II

Plant is ready to

commence commercial operations; and

15.1 Effectiveness. The Parties obligations under the

PSA shall become effective upon, among other

conditions, the Commission s approval of the PSA

and the pricing structure therein, and the attainment

or waiver of financial close for the project;

16. Stages of Supply. SEC shall supply power to

DASURECO during the commissioning of the SEC Phase

II Plant and thereafter, during the full commercial

operations of the Plant. As discussed below,

DASURECO shall pay a lower rate during commissioning;

17. Tariff Lower than Appropriate Tariff. SEC understands

that it may

be

allowed to charge

an

appropriate tariff that

will enable it to recover allowable costs to build and

operate the SEC Phase

II

Plant at an approved rate of

return consistent with recent rulings of this Honorable

Commission;

18. However, due to the request of its customers for lower

rates and for parity of pricing for its customers, SEC

agreed to a tariff that is lower than the tariff that it would

have been allowed to charge;

19. A comparison between the tariff in the subject PSA and

the appropriate tariff is summarized in the table below.

The difference represents a reduction in revenue which


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RC

NOTICE OF PUBLIC HEARING/August

22

2014

.Page 8 of 26

1. Monthly Payments

The Monthly Payments shall be paid to the Seller on a monthly

basis in accordance with the following formula:

Monthly Payments= CRF FOMF VOMF FC SC RCEC CEC Taxes

Where:

CRF

=

Capital Recovery Fees

FOMF

=

Fixed Operation and Maintenance Fee

VOMF

=

Variable Operation and Maintenance Fee

AFC

=

Actual Fuel Cost

s

= Start-up Costs

RCEC

=

Replacement Capacity and Energy Costs

BCEC

=

Backup Capacity and Energy Costs

axes

=

Value-Added Tax, other applicable taxes and

Government impositions, if any

1 1

CRF

The CRF shall be computed as follows:

1 1

1 During the First Contract Year:

CRF

1

= FCRF

1

+ DCRF

1

X X

F

Where:

=

Capital Recovery Fee for the First

Contract Year

20.32 per kW per month which shall be

converted to Philippine Pesos

on

the

Commercial Operation Date at the


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ERC CASE NO. 2014 107 RC

NOTICE OF PUBLIC

HEARING/August

22

2014

Page o

6

=

cc

=

F =

Where:

ED =

TMED =

F

=

weighted average US Dollar to

Philippine Peso exchange rate provided

in Schedule I (Power Plant Foreign

Capital Recovery Fee Conversion

PhP427.32 per kW per month

Contracted Capacity

ED

TMED

Electricity delivered during the billing

period in kWh

Theoretical Maximum Energy Delivered

being the Contracted Capacity multiplied

by the hours in the relevant month, less

any adjustments made for Allowed

Outage, limitation due to dispatch order,

Force Majeure of SEC Power Plant, and

allowable start-up time due to period of

non-generation due to a Buyer dispatch

order or an Allowed Outage, and any

other hours as a consequence of

Buyer s failure. to perform any of its

obligations

1 if the foregoing formula results in F

being greater than 1

1.1.2 During the Second Contract Year

CRF

2

FCRF

2

+ DCRF

2

X X F

Where:

CRF

=

Capital Recovery Fee for the Second

Contract Year


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NOTICE O PUBLIC HEARING/August 22 2014

Page 10 of 26

.

'

FCRF

2

DCRF2

F

Where:

ED

TMED

F

=

=

=

=

=

=

=

23.33

per kW per month which shall be

converted to Philippine Pesos on. the




in Schedule I Power Plant Foreign

Capital Recovery Fee Conversion)


Contracted Capacity

ED

TMED


period

in

kWh





Outage, limitation uei to dispatch order,


allowable start-up time due to period of


order or an Allowed Outage, and any

other hours as a consequence of

Buyer s failure to perform any

of

its

obligations

1 if the foregoing formula results n F


1.1.3

During the Third Contract Year

CRF

3

FCRF

3

+

DCRF

3

) X

X

F


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Page of 26

Where:

CRF3

FCRF3

DCRF3

cc

F

Where:

ED

TMED

F

=

=

=

=

=

Capital Recovery Fee for the third

Contract Year


converted to Philippine Pesos on the




in

Schedule Power Plant Foreign

Capital Recovery Fee Conversion)


Contracted Capacity

E

TME


period in kWh







allowable start-up time due to period o


order or

n

Allowed Outage, and any

other hours as a consequence o

Buyer's failure to perform any o its

obligations

1 if the foregoing formula results in F



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Page 12 of 26

1.1.4 From the Fourth Contract Year up to the End of the Term

CRF FCRF

+

DCRF)

