Republic of the PhilippinesENERGY REGULATORY COMMIS

San MiguelAvenue, Pasig City

IN THE MATIER OFTHE APPLICATION FORAPPROVAL OF THE FIVE (5)-YEAR CAPITALEXPENDITURE (CAPEX)PROJECTS FOR THE YEARS2017 TO 2021 AND FORAUTHORITY TO SECURELOAN, WITH PRAYER FORPROVISIONAL AUTHORITY,

ERC CASENO. 2017-039 RC

PALAWAN ELECTRICCOOPERATIVE (PALECO),

Applicant.J(- - - - - - - - - - - - - - - - - - - - - - -J(

NOTICE OF PUBLIC HEARING

TO ALL INTERESTED PARTIES:

Notice is hereby given that on 09 May 2017, Palawan ElectricCooperative (PALECO) filed with the Commission its Applicationdated 8 March 2017 (Application) for approval of its five (s)-yearCapital Expenditure (CAPEX)projects for the years 2017 to 2021 andfor authority to secure loan, with prayer for provisional authority.,

PALECOalleged the following in its Application:

1. PALECO is an electric cooperative created and existingpursuant to the provisions of Presidential Decree No. 269, asamended, with principal office at Barangay Tiniguiban, PuertoPrincesa City, Philippines, represented herein by its GeneralManager, Ric B. Zambales, duly authorized by its Board ofDirectors by virtue of a Board Resolution dated 23 September2016, copy of which is attached to the Application as Annex "A"and made an integral part thereofj

ERC CASE NO. 2017-039 RCNotice of Public Hearing/lO August 2017Page 2 of 19

2. The filing of the instant Application is, likewise, authorizedunder the afore-mentioned Board Resolution;

3. PALECO has been granted by the National ElectrificationAdministration (NEA) an authority to operate and distributeelectric light and power within the City of Puerto Princesa andthe Municipalities of Aborlan, Narra, Brooke's Point, SofronioEspanola, Cuyo, Magsaysay, Quezon, Roxas, Taytay, El Nida,AraceH, San Vicente, Bataraza, Rizal, Balabac, Cagayancillo,Agutaya, Dumaran all in the Province of Palawan;

4. This Application is filed pursuant to Section 43 (f) of RepublicAct No. 9'36, otherwise known as the "ElectricPower IndustryReform Act of 2001" (EPIRA) and Section sea), Rule '5 of itsImplementing Rules and Regulations (IRR), which provide thatany significant operating cost or project investment of theNational Transmission Corporation (TRANSCO) andDistribution Utilities (DUs), which shall become part of the ratebase, shall be subject to verification by the HonorableCommission to ensure that the contracting and procurement ofthe equipment, assets and services have been subjected totransparent and accepted industry procurement andpurchasing practices to protect the public interest;

5. Section 20 (b) of Commonwealth Act No. '46, otherwise knownas the "Public Service Act" also mandates that subject toestablished limitation and exceptions and saving provisions tothe contrary, it shall be unlawful for any public service or forthe owner, lessee, or operator thereof, without the approval andauthorization of the Commission previously had to establish,construct, maintain, or operate new units or extend existingfacilities or make any other addition to or general extension ofthe service;

6. The Distribution Services Open Access Rules (DSOAR) alsorequires that installation of all types of lines and facilitiesincluded in the DU's forecasted CAPEX approved by theCommission shall be at the expense of the concerned DUregardless of their location within its franchise area;

7. This Application is, likewise, filed pursuant to ERC ResolutionNo. 26, Series of 2009, entitled "AResolution Amending theRules for Approval of Regulated Entities' Capital ExpenditureProjects" (Amended CAPEX Rules), which mandates that allCapital Expenditure (CAPEX) Projects should be filed with andapproved by the Honorable Commission prior to theirimplementation. The filing of this Application is consistentwith the timelines set by the Honorable Commission in itsResolution No. 20, Series of 2011;

8. The afore-cited Amended CAPEX Rules was issued by theHonorable Commission to ensure that: a) the CAPEX projectsare timely, appropriate, necessary and cost efficient; b) theCAPEX projects are consistent with the Distribution

ERC CASE NO. 2017-039 RCNotice of Public Hearing/to August 2017Page 3 Of19

Development Plan (DDP), Philippine Grid Code (PGC),Philippine Distribution Code (PDC), and other relevantgovernment issuances; and c) the procurement of equipment,materials and services are transparent, competitive andcompliant with the applicable rules, laws and regulations;

9. The instant Application is consistent with the five (s)-yearrolling DDP submitted by PALECO to the Department ofEnergy (DOE);

10. Consistent with the requirement of the filing of applications forapproval of CAPEX Projects, the instant Application is verifiedby PALECO's authorized representative, General Manager, RicB. Zambales, by virtue of Board Resolution dated 8 September2016 approving the proposed CAPEX Projects, subject of thisApplication, a copy of which is attached to the Application asAnnex "B";

11. Information on the proposed CAPEX Projects had been widelydisseminated through posting in the conspicuous places of theCity of Puerto Princesa and the Municipalities of Aborlan,Narra, Brooke's Point, Sofronia Espanola, Cuyo, Magsaysay,Quezon, Roxas, Taytay, EI Nida, Araceli, San Vicente, Bataraza,Rizal, Balabae, Cagayancillo, Agutaya, Dumaran, all in theProvince of Palawan as certified to by Ms. Nerisa S. Regal,Polity Advocacy Officer and Regulatory Compliance Officer,who was tasked to undertake such dissemination, a copy ofwhich is attached to the Application as Annex "C". The Noticesposted in the areas aforementioned specifically contained thefollowing:

a. the proposed projects;b. the reasons for proposing said projects;c. the source of fund for the said projects; andd. the indicative rate impact of the said projects.

