energy regulatory commission san miguel avenue, pasig … of public... · erc case no. 2015-007 rc...

Republic of the PhilippinesENERGY REGULATORY COMMISSION

San Miguel Avenue, Pasig City

IN THE MATTER OF THE JOINTAPPLICATION FOR APPROVALOF THE POWER SUPPLYAGREEMENT (PSA) ENTEREDINTO BY AND BETWEENILIGAN LIGHT AND POWER,INCORPORATED (ILPI) ANDPOWERSOURCE PHILIPPINESENERGY, INCORPORATED(PSPEI), WITH PRAYER FORTHE ISSUANCE OFPROVISIONAL AUTHORITY

ILIGAN LIGHT AND POWER,INCORPORATED (ILPI) ANDPOWERSOURCE PHILIPPINESENERGY INCORPORATED(PSPEI),

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Notice is hereby given that on January 14. 2015, IIigan Lightand Power. Incorporated (ILPI) and PowerSource Philippines Energy.Incorporated (PSPEI) filed a joint application for approval of theirPower Supply Agreement (PSA), with prayer for the issuance ofprovisional authority.

ERC Case No. 2015-007 RCNOTICE OF PUBLIC HEARING/February 2, 2015 of 21

In the said joint application. ILPI and PSPEI alleged, amongothers. that:

Nature of the Application

1. The joint application is submitted to the Commission fordue consideration and approval of the PSA executed byand between ILPI and PSPEI pursuant to Rule 20 (B) ofits Rules of Practice and Procedure approved on June 22,2006 in Resolution No. 38, Series of 2005 (the ERCRules) and other relevant rules and regulations;

2. ILPI is a private electric distribution utility duly organizedand existing under and by virtue of the laws of theRepublic of the Philippines with principal office address atBro. Jeffrey Road, Palao-o, lIigan City. It holds afranchise to operate a light and power service in the Cityof lIigan (the Franchise Area);

3. PSPEI is a corporation duly organized and existing underthe laws of the Re~ublic of the Philippines with itsprincipal office at 10 h Floor. The Athenaeum Building,160 Leviste Street, Salcedo Village, Makati City. It is inthe process of securing its Board of Investments (801)Certificate of Registration and will submit to theCommission a copy of said document during the courseof the proceedings for the joint application;

4. In compliance with Rule 6 of the ERe Rules, a copy of theinstant joint application with all its annexes andaccompanying documents was furnished to theSangguniang Panlungsod of IIigan;

5. Furthermore, they caused the publication of the presentjoint application in its entirety, excluding its annexes, in anewspaper of general circulation within the FranchiseArea;


Statement of Facts

6. Under Section 23 of Republic Act No. 9136 or the ElectricPower Industry Reform Act of 2001 (EPIRA), aDistribution Utility (DU) shall have the obligation to supplyelectricity in the least cost manner to its captive market,subject to the collection of retail rate duly approved by theCommission;

7. In accordance with the EPIRA provision, the Departmentof Energy (DOE), through Circular No. 2003-12-11,particularly, Section 1 thereof declared that "[a)1Idistribution utilities must henceforth take cognizance andassume full responsibility to forecast, assure and contractfor the supply of electric power in their respectivefranchise areas to meet their obligations as a distributionutility":

8. It must be noted that Mindanao, including IIigan Citywhere ILPI principally operates, has long beenexperiencing widespread rotational power interruptionsdue to power supply deficiency. These powerinterruptions adversely affect the businesses and the livesof the electricity consuming pUblic. According to the2012-2013 Supply-Demand Outlook issued by the DOE, atotal of 1,600 MW additional capacity is needed during theplanning period to meet the electricity demand and therequired reserve margin of the Mindanao Grid:

9. The Power Sector Assets and Liabilities ManagementCorporation (PSALM)/National Power Corporation (NPC)is the main power supplier in the Mindanao Grid and ofILPI. PSALM/NPC has a Contract for the Supply ofElectricity (CSEE) with ILPI which expired last December25,2012. The said CSEE was renewed up to December25, 2016 but the contract volume was significantlyreduced by an average of thirty-five percent (35%). As aresult ILPI was forced to implement rotational brownoutsand to procure power supply from more expensivesources;

