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IN THE MATTER OF THEAPPLICATION FORAPPROVAL OF THE POWERSUPPLY AGREEMENT (PSA)BETWEEN MANILA ELECTRICCOMPANY (MERALCO) ANDPHILIPPINE POWER ANDDEVELOPMENT COMPANY(PPDC), WITH PRAYER FORPROVISIONAL AUTHORITY

ERC CASE NO. 2014-075 RC

MANILA ELECTRIC COMPANY(MERALCO) AND PHILIPPINEPOWER AND DEVELOPMENTCOMPANY (PPDC),

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

f.)OCK.X.1l. • AUG 2 8 2014

Date. •..•-tz!(... "'-~'-... -~.llIvo: __ •• __ •• __ •• -

NOTICE OF PUBLIC HEARING

TO ALL INTERESTED PARTIES:

Notice is hereby given that on June 2, 2014, Manila ElectricCompany (MERALCO) filed an application for the approval of itsPower Supply Agreement (PSA) with Philippine Power DevelopmentCompany (PPDC), with prayer for provisional authority.

In the said application, MERALCO alleged, among others, thefollowing: ;

1. It is a private corporation existing under the laws of theRepublic of the Philippines, with principal office located atLopez Building, MERALCO Center, Ortigas Avenue,Pasig City;

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2. It has a legislative franchise to operate and maintain adistribution system in the Cities/Municipalities of MetroManila, Bulacan, Cavite and Rizal and certainCities/Municipalities/Barangays in Batangas, Laguna,Quezon and Pampanga, pursuant to Republic Act No.9209, and is authorized to charge all its customers fortheir electric consumption at the rates approved by theCommission;

3. PPDC is a corporation duly organized and existing underthe laws of the Philippines. It owns and operates three (3)run-of-river hydro power plants, namely: (1) Palakpakin, a448 kW hydro power plant located at Brgy. Prinza,Calauan, Laguna; (2) Calibato, a 75 kW Calibato hydropower plant located at Brgy. Sto. Angel, San Pablo City,Laguna; and (3) Balugbog, a 528 kW hydro power plantlocated at Brgy. Palina, Nagcarlan, Laguna. It offered tosupply and sell to MERALCO its electric capacity andenergy produced from said power plants;

4. In support of the development of renewable energy in thecountry, it accepted the offer of PPDC. Thus, on May 15,2014, it executed a PSA with PPDC for the purchase ofelectric capacity and energy from the latter's power plantfor up to 1,051 kW. The Contract Price under Section 2.3of the PSA is as follows:

"2.3. Contract Price. The Contract Price isPhP 5.0056 per kWh, plus any governmentalcharges stipulated in Section 6.2. Provided,that, the Franchise and Benefits to HostCommunities (FBHC) charge shall not formpart of and is excluded from the computationof the Contract Price. For avoidance of doubt,all taxes pertaining to the Power Supplier,including but not limited to the FBHC charge,shall be shouldered by and for the soleaccount of the Power Supplier. Any violationof this Section shall be a ground fortermination of this Agreement upon priornotice. JJ

5. The PSA it executed with PPDC, a copy of which isattached to the application as Annex UB" and made an


integral part thereof, contains the following salientfeatures:

"2.OBLIGATIONS, DELIVERIES & CONTRACTPRICE

2.2. Take and Pay Contract. Subject toSection 2.5 hereof, MERALCO shall accept allenergy deliveries by Power Supplier andMERALCO shall pay for such energy (in kWh)delivered by Power Supplier as measured byMERALCO's Billing Meter based on theContract Price.

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2.5. Regulatory Approvals. After signing,MERALCO shall file an application with theERC for the approval of this Agreement.However, both parties shall cooperate in thisundertaking and Power Supplier shall provideall the necessary support including thesubmission of all the documents required toexpedite the approval of the Agreement.