12. In accordance with the Amended CAPEX Rules and consistentwith the DDP and PDC, PALECO shall acquire, construct andimplement the following five (s)-year CAPEX Projects forCalendar Years (CYs) 2017-2021, with a total APPROXIMATEcost of One Billion, One Hundred Sixty-one Million, EightHundred Eighteen Thousand Two Hundred Forty PESOS(PhP1,161,818,240), The background for PALECO's distributionsystem and the results of the planning process on how theprojects are formulated are presented Five-Year Statement ofThe DDP, a copy of which is attached to the Application asAnnex "D":

ERCCASENO. 2017-039 RCNotice of Public Hearing/10 August 2017Page40f19

THE PROPOSED CAPEX PROJECTS

A. CAPITAL ASSET CATEGORIES

12.1 NETWORK CAPEX PROJECTS

Aniount Per Year of ImplementationProject Project Fund (PhP in million) TotalCode Description Source 2017 2018 2019 2020 2021 Cost

(PhPinmillion)

SS5-01 This project is a one NEA/ 29,144 29,144(1) outdoor type 5 BankLoanMVA substationrated at 69 to13.2/7.62 kV withtwo (2) feeders thatwill be installed atBarangay Manalo,(Northern) PuertoPrincesa City.

SS5-02 This project is a one NEA/ 29,144 29,144(1) outdoor type 5 BankLoanMVA substationrated at 69 to13.2/7.62 kV withtwo (2) feeders thatwill be installed atBarangayMontible(Southern)Princesa City.

SA-01 Installation and NEA 38,928 38,928integration of /BankLoanAdvanceCommunicationNewtork (SCADA)to PALECO controlroom as GridSystem Operatoreight (8) powerplants, and two (2)substations in thePalawan Grid.

PD-CR- Rehabilitation of RFSC/Other 2,648 2,64801 old lines and Income

installation of newthree-phaseprimary line goingto SMMall.

ERC CASE NO. 2017-039 RCNotice of Public Hearing/tO August 2017Page 5 of19

PD-C- Upgrading of 10 RFSC/Other 4,968 4,96801 kilometer pnmary Income

conductors fromACSR #1/0 toACSR 336.4 MCMof Narra Feeder 2.

PD-C- Upgrading of RFSC/Other 1,794 1,79402 primary conductors Income

of El Nido Feederfrom ACSR #1/0 toACSR 336.4 MCM.

PD-PQ- Installation of RFSC/Other 8,100 5,400 2,7°0 2,7°0 5,400 24,30001 Three (3) units Income

single phase 76.2KVA, 7.62 kVAutomatic VoltageRegulator will beinstalled todifferent systemCDXS). to correctthe power qualityproblem

PD-Q- Conversion of 23 RFSC/Other 2,151 3,826 2,592 8,56902 kilometers Single Income

Phase to ThreePhase Line fromBarangay SanRafael To BarangayLangogan, of SanJose Feeder PuertoPrinces a City Cat 3periods).

PD-CR- Conversion of 19-44 RFSC/Other 3,001 3,000 4.032 2,188 12,22102 kilometers Single Income

Phase to ThreePhase Line fromBarangay VillaLibertad ToBarangay Bucana ofEl Nido Feeder Cat3 periods) and 5kilometers atBarangay CorongCoron •.

PD-CR- Line Conversions to RFSC/Other 1,245 2,718 3,96303 Three Phase from Income

Rizal, Taytay &Roxas DistributionStand AloneSystems.

ERCCASE NO. 2017-039 RCNotice of Public Hearing/10 August 2017Page 6 of19

SD-S-01 Single phase RFSC/Other 7,632 4,881 5,738 4,485 3,195 25,840primary line will be Incomeinstalled to theareas Mth existinglong secondarylines and servicedrop wires.

SD-S- Encasement and RFSC/Other 535 565 1,064 565 565 3,29202 protection of Income

meters into one (1)enclosure.

Rl-Ol This projects RFSC/Other 8,174 8,174 8,174 8,174 8,174 4°,872involves the Incomeinstallation ofadditionalsectionalizingequipment anddevices to differentdistributionsystems.

SL-01 This project entails RFSC/Other 8,700 8,700 8,700 8,700 8,700 43,500the replacement of Incomeageing kilowatt-hour meters,routinelycomplaints fromcustomers andmeter readers suchas not-moving,creepmg, nodisplay, brokenglass cover, burnedand inaccuratemeters.

SL-02 Installation of RFSC/Other 8,540 9,776 10.748 11,513 12,175 52,752Amorphous Metal IncomeDistributionTransformers.

SL-03 Installation of RFSC/Other 1,021 1,021photocell to Incomeexisting streetlights inreplacement tomanual switch.

RE Extension of NEA 371,277 66,062distribution lines to Subsidyun-energize 23barangays and 208sitios.

ERC CASE NO. 2017-039 RCNotice of Public Hearing/lO August 2017Page 7of19

12.2 OTHER NElWORK REQUIREMENTS FORADDmONALjNEW SERVICE CONNECTIONS OFCUSTOMERS

Amount Per Year of ImplementationOther Network Fund (PhP in million) TotalRequirements Source 2017 2018 2019 2020 2021 Cost

(PhPinmillion)

1 Distribution NEAj 4,616 4,615 4,754 4,754 5,197 23,935Transformers BankLoan

2 Low Voltage Distribution NEAj 6,784 7,124 7,138 7,463 7,787 36,296Line BankLoan

3 Metering Equipment NEAj '7,'90 18,548 19,783 19,23° 20,306 95,057Accessories and Service BankLoanDrons

4 Procurement of poles, NEA 18,312 18,312 36,624kilowatt-hour meters, jBankLoandistribution transformersand other line hardwarefor buffer stocks foremergency response III

the rehabilitationjrestoration ofdistribution lines.