10. During the Customer's Forum held in Davao City onAugust 11. 2014, PSALM presented the Mindanao PowerSupply Outlook for 2015-2016. It declared that the supply

ERC Case No. 2015·007 RCNOTICE OF PUBLIC HEARING/February 2,2015 of 21

allocation for its customers for 2015 will be reduced by amaximum of eighteen percent (18%) and will be furtherreduced in 2016 to a maximum of forty-six percent (46%).These will result to a reduction in ILPI's average PSALMallocation down to only 10.9 MW. In addition, there isuncertainty of electricity supply coming from PSALM afterthe CSEE expires on December 25, 2016;

11. Notably, PSALM has issued a certification confirming thatit has insufficient capacity to supply ILPl's additionalpower requirements beyond the contracted energy andequivalent demand in the current power supply contract;

12. ILPl's energy and demand requirements are projected tosignificantly increase in the next few years based on theexisting growth rate of 2.30/0 per annum, as evidenced byILPl's Distribution Development Plan (DDP) and PowerSupply and Demand Scenario;

13. Moreover, ILPI's demand is expected to increase evenfurther as the local government of IIigan City is takinginitiative to rehabilitate and operate the facilities of theNational Steel Corporation (NSC), one of the largest steelmanufacturing plants in Asia. 1 It is important for ILPI,being the franchised distribution utility, to procureadditional capacity to service the requirements of theNSC plant and contribute to the economic improvement ofthe City of lligan;

14. Therefore, to ensure power supply adequacy in lliganCity, it is imperative for ILPI to enter into long-term powersupply contracts from suppliers other than PSALM;

15. Starting 2012, ILPI solicited offers from generationcompanies to supply its growing power requirements.Among the offers ILPI considered and evaluated wasfrom PowerSource Philippines, Incorporated (PSPI) whichcommitted to build a 20MW embedded power plant withinthe Franchise Area through a Special Purpose Company,herein PSPEI. PSPEI's power plant is scheduled to becommissioned in December 2018;

1 "lIIgan City to Revive Mothballed NSC", Manila Bulletin, August 17, 2014,www.mb.cQm.ph

http://www.mb.cQm.ph

ERC Case No. 2015-007 RCNOTICE OF PUBLIC HEARING/February 2. 2015 of 21

16. Based on ILPI's evaluation, it was determined that theproposal of PSPEI is advantageous to its customers.Considering that the power plant of PSPEI will be locatedwithin the Franchise Area and will be connected directlyto ILPI's power distribution network, ILPI will be able toavoid paying transmission charges to the National GridCorporation of the Philippines (NGCP):

17. In addition to the cost savings, since PSPEI is anembedded generator, it is capable of delivering electricityof better quality and reliability since its power plant will besubjected to fewer power interruptions arising from grid-related faults and/or transmission line constraints. It isalso obligated to supply ILPI back-up energy and capacityduring forced outage beyond allowable threshold levels;

18. Given the need to secure long-term power supply andconsidering the advantages of procuring electricity fromPSPEI, and following extensive negotiations, they signedthe PSA sUbject of the instant joint application onNovember 28,2014;

Salient Features of the PSA

19. Generation Facilities. The electric power supply will comefrom a 1 x 20 MW Circulating Fluidized Bed CombustorBoiler (CFBCB) coal-and-biomass-fired power plant to beconstructed. owned and operated by PSPEI (the PSPEIPower Plant). The PSPEI Power Plant has beendesigned as a baseload plant expected to operate on a24/7 basis;

20. Commercial Operation Date. Subject to the satisfactionof certain conditions precedent enumerated in the PSA,the Commercial Operation Date is on December 26. 2018or such later date as may be agreed upon by them;

21. Term. The term shall be twenty-five (25) years from theCommercial Operation Date;

22. Contracted Capacity. The Contracted Capacity of 12,000kW is to be made available by PSPEI to ILPI to meet the


latter's baseload requirements as indicated in and subjectto the terms and conditions of the PSA:

23. Stages of Supply. PSPEI shall supply power to ILPIduring commissioning of the PSPEI Power Plant andthereafter, during full commercial operations of said plant.ILPI will pay a lower rate during commissioning, asdiscussed in the subsequent paragraphs;

24. Generation Charge. ILPI shall pay the generation chargeconsisting of variable and fixed charges, subject to annualadjustments. The generation charge to be paid by ILPIwill depend on whether power is delivered before theCommercial Operation Date or beginning on CommercialOperation Date. ILPI will pay the Monthly Payments forelectricity supplied beginning on Commercial Operationand the Commissioning Output Charge for electricitysupplied prior to the Commercial Operation Date:

The formula for computing these charges are as follows:

A. Beginning on Commercial Operation Date

ILPI will pay PSPEI the Monthly Payments on a monthlybasis in accordance with the following formula:

CRF + Fixed O&M +Variable O&M + Fuel Cost+ Taxes + RCP

Capital Recovery Fees which shall be computed asfollows:

CRFbase * CC· [ForexadJ + 100%]


ForexadJ =

Base Capital Recovery Fee, inPhP1,414.52/ kW

The weighted average Foreignexchange rate (in PhP per US$), ascertified by an independent externalauditor, based on actual receipts fordollar-denominated payments made tocontractors during construction anddevelopment until the ScheduledOperations Date

The total amount subject to adjustmentfor changes in the Foreign exchangerate shall not exceed US$45.5 million

To illustrate, if PSPEI pays for US$ 20Million of the total US$45.5 Millionbudget at a Foreign Exchange rate ofPhP45.00 per US$1.OOand pays for theremaining US$ 25.5 Million in PhP40.00per US$1.00, the Forexadj shall becomputed as «PhP45.00 perUS$1.OO)*(US$20 Million) + (PhP40.00per US$1.OO) * (US$25.5Million))/(US$45.5 Million) or PhP42.20per US$1.OO

The factor to adjust the CRFbase forchanges in the Foreign exchange rate(PhP per US$) during construction anddevelopment.

It shall be computed as the percentincrease or decrease of the ForexcoNsTto the ForexbBsemultiplied by 98.69%

To illustrate, if ForexCONSTequalsPhP42.20 per US$1.OO,ForexadJshall be[(PhP42.20 per US$1.OOI PhP42.00 perUS$1.00) -1] * (98.690/0) or 0.46%


Base Capital Recovery Fee. inPhP1.414.52/ kW

PhP42.00 per US$1.00

Contracted Capacity, in kW

The Fixed O&M Fee covers the operating andmaintenance costs of the Power Plant. It shall becomputed according to the following formula:

Fixed O&M = [(PH O&Mbale * PH CPI Index) + (USO&M baso * US CPI Index * FX Index) ] *CC

PH O&MbsS8 = Actual Base Philippine Peso O&M Feein PhP418.34/kW

PH CPllndex = Which shall be calculated as the ratio ofthe Philippine Consumer Price Index(CPI) for All items, as posted by theBangko Sentral ng Pilipinas (BSP) inwww.bsp,aov.ob for the month in whichthe Billing period starts and thePhilippine CPI [for All Items] as of themonth of the signing of the agreement

US O&MbBse = Actual Base US Dollar O&M Fee inPhP220,97/kW

US CPI Index = Which shall be calculated as the ratio ofthe United Stated (US) CPI for All Items.as posted by the Bureau of LaborStatistics (BLS) in www.bls.gov for themonth in which the Billing period startsand the US CPI for All Items as of themonth of the signing of the agreement

http://www.bsp,aov.ob

http://www.bls.gov


= Which shall be calculated as the ratio ofthe Peso to US Dollar exchange rate, aspublished by the asp on the meterreading date and PhP42.00 perUS$1.00

A.3 Variable Operation & Maintenance Fee (VARO&M)

The Variable O&M Fee covers the cost of the use of,among other items, chemicals, lubricants, spare parts,that are directly related to the generation of the PowerPlant. It shall be computed according to the followingformula:

VARO&M = VAR O&Mba •• • PH CPllndex· ED

Where:

VAR O&Mbaae = Actual Base Philippine Peso O&MFee in PhPO.5722/kWh

PH CPllndex - As defined in Section 2.2 of this-Schedule B

= Electricity delivered during the billingperiod in kWh

Fuel Cost shall be computed according to the followingformula:

Fuel Cost = [(Coal Cost * CReo•l• Y ) + (BiomassCost * CRbloma•• * (1-Y))]/ConversionFactor * ED + Savingsblomall


= [Coal Pricebase * Coal Price Index +Transport + Tax] * FX Index * FXbas8

Coal PricebBs8 = Fifty percent (50%) of theglobalCOAL Monthly Index forNewcastle (reported under theheading I'NEWC Index") adjusted forcoal quality and fifty percent (50%) ofthe Indonesian low-ranked coal(HBA) price index for Eco Coal, inUS$/MT, for the month in which theAgreement was signed

Coal Price Index = the ratio of 50% of the global COALMonthly Index for Newcastle(reported under the heading IlNEWCIndex") adjusted for coal quality and50% of the from Indonesian low-ranked coal (HBA) price index forEco Coal, in US$/ton, for the monthin which the billing period starts toCoal PricebQ80

= Actual cost of transporting coal fromsource to plant site including coalhandling costs, in US$/MT

= Shall be the Bureau of Customsduties and any other similargovernment charges on coal thatSupplier has actually incurred, inUS$/MT, for the month in which thebilling period starts


CRcoal = Coal consumption rate equal to0.8235 kg/kWh and escalatedthereafter at rate of 1.5% per year

Y = Percentage of energy derived fromCoal

Biomass Cost = Actual delivered cost of Biomass forrice hulls, in PhP/MT

CRblomass = Biomass consumption rate equal to1.1157 kg/kWh and escalatedthereafter at rate of 1.5% per year. Inthe event that any types of Biomassother than rice hulls are available forthe use in the Plant and such use istechnically and commerciallyfeasible, the CRblomsss shall beadjusted to reflect the applicableconsumption rate for such type ofbiomass

(1-Y) = Percentage of energy derived fromBiomass

Savingsblomass = Zero or 50% • [(Coal Cost • CRcos1) -(Biomass Cost *CRblomass)]/Conversion Factor * ED *(1 - Y). whichever is higher

PSPEI has the option to source coal from local sources orprocure biomass if the fuel cost for the locally sourcedcoal or biomass is lower than the fuel cost for foreignsourced fuel as computed in accordance with the aboveformula

ERC Case No. 2015·007 RCNOTICE OF PUBLIC HEARING/February 2, 2015Pase 12 of 21

Taxes shall mean Value Added Tax and other applicabletaxes, if any

The Reimbursable Cost Payment for each billing periodshall be derived from the definitions of ReplacementCapacity and Energy and Back-up Capacity and Energyunder Section 8.6, based on the following formula:

A.6.1 Replacement Capacity and Energy Costs(RCEC)

ILPI shall pay PSPEI Replacement Capacity and EnergyCosts in accordance with the invoice provided by PSPEIof the Replacement Capacity and Energy

ILPI shall pay PSPEI Backup Capacity and Energy Costequivalent to the Monthly Payment had there been noForced Outage

This refers to any applicable ancillary charges by NGCPfor the capacity nominated for ILPI

For reference, a sample computation of MonthlyPayments is shown in Schedule C of the PSA

ERC Case No. 2015-007 RCNOTICE OF PUBLIC HEARING/February 2,2015 of 21

B. Before Commercial Operation Date

For electricity supplied by PSPEI prior to the CommercialOperation Date, ILPI shall pay Commissioning OutputCharge. The Commissioning Output Charge shall becomputed as follows:

Commissioning Output Charge = Variable O&M +Fuel Cost + Taxes

= Computed in accordance with A.3above

= Computed in accordance with A.4above

= as defined in A.5 above

C. Additional Capacity & Dispatchable Energy Charge

ILPI shall pay PSPEI the Additional Capacity andDispatchable Energy Charge for any electricity supplied inexcess of the Contracted Capacity and DispatchableEnergy at the Commission-approved rate