If, in connection with the ERC Application, theERC, in its provisional and/or final approval,requires any portion of any sum that has beenpaid by MERALCO to Power Supplier to beadjusted, the Power Supplier shall make thenecessary adjustments in accordance with thedirection of the ERC. Any disallowance of theContract Price, or any of its components forrecovery from end-users shall be for the soleaccount of, and shall be refunded by, thePower Supplier and shall not prejudiceMERALCO.

3.CONTRACT DURA TION

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3.1. Term of Agreement. This Agreement shallbecome effective immediately upon receipt byMERALCO of the Delivery PeriodCommencement Date Notice from PowerSupplier and shall remain in full force andeffect for a period of FIVE (5) YEARStherefrom unless earlier terminated underSections 9. 1 and 9.2.

3.2. Extension. This Agreement may beextended under the same terms andconditions unless a party gives written noticeto the other party of its intention not to extendthe Term, at least thirty (30) days prior to theintended date of termination.

4.BILLING AND PAYMENT

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4.2. Timeliness and Manner of Payment. Allinvoices under this Agreement shall be paidon due date by MERALCO unless the same isdisputed due to manifest error, apparentinvalidity and not in accordance with the termsof this Agreement. Any undisputed amountswhich is not paid by due date will be deemeddelinquent and will accrue interest underSection 4.8 hereof

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4.5 Disputed bills, other than those due tomanifest error, apparent invalidity and thosewhich are not in accordance with the terms ofthis Agreement, shall be paid by MERALCOwithout deductions or offsets and shall not bean excuse or ground for MERALCO to delaypayment of succeeding billings or tounilaterally deduct any amount therefrom,provided, however, that Power Supplier shallact in good faith in resolving the dispute andshall not unreasonably withhold action ordelay the resolution of the dispute. Disputed


bills, other than those due to manifest error,apparent invalidity and those which are not inaccordance with the terms of this Agreement,not paid by MERALCO shall be subject toSection 4.8. However, if the dispute isresolved in favor of MERALCO, the paymentfor the bill including interest shall be offsetagainst outstanding obligations of MERALCOto the Power Supplier.

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6.GOVERNMENTAL CHARGES AND WESMCHARGES

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6.2. Governmental Charges. All value addedtaxes, sales taxes, goods and services taxes,excise taxes, import duties, documentarystamp taxes and similar taxes imposed by anygovernment authority ("GovernmentalCharges'') on or with respect to the Product,shall form part of the Contract Price and areconsidered pass-through charges. The PowerSupplier's own income taxes, property taxesand local business taxes are for its account.In the event the Power Supplier is required byApplicable Laws to remit or pay any suchGovernmental Charges, such amounts will beset forth in the invoice for the next subsequentBilling Period and shall be due and payable byMERALCO according to the provisions of thisAgreement. Any changes to theseGovernmental Charges, upward or downward,or the imposition of additional GovernmentalCharges that are approved to be collectedfrom the end-users, will affect the ContractPrice invoiced to MERALCO.


7.MISCELLANEOUS

7. 1. This Agreement shall be binding upon theparties from execution thereof up to, andincluding, the Termination Date unlessotherwise earlier terminated by either party inaccordance with this Agreement; provided,however, that such termination shall not affector excuse the performance of either Partyunder any provision of this Agreement that byits terms survives any such termination.

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9.TERMINA TION

9.1 Either party may terminate the PSA forany material breach of its terms andconditions upon thirty (30) Days prior writtennotice to the other party.

9.2 This Agreement may also be terminated,subject to thirty (30) day prior notice, uponeffectivity of the Feed-in Tariff Allowance (FIT-All) and should Power Supplier qualify and optto avail of the FIT rates under Republic Act9513 (otherwise known as the RenewableEnergy Act of 2008 and its ImplementingRules and Regulations.