12.3 NON-NElWORKASSETS

Amount Per Year of ImplementationNon-Network Fund (PhP in million) Total

Assets Source 2017 2018 2019 2020 2021 Cost(PhPinmillion)

1 Land and Land RFSCjOther 1,400 16,000 3,000 900 21,300Rights Income

2 Structures and RFSCjOther 1,800 '7,700 10,300 5,000 5,000 39,810Improvements Income

3 Transportation RFSC/Other 6,975 12,660 17,690 17,155 '4,987 69,467Equipment Income

4 Laboratory and RFSC/Other 5,399 956 2,802 2,100 2,158 13,415Miscellaneous IncomeEauinment

5 Tools, Shop, Safety RFSCjOther 7,953 6,857 7,528 6,886 7,730 36,953Gadgets and IncomeGarage Eqnipment

6 Information RFSCjOther 9.995 821 3,685 1,775 962 17,238System Equipment Income

7 Communication RFSC/Other 866 734 634 627 677 3,539Plant and IncomeEquipment

8 Office Furniture RFSCjOther 2,693 1,184 1,812 1,°32 1,017 7,738and Equipment Income

ERCCASENO. 2017-039 RCNotice of Public Hearing/to August 2017PageS of 19

B. CAPITAL EXPENDITURE PROJECT TYPE

Project Project Title Project TypeCode

SS5-01 Installation of 5 MVASubstation at Barangay Power QualityManalo, Puerto Princesa City

SS5-02 Installation of 5 MVASubstation at Barangay Power QualityMontible, Puerto Princesa City

SA-01 Installation of Advance Communication SafetySystem for Substations

PD-CR-Ol Construction of three-phase primary line Capacity~oin~ to SM Mall

PD-C-Ol Uprating of Existing Primary Conductors of CapacityNarra Feeder 2

PD-C-02 Uprating of Existing Primary CapacityConductors of El Nido Distibution Line

PD-PQ-01 Installation of Automatic Voltage Regulator Power OualitvPD-PQ-02 Single to Three Phase Line Conversion from Power Quality

Barangay San Rafael to Barangay Langogan,Puerto Princesa City

PD-CR-02 Single to Three Phase Line Conversion from CapacityBarangay Villa Libertad to Barangay Bucana,El Nido and Sitio Logadia to SitioBobolungan, Coron~ Coron~, El Nido

PD-CR-03 Line Conversions to Three Phase from Rizal, CapacityTaylay & Roxas Distribution Stand AloneSvstems

SD-S-01 Installation of Primary Lines to SafetyOverextended Secondary Lines and ServiceDrop Wires

SD-S-02 Meter Encasement and Protection SafetyRI-01 Installation of Additional Sectionalizing Reliability

Eouinment & DevicesSL-Ol Replacement of Old and Defective Kilowatt- System Loss

hour MetersSL-02 Installation of Amorphous Distribution System Loss

TransformersSL-05 Installation of Photo switch for Street Li.hts Svstem LossRE Extension of distribution lines to un-energize Rural

23 barangavs and 208 sitios. Electrification

The CAPEX Project may either be for:

a. Safety;b. Capacity (including customer requirements);c. Power Quality;d. -Reliability improvements above performance standards; ande. System loss reduction above performance standards.

ERC CASE NO. 2017-039 RCNotice of Public Hearing/to August 2017Page 9 of 19

JUSTIFICATIONS OF THE CAPEX PROJECTS

"3. The Network CAPEX Projects are intended to address safety,power quality and reliability of the distribution system of theApplicant.

ProjectInstallation of 5MYA Substation atBarangay Manalo,Puerto PrincesaCity

Installation of 5MVA Substation atBarangayMontible, PuertoPrinces a City

Installation ofSCADA Networkfor Palawan Grid

JustificationThe project will primarily address and mitigate the voltageviolations (under voltage and voltage unbalance) of SanJose Feeder which has a total length of 9" kilometers "3.2kV primary distribution line from the existing switchyard.

The voltage level at the farthest part of the line which isBarangay Langogan is 136.39 volts at phase B. The voltagevariation in phase A is 0.691 per unit (bus ID PPSJ0754),in phase B is 0.539 per unit (bus ID PPSJ2656) and inphase C is 0.654 per unit (bus ID PPSJo749), with anunbalance voltage of 6.878% at farthest end of the threephase line. Relevant map and diagram is presented inAnnexH.

Several penSIOn houses, hotels and water park areconnected in this feeder and for long are experiencing lowvoltage power which could not utilize most of theirmotorized equipment and even some of the lightings.

The project will primarily address and mitigate the voltageviolations (under voltage and voltagevariations/imbalance) of Iwahig Feeder which has anexisting total length of 35.84 kilometer "3.2 kV primarydistribution line from the existing switchyard.

The voltage level at the farthest part of the line which isBarangay Mangingisda IS 184.45 volts. The voltagevariation in phase A is 0.891 per unit, phase B is 0.876 perunit and phase C is 0.802 , with an unbalance voltage of5.983%.

The primary line of Iwahig feeder will lengthen uponenergization of the ongoing construction of 40 kilometerthree phase lines going to three (3) barangays at west coastof Puerto Princesa City. This line extension project is agovernment funded project, Barangay Line EnhancementProgram of National Electrification Administration. This. additional length will aggravate the violation in voltagevariations.