25. Ancillary Charges, Taxes, Similar Fees. All ancillaryservice charges, taxes, fees and other imposts areincluded in the monthly bill and shall be payable by ILPI;

26. Prompt Payment Discount (PPD). ILPI is entitled to aPPD of one percent (1%) of the Capital Recovery Fee forthe billing period if payment is made in full earlier than the20th day of the month:

27. Replacement Power During Allowed Outage. Beginningon Commercial Operation Date, during plant outagewithin the Allowed Outage, PSPEI shall sourcereplacement power, on a best effort basis, from othersuppliers of ILPI, or of any third party, including the

ERC Case No. 2015·007 RCNOTICE OF PUBLIC HEARING/February 2, 2015 of 21

Wholesale Electricity Spot Market (WESM) or itsequivalent. Such replacement power shall be at full pass-through cost to ILPI. The Allowed Outage is the sum ofhours allocated for Scheduled Maintenance Outage andForced Outage within the year;

28. Back-up Power in Excess of Allowed Outage. Beginningon Commercial Operation Date. in the event that PSPEIexceeds its Allowed Outage for the year, it shall beresponsible for obtaining power from other suppliers ofILPI, or of any third party. inclUding the WESM or itsequivalent at the Contracted Rate. In case PSPEI isunable to deliver power to ILPI, the latter may opt toprocure power from other sources. In no case howevershall ILPI pay more than the Contracted Rate in thisinstance where: a) PSPEI has exceeded its AllowedOutage for the year; and b) power is sourced from othersuppliers by either ILPI or PSPEI;

29. Start-up Costs. Beginning on Commercial OperationDate, if ILPI fails to accept delivery of electric power fromPSPEI due to reasons attributable to ILPI, the latter isrequired to pay Start-up Costs (which include amongothers the cost of light or heavy fuel oil. additives. waterand sorbents) to PSPEI within thirty (30) days fromreceipt of written demand from PSPEI;

30. Increase / Decrease in Contracted Capacity. During theterm of the PSA, PSPEI may make available to ILPIelectricity in excess of the Contracted Capacity uponwritten request of the latter. Such electricity shall be paidat the Contracted Rate. In anticipation of theimplementation of open access in Mindanao. ILPI mayalso request for a reduction of its demand from PSPEI asa result of the transfer of any of its contestable customers.Such reduction, however, shall be granted only upon thefulfillment of certain reasonable conditions;

31. Security Deposit. Not later than thirty (30) days prior tothe Scheduled Commercial Operations Date, ILPI shalldeliver to PSPEI a Security Deposit in the form of a bankguarantee or irrevocable letter of credit equivalent to thehighest projected monthly payment for the first contractyear, and to the actual highest monthly payment in thepreceding year for every year thereafter. In case ILPI is


unable to pay its obligations under the PSA. PSPEI has aright to draw against the Security Deposit. ILPI has theobligation to maintain the Security Deposit for the durationof the PSA;

32. Adjustments Due to Force Majeure. They are excusedfrom performing their respective obligations under thePSA in the event of Force Majeure, provided that theparty claiming Force Majeure has an obligation to notifythe other party within twenty-four (24) hours from theoccurrence of said force majeure. The PSA term shall beextended equal to the duration of the force majeure event;

33. Assignment. PSPEI has the right to assign the contract toits lenders for financing purposes. In case of suchassignment, ILPI agrees to give either PSPEI or itslenders additional time to cure the event of default whichgave rise to the assignment. In case the assignmentprovision is enforced, ILPI agrees to execute a directagreement with PSPEI's lenders for the assignee to stepinto the rights of the assignor:

34. Termination Fee. If ILPI is unable to remedy a CustomerEvent of Default within ninety (90) days after receipt of aNotice of Customer Default. PSPEI may terminate thePSA and ILPI shall be liable to pay a termination fee(defined in the PSA as IITermination Payment") eqUivalentto seventy-five percent (75%) of the net present value ofthe adjusted Capital Recovery Fees multiplied by theContracted Capacity for the remaining term of the PSAhad it not been terminated. The formula for computingthe Termination Payment is as follows:

NJ'V =t Vallles,_I (I +1'CI1t:)'

= The stream of adjusted CapitalRecovery Fees multiplied by theContracted Capacity for theremaining term of the PSA had it notbeen terminated

ERC Case No. 2015-007 RCNOTICE OF PUBLIC HEARING/February 2,2015 of 21

35. DOE Endorsement. On November 24, 2014. the DOEissued Certificate of Endorsement No. 2014-10-005certifying that the PSPEI Power Plant is consistent withthe government's Power Development Plan (POP);

36. Environmental Compliance Certificate (ECC). PSPEI filedwith the Environmental Management Bureau (EMS) -Department of Environment and Natural Resources(DENR) its application for an ECC on October 30,2014;

37. Cerlificate of Compliance (COe). Pursuant to ERCResolution No.9, Series of 2010. PSPEI shall file itsapplication for a coe not later than three (3) months priorto the commencement of commercial operations;

38. ILPI has conducted a generation rate impact simulation todetermine the impact of the implementation of the PSA onits generation costs. assuming that power to be suppliedby PSPEI is included in its generation mix;

39. A summary of the simulation on IPUls generation rateimpact is shown in the table below:

In PhP/kWhEffective Effective EstimatedBlended Rate Savings from NetBlended

Year Generation Generation Impact: Avoided EstimatedRate Rate WITH Increase/ NGCP Increasel

WITHOUT PSPEI (Decrease) Transmission (Decrease)PSPEI Costs

2019 5.5878 5.8382 0.2504 0.85 _~~96)2020 5.5299 5.7754 0.2455 0.85 (0.6045)-'_ .. __ .~- --

While the table above shows a slight increase in ILPI'sgeneration rate upon entry of PSPEI in its generation mixstarting in 2019, it must be noted that said increase iscounterbalanced by the avoided transmission costs ofNGCP estimated at PhPO.85/kWh (since PSPEI will be an


embedded generator of ILPI) thereby resulting to a netsavings per kWh charged by ILPI to its customers:

Allegations to Support Motion for ConfidentialTreatment of Information

40. Under Rule 4 of the ERC Rules, the Commission may,upon request of a party and determination of theexistence of conditions that would warrant such remedy,treat certain information submitted to it as confidential:

41. They are submitting the following documents pursuant tothe foregoing Rule: PSPEl's Project Cost, WeightedAverage Cost of Capital (WACC) Computation, Sourcesof Funds/Financial Plans, Fuel Procurement Process andBreakdown of O&M Expenses, marked as Annexes "Q",uR", "S", "T" and "U", respectively;

42. These documents contain certain non-public information,data and calculations involving business operations andfinancial trade secrets reflecting PSPEl's investment andbusiness calculations. Under Article 22 of the PSA, theyagreed not to disclose the provisions of the PSA to anythird person except to a party's advisors, agents andcounsels, or to banks and financial institutions providingsecurity for PSPEI's obligations under financingagreements, or to ILPl's prospective investors andlenders;

43. They, thus move that Annexes "Q", uR",uS",uT" and"U" not be disclosed and be treated as confidentialdocuments in accordance with Rule 4 of the ERC Rules.Accordingly, they submit one (1) copy of Annexes "Q","Rn, "S", "T" and "U" in a sealed envelope, with theenvelope and each page of the document stamped withthe word "Confidential";

Summary of Submitted Documents

44. In support of the instant joint application, they submit tothe Commission the following documents which arereferred to herein and summarized below, thus:


AnnexABC

Nature of DocumentP~w~r ~~p-p!y~A9r~~rn_e_~n_t <ILPI's FranchisePSPEI's Securities and Exchange Commission(§§gt~~rtificate of RegistrationPSPEI's Articles of Incor orationPSPEl's Latest General Information Sheet GISProof of receipt by the SangguniangPan/un sod of iii anAffidavit of PublicationCopy of Newspaper where joint application was

ublishedPSALM CertificationILPI's DDPILPI's Su I and Demand ScenarioAffidavit on ILPI's Procuremenn:'rocess_ ..__ ..~.-