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6. Shown below is the simulation of the rate impact of thePhP5.0056 per kWh Contract Price under the PSA itexecuted with PPDC as against the WESM rate:

ERC CASE NO. 2014-075 RCNOTICE OF PUBLIC HEARING/August 22,2014 of 9

Rate Impact SimulationWESM Price vs PHP5,~056/kWhMarch 2014

EnergyCapac~ Supplied Load(M~ (GWh) Fador1.0~ 0,19 26,25%

Average Monlhly Rate(P~Wh)

@WESM Rale @ PSA Rale6,3354 5,0056

GeneranonCosl MeralcoSavingsI (losses) 01CSE Generalion Charge

overWESMRates (PiKWh)(P~'Ml) (Ph? million) wlo ?SA VII PMl.m8 0,25 5,8991 5,8995

Increase I (Decrease) inGeneralbn Charge

due to Philpodeco CSE(P~Wh)~.OO0113

Notes:PPDC ene~y, WESM prices and Generalion Charge were based on ac!ual billing dala for the March 2014 supply monlli

7. As seen above, the PhP5.0056/kWh Contract Price wouldresult in cost savings in the blended generation rate ofabout PhP1.3298. This translates into a PhP(0.000113)per kWh decrease in the generation charge should thePSA it executed with PPDC be implemented;

8. The Contract Price provides a much lower cost of powercompared to that of the WESM, where the simulated costis PhP6.242 per kWh. In addition to this benefit of lowercost of power, PPDC's power plant is an embeddedgenerator. Thus, the delivery of power from said plantprovides benefits in terms of support for its distributionsystem and savings on purchased power since there areno transmission charges and systems losses;

9. The immediate implementation of the PSA would not onlyredound to the benefit of the consumers in terms ofenvironmental benefits but would also contribute to thegovernment initiative of encouraging the development ofrenewable energy in the country by providing availablemarket for renewable energy;

10. There is a paramount urgency and necessity toimplement the subject PSA. In support of the instantapplication, the Judicial Affidavit of Mr. Ciprinilo C.Meneses, Head of its Energy Sourcing Office, is attachedto the application as Annex "C"; and


11. It prays that after hearing on the merits, a Decision beimmediately rendered approving the PSA it executed withPPDC and that pending hearing, a provisional authoritybe immediately issued authorizing it to implement theproposed Project.

On August 18, 2014, PPDC filed a "Motion to Intervene (Join)as Co-Applicant with Entry of Appearance" praying that it be includedas a co-applicant in the instant application, being a co-party in thePSA.

The Commission has set the said application for jurisdictionalhearing, pre-trial conference, expository presentation and evidentiaryhearing on September 25, 2014 (Thursday) at ten 0' clock in themorning (10:00 A.M.) at the 15th Floor, Pacific Center Building,San Miguel Avenue, Pasig City.

All persons who have an interest in the subject matter of theproceeding may become a party by filing, at least five (5) days prior tothe initial hearing and subject to the requirements in the ERC's Rulesof Practice and Procedure, a verified petition with the Commissiongiving the docket number and title of the proceeding and stating: (1)the petitioner's name and address; (2) the nature of petitioner'sinterest in the subject matter of the proceeding, and the way andmanner in which such interest is affected by the issues involved in theproceeding; and (3) a statement of the relief desired.

All other persons who may want their views known to theCommission with respect to the subject matter of the proceeding mayfile their opposition to the application or comment thereon at anystage of the proceeding before the applicants conclude thepresentation of their 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 concisestatement of the opposition or comment and the grounds relied upon.

All such persons who may wish to have a copy of theapplication may request the applicants, prior to the date of the initialhearing, that they be furnished with a copy of the application. Theapplicants are hereby directed to furnish all those making a requestwith a copy of the application and its attachments, subject toreimbursement of reasonable photocopying costs. Likewise, any

ERC CASE NO. 2014-075 RCNOTICE OF PUBLIC HEARING/August 22,2014 of 9

such person may examine the application and other pertinent recordsfiled 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 RegulatoryCommission, this 22nd day of August, 2014 at Pasig City.

ATTY.~s ;';;;:RNINO c. JUANExe utive Director III

date. ••-tz!( '-~'- llivo: - energy regulatory commission erc case no. 2014-075...

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