All the power suppliers III Palawan Grid are allIndependent Power Providers (IPPS) contracted byPALECO. Consequently, starting March 2015, NPC-SPUGhas already transferred to PALECO the responsibility forgeneration dispatch in Palawan Grid. This is pursuant toSection 7.1.3.1of the ERC Resolution No. 15 Series of 2013,A Resolution Adooting the Philiooine Small Grid

ERC CASENO. 2017-039 RCNotice of Public Hearing/lo August 2017Page 10 of 19

Guidelines, "The Distribution Utility shall be the SystemOperator since they are the off-taker of the generator.

Existing Scheme at Load Dispatch Center:1. Communication with power plant operators and

substation tenders - VHF radio and cellular phones.2. Monitoring of parameters and status of power plants

and substation - power meters which can only forpower plants in Puerto Princesa City (PPC), nomonitoring means for power plants outside PPC.

3. Control of Panels - Manual switching Operation

This project is expected to ensure the security, qualitypower and reliability of the entire grid with the availabilityof real-time monitoring system. The incidents of powerinterruptions and total blackout in the grid due to untimelyinstruction of system operators to the plant operators willbe eliminated. And tripping of the automatic circuitreclosers (ACRs) in the distribution system will be reduce,since the system operator can direct plant operators inevery critical conditions.

of The exiting lines along the location of 8M Mall is a three-phase line built in '974. Since then not all the poles havebeen replaced as well as the conductors and other linehardware. Considering the age of the existing lines and theload requirement of SM Mall, lines will be rehabilitatedand additional three-phase line will be constructed to makea double circuit for the efficient supply requirement of 8MMall and other consumers connected.The expected energy sales from 8M Mall is 13,140,000kWh per annum.

Installationthree-phaseprimary line goingto SM Mall

Upgrading of 10kilometer primaryconductors fromACSR #1(0 toACSR 336-4 MCMof Narra Feeder 2

This is to prevent the overloading of the conductors due toload growth. The existing line is designed and constructedin 1983 which has a primary conductor of ACSR #1(0 witha carrying capacity of 4427 kW. Based on the forecast, theexisting conductors will be overloaded by 2020 havingexpected demand of 4432.

This project is expected to reduce system loss by more orless 0.19%.

of This is to prevent the overloading of the conductors due toload growth. The existing line is designed and constructedin 1993 which has a primary conductor of ACSR #1(0 witha carrying capacity of 4427 kW. Based on the forecast, theexisting conductors will be overloaded by 2019 havingexpected demand of 5'56.

Upgradingpnmary'conductors of ElNido Feeder fromACSR #1(0 toACSR 336-4 MCM

This project is expected to reduce system loss by more orless 0.05%.

ERC CASE NO. 2017-039 RCNotice of Public Hearing/tO August 2017Page 11of 19

Installation of Most feeders and the stand alone distribution systems ofAutomatic Voltage isolated mainland and island municipalities are all directlyRegulators (AVRs) fed or connected to the generations at 13.2 kV. Thus, the

lines which are all more than 20 kilometers, in general hasproblem in voltage level and balance. Voltage profiles arepresented in Annex F. Installation of AVRs to these longlines will increase the voltage level in the middle or far endof the lines.

Single to Three The long single phase line creates unbalance phasePhase Line currents and phase voltages in San Jose feeder whichConversion from usually results to tripping of feeder breaker when there isBarangay San fault in one line. The installation of additional two-phaseRafael to Barangay line will correct the unbalance phase current and improveLangogan, Puerto voltage imbalance. In the future, this will alsoPrincesa City accommodate potential large load customers with three-

phase connection requirement since the area is potentialfor resort hotels.

This will also expected to reduce system loss estimated at5,535 kWh on its first year and improve reliability thrubalance currents and voltages.

Single to Three The line conversion to Barangay Villa Libertad and portionPhase Line of Barangay Pasadena are required to meet the connectionConversion from requirement of Ayala Corporation. The expected demandBarangay Villa of Ayala Corporation is initially 1.5 MW and will increaseLibertad to by 2.5 MW per year with an expected maximum demand ofBarangay Bucana, 15 MW. The expected additional sales per year isEI Nido and Sitio 10.950,000 kWh.Logadia to SitioBobolungan, Aside from this, the long single phase line createsCorong Corong, El unbalance in phase currents which usually results toNido tripping of feeder breaker when there is fault in one line.

Line Conversions The main purpose of this project is to accommodate theto Three Phase at three-phase connection requirement of governmentRizal, Taytay & facilities and other commercial customers. The conversionRoxas Stand Alone of this lines will also refurbish the existing lines which isDistribution deteriorated. This will also serve as tapping of the futureSystems line extension of unenergized barangays of the respective

distribution system.

Installation of This project will address the following problems:Primary Lines to l. Violation to the technical and safety standards of theOverextended PEC considering the hazards to the public dueSecondary Lines multiple octopus-connections and long service dropand Service Drop wires that hangs on trees and service poles that willWires not last for long period; and,

2. Service drop wires traversing private lots.3. Renew the deteriorated lines.

Meter Encasement There are areas with more than five connections tapped inand Protection one Dole where resnective meters were mounted, which

ERC CASE NO. 2017-039 RCNotice of Public Hearing/tO August 2017Page 12 of 19

happen to be non-compliance with the prescribed 1.50meters mounting height in Article 11 of Magna Carta forResidential Customers and Section 2.11.1 of EReResolution NO.2, Series of 2010 - A Resolution Adoptingthe Amendments to the Distribution Services and OpenAccess Rules (DSOAR).