Descri tion of PSPEI Power PlantDOE Certificate of EndorsementECC A licationRate 1m act SimulationPrQJ~~tCost COrD utationWACC ComputatiQn_< __««<_«~o_~<,__ ~~<~~Sources of Funds/Financial Plans.•_.~ -_." __.~_" __ o.-.i_ .._~ __

PSPEl's Fuel Procurement ProcessBreakdown of 0 & M Ex ensesSworn Statement from ILPI in Support of Prayerfor Provisional AuthoriSworn Statement from PSPEI in Support ofPra er for Provisional Authorit

Arguments in Support of Motion for ProvisionalAuthority

45. As stated in the foregoing discussion, ILPI's forecasteddemand is expected to increase significantly in thecoming years. In addition, NPC/PSALM's supply isexpected to lower after the CSEE expires in 2016 by amaximum of forty-six percent (46%), as stated in theMindanao Power Supply Outlook for 2015-2016presented by PSALM during the Customer's Forum heldin Davao City on August 11,2014;

46. Based on the Supply and Demand Scenario prepared byILPI, ILPI may suffer a power supply deficit ranging froman average of 8 MW to a maximum of 12 MW in 2019 if


PSPEI does not start delivering power in December 2018.This deficit is expected to increase annually if PSPEI failsto go on-line given the consistent increase in ILPJ'sdemand;

47. Thus. there is a need for ILPI to secure long-term powersupply in order to adequately service the needs of theresidents and business enterprises within the FranchiseArea;

48. Moreover, the construction of the PSPEI Power Plantrequires substantial financing from lending institutions andinvestors. Such financing in turn requires a determinationof the Commission-approved tariff. Likewise, the project'simplementation is bound by contractual milestonesincluding approval of the PSA by the Commission. Aprovisional approval of the PSA from the Commission,together with an indicative tariff, is critical in theevaluation to be made by financial institutions andpotential investors of the project;

49. Notably. securing the financing for the PSPEI Power Planttriggers the timely implementation of the project andachievement of the Commercial Operations Date. that inturn ensures that PSPEI is able to provide power in atimely manner to ILPI, which is in dire need of reliablesupply of electricity;

50. Sworn statements attesting to the allegations made in thejoint application in connection with the prayer for issuanceof a provisional authority are submitted to theCommission;

51. Therefore, they move for the provisional approval of theinstant joint application pursuant to Rule 14 of the ERCRules; and

52.1 Immediately issue an Order provisionally approvingtheir PSA subject of the instant joint application as


well as the generation rate and adjustmentmechanisms indicated therein;

52.2 Issue an Order: a) treating Annexes "Q","R", "S", liT", and "U" and the informationcontained therein as confidential; b) directing theirnon-disclosure pursuant to Rule 4 of the EReRules; and c) prescribing the guidelines for theprotection thereof; and

52.3 After due hearing, render judgment making theprovisional approval of the said PSA permanent.

The Commission has set the application for initial hearing,expository presentation, pre-trial conference and evidentiary hearingon March 3, 2015 (Tuesday) at ten o'clock in the morning (10:00A.M.) at Fontina Coffee Shop, Andres Bonifacio Avenue,Tibanga, lligan 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.

NOTICE OF PUBLIC HEARING/February 2, 2015 of 21

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 suchrequest with copies of the application and its attachments, subject toreimbursement of reasonable photocopying costs. Likewise, anysuch 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,GLORIA VICTORIA C. YAP-TARUC, and JOSEFINA PATRICIA A.MAGPALE-ASIRIT, Energy Regulatory Commission, this 2nd day ofFebruary, 2015 at Pasig City.

"

, /L --_/

ATTY. ~A;P~·SA~URNINO C. JUANExrutive Director III

11and PSPEI/PSN20,5-007 RCinph