X X

F

Where:

CRF

FCRF

DCRF

cc

F

Where:

ED

TMED

=

=

=

=

=

=

=

Capital Recovery Fee for the Fourth

Contract Year up to the end of the Term


converted to Philippine Pesos on




in

Schedule

I Power Plant Foreign

Capital Recovery Fee Conversion); or i

either of the conditions

n

Section

6.19(b)

1

o

this Agreement applies,

28.69

PhP668.68 per kW per month;

or

if

either of the conditions

n

Section

6.19(b)

1

of this Agreement applies,


Contracted Capacity

E

TME


period

in

kWh







1

The

entry

Section 6.19 br in Schedule B Sec. 1.1.4.

page

40 of

the

PSA is a

typographical

error. The

correct entry

is ~ s e t i o n

6.1(b) .


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Page

3 o

26

F

=

allowable start-up time due to period o


order or

an

Allowed Outage,

and

any

other hours as a consequence

o

Buyer's failure to perform any of its

obligations

1 i the foregoing formula results

in

F


1.2 Fixed Operation and Maintenance Fee

The Fixed Operation and Maintenance (O M) Fee covers the

operating and maintenance costs of the SEC Power Plant. It shall be

computed according to the following formula:

FOMF OMRX[ o.44XCP,, X

xn]

+ [o 56XCPJJX X F

FCP

Fx

LCP

Where:

FOMF

OMR

F

Where:

E

TMED


in Philippine Pesos


Contracted Capacity

E

TMED

Electricity delivered during the

billing period

in

kWh

Theoretical Maximum Energy

Delivered being the Contracted

Capacity multiplied by the hours

in

the relevant month, less any


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ERC CASE NO. 2014 107

R

NOTICE OF PUBLIC HEARING/Aug11st 22 2014

Page 14 of 26

F

FCPn

FCPo

adjustments made for Allowed

Outage, limitation due to dispatch

order, Force Majeure

o

SEC

Power Plant, and allowable start-

up time due to period of non-

generation due to a Buyer

dispatch order or an Allowed

Outage, and any other hours as a

consequence

o

Buyer s failure to

perform any of its obligations

1 if the foregoing formula results

in

F being greater than 1

The arithmetic average of the values of

the United States Consumer Price Index

for all Items, as last published

on

or

before the last day of such billing month

by the International Monetary Fund;

provided that if the International

Monetary Fund ceases to publish such

indices, the relevant indices as

published by the U.S. Department

o

Labor Bureau of Labor Statistics shall

apply.

The arithmetic average of the values as

of May 31 2011 of the United States

Consumer Price Index for all Items; as

published by the International Monetary

Fund, provided that i the International

Monetary Fund ceases to publish such

indices, the relevant indices as

published by the U.S. Department o

Labor Bureau of Labor Statistics shall

apply.

The arithmetic average o the values o

the Consumer Price Index

in

the

Philippines for all items and General

Wholesale Price Index in Metro Manila

for mineral fuels, lubricants and related

materials, both as last published

on

or

before the last day of such Billing Month

by the National Statistics Office.


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Page 15 of 26

LCPo

=

=

Fx

0

=

The arithmetic average of the values as

of May 31 2011 of the Consumer Price

Index

in

the Philippines for all items and

General Wholesale Price Index

in

Metro

Manila for mineral fuels, lubricants and

related materials, both as published by

the National Statis ics Office.

Actual Philippine Peso to US Dollar

exchange rate

on

the meter reading

date as published by the Bangko Sentral

ng Pilipinas, www.bsp.gov.ph

Actual Philippine Peso to

US

Dollar

exchange rate on May 31 2011 as

published by the Bangko Sentral ng

Pilipinas, www.bsp.gov.ph.

1.3 Variable Operation and Maintenance Fee

The Variable Operation and Maintenance (O&M) Fee covers

the cost of the use of among other items, chemicals, lubricants,

spare parts,

th t

are directly related to the generation of the SEC

Power Plant. It shall be computed according to the following formula:

[

PPP, Fx..]

LCP, }

OM ~ V O R x

0 3 5x + 0 6 5x xE

Where:

VOMF

=

VOMR

=

ED

=

=

Pl Po Fxo LCJ o

Variable Operation and Maintenance Fee in

Pesos

PhP0.3170 per kWh

Electricity delivered during the

billing period

in

kWh

The arithmetic average

of

the values of the

United States Producers' Price Index for

industrial goods; as last published

on

or

before the last day of such billing month by


16/26


R


Page 16 of 26

the International Monetary Fund; provided that

if the International Monetary Fund ceases to

publish such indices, the relevant indices as

published

by

the U.S. Department of Labor

Bureau of Labor Statistics

shall apply.