InstallationAdditionalSectionalizingEquipmentDevices

ReplacementKilowatt-hourMeters

This will eliminate many service drop wires in the polewhich is prone to short circuit.

of This project will help improve system reliability byshortening the lines to be affected in case of line faults,therefore decrease number customers affected. Generally,

& these devices and equipment can:a. reduce the restoration time and outages coverage;b. allow faults to be quickly detected and tbe fault

information to be analysed;c. fast isolation of faults, thereby reducing damage to

the system;d. allows temporary faults to clear without

experiencing a sustained interruption;e. isolates temporary faults preventing extensive

outages;f. improve system coordination; and

systematic series of switching operations, to isolate acertain section of overhead line.

of The result of the initial implementation of the Meter InService Testing Programs found that almost all lots areover the criteria for the number of non-conforming meterstherefore need replacement. Instead of spending much onthe testing, maSSIve replacement of old meters ISprogrammed.

Installation ofAmorphous MetalDistributionTransformers

This project is estimated to reduce system loss by 632,000kWh in a year or 0.20% of the total system loss .

.

Though the average system loss of PALECO is 10.98% forthe past seven (7) years, which is below 13%, cap set byERC, PALECO still aims to reduce its system loss. Basedon the 2015 segregated system loss, 1.43% is from the DTno load loss. Thus, PALECO programmed to start thereplacement of the in-service DTs, from silicon steel core toamorphous metal core.

InstallationPhoto CellStreet Lights

This project is estimated to reduce system loss by 61,000kWh in a year or 0•.02% of the total system loss .

.

of Most of the individual streetlights usually installed infor barangay roads are manually switch to on and off by the

nearest consumer. These days, people have become toobusy and has no time to switch off the street lights ondaytime. In agreement with the city government who ispaying the streetlight energy consumptions, streetlightswith manual switch are billed at 12 hours usage hence,

ERC CASENO. 2017-039 RCNotice of Public Hearing/10 August 2017Page 13 of 19

contributes losses in the system if not switch off. With thelight sensor of the photocell, the street lights willautomatically switch on and off and the manual operationof the street lights will be reduced.

A more detailed justifications per project is prepared in theprescribed project justification template, a copy of which ishereto attached as Annex "E".

SOURCES OF FUNDS FOR THE CAPEX PROJECTS

14. The total estimated cost of PALECO's CAPEX Projects for CYs2017-2021 is PhPl,161,818,240.00;

CAPEX projects,the amount ofElectrificationonly if better

15. In the implementation of the proposedPALEeO intends to secure a loan inPhP289,128,34, from the NationalAdministration or Bank, and from the latterinterest rates and better terms are offered;

16. Other CAPEX projects and requirements will be funded thmPALECO's Reinvestment Fund for Sustainable Capex and OtherIncome and government subsidy thm National ElectrificationAdministration as presented in CAPEX Project Financing Planin Annex Lwhich is attached to the Application;

17. The implementation of the proposed CAPEX Projects shallyield an indicative rate impact of PhPo.o934/kWh, computedas follows:

2017 "''' 2019 2020 2021 TOTAL

Forecasted Ene Sales, KWh 249,166,172 269,040,931 269,176,915 309,729,189 330,537,513 1,447,772,720

RfSC Bllinca Bell, Php, Excess (Shortfall 52,891,538 20,897,323 34,422,905 56,991,391 114,002,843) 52,891,535

Cash Inflows:RFSC Annual Collecllon eo .2619/Kwh 70,245,582 75,842,638 61,519,535 67,312,658 93,208,715 408,127,130

RFSC Annual Collection er rale 1m aclAnnual Income on Leased Pro ellies 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 5,000,000

From Share Ca ltal 7,000,000 7,000.000 7,000,000 7,000,000 7,000,000 35,000,000

Loan Proceeds 'rom Financlallnsmu~ons, PhpIndusl"" of Permit Fee 55,851,785 47,021,854 59,333,522 59,504,970 32,854,474 255,588,584

Total Cash Inflows, Ph 135,107,345 130,864,492 148,653,058 1&4,917,529 134,071,189 713,813,714

Available Cash for Ca ex Pro-eots 187,998,882 151,781,815 114,430,153 95,928,238 20,068,348 755,705,250

Cash Outnows:CAPEX Re uirementFunded b Loans: -NewCa ex 66,438,475 45,571,815 58,B91 ,833 59,085,619 32,819,825 263,708,759

Funded b RFSC: -New Ca ex 91,055,868 110,845,999 91,554,475 95,990,895 71,321,074 450,770,310

CAPEX Debt Service -NewCa ex 8,484,518 11.B48,586 18,613,283 25,551,034 63,495.722

Old Loans 18,500,000 21,000,000 20,000,000 25,000,000 24,000,000 108,500,000

ERC Permit Fee, Ph 0.75% 1,106,215,08 1,181,39110 1,128,347.31 1,238,08285 779,556,74 5,433,593

Total Cash Outflows, Ph 157,101,559 186,184.721 183,421,543 209,929,OBO 155,271,490 901,908.394

RFSC Balance Endin ,Ph bee •• Shortfall 20,697,323 34,422,906 (68.991.391 114,002,843 136,203,144) 135,203,144

Excess Shortfall on RFSC. Ph /Kwh 0.0839 0,1279 0.2386 0,3681 0.4089 0.0934

ERC CASENO. 2017-039 RCNotice of Public Hearing/lo August 2017Page 14 of19

If sales will increase at 10% higher than forecast, rate impactwill be PhPo.0593(kWh.

Overall indicative Rate Impact of the 2017_2021 Capex Projects$.18$"\ 10% HI he, th.n Forecut, G% [n"',est

2017 20111 2019 2020 2021 TOTALF",ecuted Ene S"les KWK 274,104,789 295.s.45,024 318,096.807 340,702,108 383,701,264 , ,592,549,992RFSC B"I"nce Be .'" Excen Shortfall 52.891,536 27,921,881 (19,814,084 46,230,615 (82,810,601 52,891,536Cnh Inflows:

RFSC Annual Cellectlon eK II 2819/Kwh 77,270,14{) 83,426902 89,671.490 98,043,924 102,527,386 448,939,8HRFSC Annual Cellection er,Bt •• 1m ,,'Annual Income on Lea""d Pro ert,e. 1,000,000 1,000,000 1,000,000 , ,000,000 1,000,000 5.000,000From ShaM Ca ital 7.000,000 7,000000 7,000,000 7,000,000 7,000,000 35,000,000r"Loan Proceedslrom Flnandal InSll'UM"" PhpInclu.ive ef Permll Fee 55,661,765 47,021,854 59,333,522 69,804,970 32,864,474 265,688,584Total Ca.h Inficw., Ph 142,131,905 136,446,758 157,005,012 173,646,894 143,391,680 754.626,427

Avallabl•• CaSh fo, Ca ~x P,o ~c•• 195,023,4-40 166,370,637 137190,928 127,418,278 50,861,059 607,517,983

Cash Outflows:CAPEX Re ulremenl'Fund~d b L~an",New Ca •• 56,438,476 46,671,615 56,691,633 69,066,619 32,616,825 263,708,789Funded b RFSC:N~w Ca •• 91,056.866 110,646,998 81,554,475 95,990,695 71,321,074 460,770,310

CAPEX D~bl S~MC~N_Ca " 6,454.516 11,e46,ee6 18,613,263 28,551,034 63,495,7<2Old Loans 16,500,000 21,000,000 20,000000 25000.000 N,OOO,OOO 106,500,000

ERC Permit Fee. eK 075% 1,106,215,06 1,161,391,10 1,126,347.31 1,236,082.66 779,556,74 5,433,593Tolal Cash Outflows. eK 187101,559 166,164,721 183.421,543 209,929,060 155,271,490 901,908,394

RFSC Balance End,n e, E~c~ss Shortfall 27,921,661 19614,OB4 46,230,615 62,510,801) 94,390,431 94,390,431Exces. Shortfall on RFSe, Ph IKwh 0,1019 0.0&70 0.1453 0,2422 0.25!5 0.0593

Assumptions:

1. tnccm ••on I~a.~d properties prollid~d at P1M annually,2. Loan proe&eds a'e ",I••as~d al 'h~ b~giMnlngcf lh~ y~a,3 Sal". fe,eeast is based on lhe t=chnical d"partment's proj"""ions using linea' regression ave,aging aI7.58% g,owth ,ale annually.4 Lo~n. ~f8 8vailed of a16% inlere.l. payable in 15 yea" wilh 1 year grace pericd.

If sales will decrease at 10% lower than forecast, rate impactwill be PhPO.1351(kWh.

Overall Indicative Rate Impact of the 2017-2021 Capell ProjectsSales '110% Lowerth.n Forecast, 6% Interest

2017 2018 ,,,. 2020 2021 TOTALForecnted Ene S.leo, KWh 224,267,555 242,136,838 260,261,024 U6,756,270 297,573,762 1,302,995,448RFSC Balance Be ,Ph ,Excess Shortf.1I 52,69' ,536 13,872 765 49,031,728 91,752,155 '45,494,684 52,891,536Cash Inflows:

RFSC Annual Cojleolion Ph 0,28191Kwll 63,221,024 56,256,375 73,357,583 78,581,393 83,865,043 ~57,~14,417RFSC Annual Cojlectlon er rale im actAnnuallncorne on Leased Pro erties 1,000,000 1,000,000 1,000,000 1,000,000 1.000,000 5,000,000From Share Ca ilal 7,000,000 7,000,000 7,000,000 7,000,000 7,000,000 35,000,000Loan Proceeds from~:;nanoialln.litutions, Phpindusive of Perm~ Fee 56,861,765 47,021,654 59,333,522 69604,970 32,854,474 255,565,584Total Cash Innows, Ph 128,082,788 123,260,229 140,701,108 155,186,363 124,750,517 573,001,001

Available Cash for Ca ex Pro ects 180,974324 137,152,99~ 91,559,377 64,434,196 20,744,357 725,892,5~7

Cash Outflows:CAPEX Re uirement:Funded b Loans: .NewCa " 56,4~8,476 45,571,615 58,891,833 69,086,819 ~2,619,825 263,708,769Funded b RFSC:NewC. •• 91,056,668 110,846,999 91,554,475 95.990,895 71,~21,074 460,770,~10

CAPEXDebl Service .New C. ex 6,484,515 11,646,888 18,613,283 25,551,034 63,495,722Old Loans 18,500,000 21,000,000 20,000,000 25,000,000 24,000,000 106,500,000

ERe Permit Fee, Ph 0.75% 1,106,215,06 1,181,391,10 1,128,347 ~1 l,2~8,062,65 779,556.74 5,433,593Tolal Cash Outflows, Ph 167,101.559 186,164,721 183,421,54~ 209.929,060 155,271,490 901,908,~94

RFSe Balance Endin ,Ph Excess ShOl1fall 1~,872,755 49,031,728 91,752,166 145,494,654 178,0'5,857 176,015,857Excess Shortfall on RFSC, Ph IKwll 0,0619 0,2025 0,3525 0,5219 0,5915 0.1351

ERC CASE NO. 2017-039 RCNotice of Public Hearing/10 August 2017Page 15 Of19

If there is an additional increase in rate base, rate impact willbe PhPo.0950/kWh.