PPP

=


o

the values as of

May 31,

2011

of the United States Producers'

Price Index for industrial goods; as published

by the International Monetary Fund, provided

that if the International Monetary Fund ceases

to publish such indices, the relevant indices as

published by the U.S. Department of Labor

Bureau of Labor Statistics shall apply.

LCP

=

The arithmetic average of the values

o

the

Consumer Price Index

in

the Philippines for all

items and General Wholesale Price Index

in

Metro Manila for mineral fuels, lubricants and

related materials, both as last published on or

before the last day of such Billing Month by

the National Statistics Office.

LCP

0

=


o

the values as of

May 31 2011 of the Consumer Price Index in

the Philippines for all items and General

Wholesale Price Index in Metro Manila for

mineral fuels, lubricants and related materials,

both as published by the National Statistics

Office.

Fx

=

Actual Philippine Peso to US Dollar exchange

rate

on

the meter reading date as published

by the Bangko Sentral ng Pilipinas,

www.bsp.gov.ph.

Fxo = Actual Philippine Peso to US Dollar exchange

rate on May 31 2011 as published by the

Bangko Sentral ng Pilipinas, www.bsp.gov.ph.

1.4 Actual Fuel Cost

The Actual Fuel Cost is the fee paid to the Seller as payment

for the procurement and delivery of the coal used

in

the operation of


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Page

17 o 26

the SEC Power Plant. The Actual Fuel Cost shall

be

computed as

follows:

FO

Coal Price+

TC +Other

Charges

Actual Fuel

Cost=

l DDDkg

X

Consumption

Rate

X Fotex

X

ED

to

Where:

l OH Base

1\-icc

x Calorific Value x

ll

FOB Coal Price =

GCN Ctilorilic

alue

Where:

FOB Base Price =

The price expressed in U Dollars

applicable for all Shipments for

which the Bill o Lading Date falls

within the period from and

including the date o this

Agreement until and including the

last day of the Quarter in which

the date o this Agreement occurs

(the

FOB Base ,Price ),

shall

be

equal to the globaiCQAL

Newcastle Index (which is the coal

price per ton, FOB Newcastle,

stated in USD, as published by

globaiCOAL on

www.globalcoal.com under the

heading Weekly Index; NEWC

Index (or under such other

replacement heading under which

such prices are published by

globaiCOAL) with calorific value

basis

o

6,000 kcal/kg net as

received) for the week

immediately preceding the week in

which the date of signing of this

Agreement occurs. The FOB Base

Price shall be reset every Quarter

following the Quarter in which the

date of this Agreement occurs,

and such FOB Base Price

applicable for all Shipments for

which the B/L Date falls within and


18/26


19/26



Page 19 o 26

Note: In the event that the Seller procures coal from multiple

suppliers, the weighted average of the relevant values above shall be

used.

1.5 Start-Up Costs

The Buyer shall pay the Seller Start-Up Costs for the cost of

starting

up

the SEC Power Plant after a period of shutdown due to

any reason attributable to the Buyer. The Start-Up Costs shall be

paid in accordance with the following schedule:

Cost per Event

Type of Synchronization

PhP)

Cold Start-up to Synchronization 4,209,906

Warm Start-up to Synchronization

2,872,221

Hot Start-up to Synchronization

1,227,515

1.6 Replacement Capacity and Energy Cost

The Buyer shall pay the Seller Replacement Capacity and

Energy Cost

in

accordance with the invoice provided by the supplier

o

Replacement Capacity and Energy.

1 7 Backup Capacity and Energy Cost

The Buyer shall pay the Seller Backup Capacity and Energy

Cost equivalent to the Monthly Payment had there been

no

Forced

Outage.

2. Commissioning Output Charge

The Buyer shall pay the Seller the Commissioning Output

Charge for electricity supplied prior to the Commercial Operation

Date. The Commissioning Output Charge shall be computed as

follows:


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Page 20 of 26

CDC FOMF + VOMF + CF

Taxes

Where:

coc

Commissioning Output Charge

FOMF

=


computed in accordance with Item 1.2

o

this

Schedule B

VOMF

= Variable Operation and Maintenance Fee

computed in accordance with Item 1.3

o

this

Schedule B

ACF =

Actual Cost of Fuel computed in accordance

with Item 1.4

o

this Schedule B

For reference, a sample computation

o

the generation

rate is contained in Schedule C of the PSA.

21.1

Basis for Indexation.

As indicated in the formulae

above, the monthly fees to be paid by DASURECO

are subject to adjustments based on various indices

or factors;

21.2 The Foreign CRF component is fixed and

is

subject

only to a one-time conversion to Philippine Pesos

on Commercial Operation Date at the weighted

average exchange rate as computed in accordance

with the

PSA

This will ensure that DASURECO

does not carry a long-term foreign exchange

exposure

on

the CRF component; and

21.3 The components of the O M Fees representing

dollar-denominated costs are adjusted based

on

the

foreign exchange rate and the US Consumer Price

and Producer Price indices. Those representing

local costs are adjusted based

on

the local

Consumer Price Index. The Actual Fuel Costs vary

based on actual costs as well as the foreign


21/26


RC


Page

2

of 26

exchange rate and

on

the Global Coal Newcastle

index;

22.

Sources of Funds/Financial Plans.

The project will

be

financed through loans and equity, with an indicative

debt-equity ratio o 70:30.

22.1

Project Cost.

The total estimated project cost for

the SEC Phase II Plant is US$ 303.8 Million.

A breakdown of the project cost, including the cost

of interconnection facilities, is attached to the joint

application as Annex I ;

22.2

Annual Interest.

SEC is currently discussing with

prospective lenders the terms and conditions of the

project financing; and

22.3

Computation of Weighted Average Cost

o

Capital WACC).

Consistent with previous rulings

o

the Commission, the nominal pre-tax WACC

is

13.59%.

A computation

o

the WACC is shown in Annex

J

of the joint application;

23.

Cash Flow.

23.1 Breakdown of Operating and Maintenance

Expenses.

A breakdown

o

the operating expenses

which form the basis of the tariff is attached to the

joint application as Annex K ;

23.2

Offtake Arrangement.

Under the PSA, SEC shall

make available, reserve, guarantee, and deliver to

DASURECO the Contracted Capacity, and

DASURECO shall pay for such quantity of electric

power. SEC shall utilize such Contracted Capacity

to generate energy for DASURECO; and


22/26


NOTICE OF PUBLIC

HEARING/August 22, 2014

Page 22 of 26

23.3 There is no minimum energy offtake under the PSA.

As SEC will dedicate capacity to DASURECO, the

Capital Recovery and the Fixed Operations and

Maintenance Fees are computed based the

contracted capacity, and

on th

proportion

of

actual

energy delivered to the energy that could have been

delivered;

24. Prompt Payment Discount PPD).

DASURECO shall

be

entitled to discount of 1.5 of the amount paid for the

CRF in case of prompt payment;

25. Fuel .Procurement. An international public tender was

conducted for the purpose of procuring fuel for the SEC

Phase

II

Plant. The conduct of the tender and the fuel

procurement process is summarized in Annex L of the

joint application;

26. The conduct of

an

international public tender assures

DASURECO of the best available cost

of

fuel supply. It

must be stressed that SEC derives

no

revenue

whatsoever from the

fuel supply;

27. Environmental Compliance Certificate ECC).

The

Department of Environment and Natural Resources

DENR) has issued ECC

Ref. No. 0901-001-4021

for the

SEC Power Station.

A copy

of

the said

ECC

is attached to the joint application

as Annex M

'

28. DOE Certification. On February 25, 2014, the DOE

issued Certificate of Endorsement No. 2014-02-004,

certifying that the

SEC

Phase

11

Plant is consistent with

the Power Development Plan PDP)

of

the Government.

A copy

of

the said certificate is attached to the joint

application as Annex N ;

29. Certificate of Compliance COC). As the SEC Phase 1 1

Plant is still to

be

constructed, it is not yet covered by a

COC. In accordance with ERC Resolution No. 9, Series


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RC


Page 23 of 26

of 2010, SEC shall file the necessary application for a

COC no later than three (3) months before the

commencement of commercial operations;

30. Load Forecast.

A copy of DASURECO s Distribution

Development Plan (DDP) showing its load forecast

projections is attached to the joint application as Annex

Q

RATE IMPLICATIONS OF THE POWER SALES AGREEMENT

31.

In order to determine the impact of the implementation of

the PSA on DASURECO s generation costs, an analysis

was conducted taking into consideration the expected

supply from its other suppliers;

32. It should be emphasized that the analysis covers 2016 as

the sample year, and considers the forecasted power

requirements and expecte.d supply for that year. In the

analysis, two (2)

scenario >

are considered: one without

supply from SEC under the PSA, and another

with

SEC

supply.