Overall Indicative Rate Impact of the 2017-2021 Capex ProjectsInteresl a16,5%

2017 2018 2019 2020 2021 TOTALForecasted Ene, Sales, KWh 249,186,172 269040931 289178915 309,729,189 330,637,513 1,447,772,720RFSC Balance Be . Ph • Excess Shortfall 52891 536 20,S9l,n3 34 B65,699 69,562,313 115,334,850 52.891 536Cash Inflows:

RFSC Annual Collection Ph D.2Bl9/Kwh 70,245,582 75,842,638 81,519,536 87,312,558 93,206,715 408,127,130RFSC Annual Collection er raIl' 1m aelAnnual Income on Leased Pm rtles 1 000,000 1,000,000 1,000,000 1,000,000 1,000,000 5,000,000

From Share Ca ~al 7000 000 7,000,000 7,000,000 7,000,000 7,000,000 36,000,000Loan Proceeds from Flnsndallnstilutlons, Php

flnclusive of Permit Fee 56,861,765 47,021,854 59333522 69,604970 32,664,474 265,686584Total Casllinfiows, Ph 135,107,346 130,864,492 148,853058 164,917,629 134,071,186 713,813,714

Available Cash lorCa ex Pro'eds 187,968,882 151,761,815 114,196,359 95,265,316 18,736,339 766,705,250

Cash Outflows:CAPEX Re uirementFunded b Loans:New Ca ex 56,436,476 46,671,815 56,691,633 69,OB6,619 32,619,825 263,706,769

Funded b RFSC:New Ca ex 91,056,888 110846999 91,554,475 95,990,695 71,321,074 460770310

CAPEX Debt Service .New Ca ex 6,718,309 12,274,017 19,284,366 27,508,308 65,785,002Old Loans 18,500,000 21,000,000 20,000,000 25,000,000 24,000,000 108,500,000

ERC Permit Fee Ph 0.75% 1,106,215,06 1,181,391,10 1,128,347,31 1,238,082.86 779,556.74 5,433,593Total Cash Outflows, Ph 167,101,559 186,418,514 163,848,672 210,600,165 156,228,763 904,197,674

RFSC Balance Endin ,Ph Excess Shortfall 20897,323 34656699 69,652,313 115,334,650 137492424 137492,424Exces" Shortfall on RFSC, Ph II<wh 0,01139 0,1288 0,2409 0,3724 0.4158 0,0950

If there is a decrease m rate base, rate impact will bePhPo.0918/kWh.

Overall Indicative Rate Impact of the 2017.2021 Capex ProjectsInlerest at 5 5%

2017 2018 2019 2020 2021 TOTALFore<:asled Ene, Saln KWh 249,186,172 269,040,931 289,178.915 309,729,189 330,637,513 1,447,772,720RFSC Balance Be ,Ph, Excess Shortfall 52,891,536 20,897,323 34,194,007 68,344,304 112,698,720 52,891,538Cash Inflows:

RFSC Annual Collection Ph 0,2619/Kwh 70,245,582 75,842,638 61.519536 87,312,658 83,206,715 408,127,130RFSC Annual Collection er rale 1m actAnnual Income on Leased Pro ertles 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 5,000,000From Shllre CII ;tal 7,000,000 7,000,000 7,000,000 7,000,000 7,000,000 35,000,000LOlln Proceeds from Financial Institutions, Phpinclusive 01 Perm;1 Fee 56,661,765 47,021,854 59,333,522 69,604,970 32,654 474 265,886,584Total Cash Inflows, Ph 135,107,346 130,664,492 148,853,058 164,917,629 134,071,169 713,813,714

Available Cash for Ca ex Pro'eels 187,998,882 151,761,815 114,659,052 96,573,324 21,372.469 766,705,250

Cash Ou/Mows:CAPEX Re U1rementFunded b Loans:New Ca ex 56,438,476 46,671,815 58,891,833 69,086,819 32,819,825 263,706,169

Funded b RFSC'NewCa ex 91,058,868 110,846,999 91,554,475 95,990,895 71,321,074 460,770,310

CAPEX Oebt ServiceNewCa ex 6,255,617 11,428,701 17,958,247 25,613,800 63,495,722Old Loans 18,500,000 21,000,000 20,000,000 25,000,000 24,000,000 108500,000

ERC Permil Fee, Ph 0.75% 1,106,21508 1,181,391,10 1,128,347,31 1,236,082.86 779,556,74 5,433,593Total Cash Outflows, Ph 167,101,559 165,955,622 183,003,356 209,272,044 154,334,256 899,667,037

RFSC 8alllnce Endin , Ph Excess Shortfall 20,697,323 34,194,007 66,344,304 112,698,720 132961,767 132,981,787Excess Shortfall on RFSC, Ph /Kwh 0,0839 0,1271 0,2363 0,3639 0,4021 0,0918

[17] PALECO submitted the following documentary requirements insupport of this Application, copies of which are attached to theApplication as annexes:

a. Gantt Chart Schedule of the proposed CAPEX Projects asAnnex "F";