A copy of the said analysis s attached to the joint

application as Annex "P";

33.

The results of the said analysis are summarized

in

the

table below:

Without SEC Supply With SEC Supply

Year2016

Year2016

(PSALM+ TUDAYA +

(PSALM+ TUDAYA +

Rate Impact

TSI

+AEDC

TSI

+ AEDC + SEC)

(PhP/kWh)

Power Cost Power Cost

(PhP/ kWh) (PhP/kWh)

5.49 5.12 -0.37

34. The supply from SEC under the PSA will not only provide

additional stable

and

reliable baseload power supply but


24/26



Page 24 of 26

will also serve to reduce the power costs of DASURECO,

to the benefit of its customers;

ALLEGATIONS IN SUPPORT OF

THE MOTION FOR PROVISIONAL AUTHORITY

35. There is a need for DASURECO to procyre sufficient

long-term power supply so that the power requirements o

its customers are adequately addressed, especially as its

power requirements are forecasted to rise steadily

in

the

coming years due to the increasing demand

o

its

customers;

36.

Moreover, NPC/PSALM, which currently supplies majority

o DASURECO s electricity requirements, drastically

reduced its firm supply commitments by about one-third

1/3);

37.

Thus, given DASURECO s increasing power

requirements, the procurement o additional power supply

is imperative in order to address its power requirements

adequately and in a timely manner;

38.

The provisional approval

o

the instant application is

necessary for SEC to secure,

in

a timely manner, the

necessary financing for the SEC Phase II Plant. The

project

o

developing and

construc::ting

the Plant

is

capital

intensive, and will take an extended period o

time. Consequently, obtaining financing in a timely

manner is critical to complete the Plant;

39. Thus, the issuance of a provisional approval will enable

SEC to complete the project and consequently, provide

the power needed by DASURECO under the PSA in a

timely manner;

40. Hence, they move for the provisional approval of the

instant application pursuant to Rule

14

of the ERC Rules

o

Practice and Procedure.

A copy of the Sworn Statement supporting the said

motion is attached to the joint application as Annex Q ;


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Page 25 o

26

41. They pray that the Commission:

a.

Immediately issue

an

Order provisionally approving

the PSA subject of the instant joint application as

well as the generation rate and adjustment

mechanisms indicated therein; and

b. After due hearing, render judgment making such

provisional approval permanent.

The Commission has set the said joint application for

jurisdictional hearing, pre-trial conference, expository presentation

and evidentiary hearing on October

2

2014 (Thursday) at one

thirty in the afternoon (1:30 P.M.) at DASURECO s Principal

Office, Barangay Cogan, Digos City, Davao Del Sur.

All persons who have

an

interest in the subject matter

o

the

proceeding may become a party by filing, at least five (5) days prior to

the initial hearing and subject

to

the requirements

in

the ERG s Rules

of Practice and Procedure, a verified petition with the Commission

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

the petitioner s name and address; (2) the nature o petitioner s

interest

in

the subject matter of the proceeding, and the way and

manner

in

which such interest is affected by the issues involved

in

the

proceeding; and (3) a statement o the relief desired.

All other persons who may want their views known to the

Commission with respect to the subject matter

o

the proceeding may

fil their opposition to the joint application or comment thereon at any

stage of the proceeding before the applicants conclude the

presentation

o

their evidence. No particular form

o

opposition or

comment is required, but the document, letter or writing should

contain the name and address of such person and a concise

statement

o

the opposition or comment and the grounds relied upon.

All such persons who may wish to have a copy of the joint

application may request the applicants, prior to the date o the initial

hearing, that they be furnished with a copy of the joint application.

The applicants are hereby directed to furnish all those making a

request with a copy of the joint application and its attachments,

subject to reimbursement of reasonable photocopying costs.

Likewise, any such person may examine the joint application and


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Page 6 o 26

other pertinent records filed with the Commission during the usual

office hours.

WITNESS the Honorable Chairperson ZENAIDA

G.

CRUZ

DUCUT and the Honorable Commissioners ALFREDO J. NON and

GLORIA VICTORIA

C.

YAP-TARUC Energy Regulatory

Commission this 22nd day

o

August 2014 at Pasig City.

V c ~

ATTY. FRANCIS SATURNINO

C.

JUAN

Executive Director Ill

Documents

(SEC-DASURECO) ERC Notice of Public Hearing d 8.22.14URECO) ERC Notice of Public Hearing d 8.22.14