ERC CASE NO. 2017-039 RCNotice of Public Hearing/tO August 2017Page 16 Of19

b. Project Cost Estimates which has to be in reference to thesubmitted engineering design and bill of materials as Annex"G"j

c. Technical Analysis (Summary of Options/Alternativesconsidered, simulations and interpretation of resultsshowing the electrical effects of the proposed projects, suchas power transformer loadings, voltage drops, power quality,power factor, system loss, frequency, harmonics, load/phasebalancing etc. Criteria and System Performance without andwith the proposed project) as Annex "H";

d. Economic Analysis (Summary of technically feasible projectsthat are evaluated, the present value oflife cycle costs of eachproject alternative, and the financial indices (NPV and B/C).Mandatory project must be marked as least-cost) as Annex"I";

e. Annexes (Data and assumptions used in the technical andeconomic analysis, calculation sheets, summary reports, andother relevant information, such as diagrams, drawings andpictures) as Annex "J";

f. PALECO'sDDP asAnnex "K";

g. Project Financing Plan as Annex "L"; and

h. Sworn statement from the authorized representative ofPALECO that an application for approval from the concernedagencies that may have interest in the proposed project willbe filed no later than , 2017 and furnish theHonorable Commission a copy within five (5) days uponfiling as Annex "M";

[18] In compliance with Section 2, Rule 6 of the ERG Rules ofPractice and Procedure, PALECO furnished the LegislativeBody of Puerto Princesa City, where it principally operates, andthe Legislative Body of Provincial Government of Palawan, withcopies of Application, together with all its annexes andaccompanying documents. It also caused the publication of theApplication, excluding its annexes, in a newspaper of generalcirculation within its franchise area;

[19] PALECO submitted the following docnments to prove theforegoing compliances: a) Affidavit of Service executed by Ms.Nerisa S. Regal, Polity Advocacy Officer and RegulatoryCompliance Officer, and the first page of the Applicationbearing the stamp "RECEIVED", copies of which are attachedhereto as Annexes "N" and "0", respectively; b) Affidavit ofPublication executed by the Editor, and the original copy of thenewspaper showing the published Application, copies of whichare attached hereto as Annexes "P" and "Q", respectively;

ERCCASE NO. 2017-039 RCNotice of Public Hearing/to August 2017Page 170f19

[20] Prior to the filing of this Application, a pre-filing conference withthe concerned staff of the Honorable Commission wasconducted pursuant to Section 4, Rule 6 of the ERC Rules ofPractice and Procedure for purposes of determiningcompleteness of the supporting documents attached herewith;

ALLEGATIONS IN SUPPORT OF THE PRAYER FORPROVISIONAL AUTHORITY

[21] Public interest and necessity requires the immediateimplementation, without delay, of the subject CAPEX Projectsin order to ensure continuous, safe and reliable electric service,and compliance with safety and performance standards of itsdistribution system. Moreover, the immediate implementationof these projects will avert possible emergency situations and atthe same time, address the forecasted growth in the electricitydemand of its member-consumers;

[22] Thus, pending final approval, there is an urgent need for aprovisional authority for PALECO immediately implement itsproposed CYs2017-2021 CAPEXProjects;

[23] The implementation of the foregoing CAPEX Projects for CYs2017-2021 will ultimately redound to the benefit of PALECO'smember-consumers in terms of continuous, reliable andefficient power supply.

PRAYER

WHEREFORE, the foregoing premises cousidered, the ApplicantPalawan Electric Cooperative most respectfully pray that:

1. Pending trial on the merits, immediately issue a PROVISIONALAUTHORIlY authorizing PALECO to implement its CAPEXProjects for CYs2017-2021;

2. After due hearing, render judgment making the approval of theApplication permanent;

3. Grant PALECO the authority to obtain a loan from NEA or bankto finance its CAPEXprojects; and

4. PALECObe allowed to recover from its members-consumers thecost of the CAPEX Projects, updated up to the time of tbeapproval.

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

ERCCASENO. 2017-039 RCNotice of Public Hearing/lo August 2017Page 18 of19

The Commission has set the Application for determination ofcompliance with the jurisdictional requirements, expositorypresentation, Pre-trial Conference, and presentation of evidence on14 September 2017 (Thursday) at nine o'clock in themorning (9:00 A.M.), at PALECO's Principal Office,Barangay Tiniguiban, Puerto Princesa City,Palawan.

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

I. The petitioner's name and address;

11. The nature of petitioner's interest in the subject matter ofthe proceeding and the way and manner in which suchinterest is affected by the issues involved in the proceeding;and

lll. 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 case may filetheir Opposition or Comment thereon at any stage of the proceedingbefore Applicant rests its case, subject to the requirements underRule 9 of the 2006 Rules of Practice and Procedure. No particularform of Opposition or Comment is required, but the document, letter,or writing should contain the following:

1) The name and address of such person;

2) A concise statement of the Opposition or Comment; and

3) The grounds relied upon.

All such persons who wish to have a copy of the Applicationmay request from Applicant that they be furnished with the same,prior to the date of the initial hearing. Applicants are hereby directedto furnish all those making such request with copies of theApplication and its attachments, subject to the reimbursement ofreasonable photocopying costs. Any such person may likewise

ERC CASE NO. 2017-039 RCNotice of Public Hearing/tO August 2017Page 19 Of19

examine the Application and other pertinent records filed with theCommission during the standard office hours.

WITNESS, the Honorable Officer-in-Charge of ERCALFREDO J. NON, and the Honorable Commissioners GLORIAVICTORIA C. YAP-TARDC and GERONIMO D. STA. ANA,Energy Regulatory Commission, this 10th day of August 2017 at PasigCity.

JOSEFINA PATRICOversight Commis 0

GPALE-ASIRITrfor Legal Service