in the matter of the application for approval of the …

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IN THE MATTER OF THEAPpLICATION FOR APPROVALOF THE POWER SUPPLYAGREEMENT BETWEEN BOHOL IELECTRIC COOPERATIVE, INC.AND STA. CLARA POWERCORPORATION (SCPC), WITHPRAYER FOR THE ISSUANCE OFPROVISIONAL AUTHORITY

ERC CASE NO. 2014-082 RC

BOHOL I ELECTRICCOOPERATIVE, INC. (BOHECO I)AND STA. CLARA POWERCORPORATION (SCPC),

Applicants.x-----------------------------------------------x

ORDER

On June 10, 2014, Bohol I Electric Cooperative, Inc. (BOHECOI) and Sta. Clara Power Corporation (SCPC) filed an application forapproval of their Power Supply Agreement (PSA), with prayer forissuance of the issuance of provisional authority.

In the said application, BOHECO I and SCPC alleged, amongothers, that:

1. BOHECO I is a franchised electric cooperative dulyauthorized to distribute electric power to its members-consumers in the Municipalities of Albuquerque,Antequera, Baclayon, Balilihan, Batuan, Bilar, Calape,Carmen, Catigbian, Clarin, Corella, Cortes, Dauis,Dimiao, Inabanga, Lila, Loay, Loboc, Loon, Maribojoc,Panglao, Sagbayan, San Isidro, Sevilla, Sikatuna, andTubigon, all in the Province of Bohol;

ERC CASE NO. 2014-082 RCORDER/August 18,2014 of 14

2. SCPC is a domestic corporation duly organized andexisting under and by virtue of the laws of the Republic ofthe Philippines, with principal office at 2nd Floor, Highway54 Plaza, 986 Stanford Street corner EDSA MandaluyongCity, Metro Manila.

It is the owner and operator of the 1.2 MW Loboc Mini-Hydro Power Plant located in Gotozon, Loboc, Bohol (the"Loboc Hydroelectric Power Plant");

3. Pursuant to Rule 20 (B) of the ERC Rules of Practice andProcedure, and other pertinent rules and regulations, theinstant application is submitted to the Commission for dueconsideration of the PSA executed by and betweenBOHECO I and SCPC. A copy of the PSA is attached tothe instant application;

STATEMENT OF FACTS

4. SCPC is a corporation duly existing under and by virtue ofthe laws of the Republic of the Philippines and the ownerand operator of the Loboc Hydroelectric Power Plant.Copies of pertinent documents evidencing SCPC's dueregistration and permit to operate as a generationcompany are as follows:

DOCUMENT ANNEXSCPC's SEC Certificate of Registration tlB"SCPC's Articles of Incorporation and By-Laws tiC"SCPC's Generation Information Sheet for 2014 tiD"SCPC's Latest Audited Financial Statements tiE"ERC Certificate of Compliance tlF"General Plant Description of LobocHydroelectric Power Plant, showing all relevant tlG"technical characteristics

5. The Loboc Hydroelectric Power Plant was acquired by theSta. Clara International Corporation (SCIC) through apublic bidding held on November 10, 2004 by the PowerSector Assets and Liabilities Management Corporation(PSALM);

ERC CASE NO. 2014-082 RCORDER/August 18, 2014 of 14

6. After being declared as the winning bidder, SCIC signedan "Asset Purchase Agreement" (APA) on December 29,2004 with PSALM. A copy of the APA is attached to theinstant application as Annex "H";

7. On September 8, 2005, SCIC and BOHECO I enteredinto a Memorandum of Agreement ("2005 MOA") for thesupply of electric power from the Loboc HydroelectricPower Plant with a cooperation period from July 1, 2005to July 1, 2008. A copy of the MOA is attached to theinstant application as Annex "/". The Commissionapproved the MOA in its Decision dated November 3,2006 under ERC Case No. 2006-040 RC;

8. On April 8, 2006, SCIC transferred all its rights andobligations to SCPC through an "Acknowledgement andAccession Undertaking" which was formally confirmed byPSALM as attested by their letter dated May 16, 2006. Acopy of the said Undertaking and the May 16, 2006 letterare attached as Annexes "K" and "L" to the instantapplication;

9. Subsequently, BOHECO I and SCPC entered intoanother "Memorandum of Agreement (2009 MOA)" whichwas effective on February 26, 2009. Under the 2009MOA, BOHECO I and SCPC agreed to extend the termof the 2005 MOA for another five (5) years, or untilFebruary 25, 2014. A copy of the 2009 MOA is attachedto the application as Annex "M";

1O. With the expiration of the 2009 MOA approaching coupledwith the request by SCPC to BOHECO I for a rateadjustment, both parties agreed to start negotiations forthe PSA;

11. The negotiations started on January 13, 2014, with SCPCinitially offering to supply at PhP5.1296 per kWh;

12. In the meantime, while negotiations for the PSA wasongoing, SCPC, through its Vice President for BusinessDevelopment, Mr. Edvard Ian Gonzaga, verbally advisedBOHECO I of the first extension of the 2009 MOA tocover the months of February 26, 2014 to April 25 of

" ERC CASE NO. 2014-082 RCORDER/August 18, 2014 of 14

2014. The second extension, covering April 26 to June27 of 2014, was officially communicated to BOHECO I bySCPC in its letter dated April 24, 2014;

13. The Philippine Electricity Market Corporation ("PEMC")was likewise advised of both extensions through SCPC'ssubmission of the "Wholesale Customer EnrolmentForm". A copy of SCPC's April 24, 2014 letter and theWholesale Customer Enrolment Form are attached to theinstant application as Annexes "N" and "0",respectively; .

14. Thus, the supply of power by SCPC to BOHECO I will lastonly up to June 27, 2014;

15. After several discussions, a new PSA between BOHECOI and SCPC was signed last May 12, 2014, which is thesubject of the instant application for approval by theCommission.

ABSTRACT OF THE PSA AND OTHERRELATED INFORMATION

16. The following contains the abstract of pertinent provisionsof the PSA:

a. Term. The PSA shall have a limited term of onlytwo (2) years from the date of execution of the PSA,or until April 2014, unless sooner terminatedpursuant to the terms thereof.

b. Quantity of Energy To Be Supplied. SCPC shallsupply BOHECO I, and BOHECO I shall purchaseon a non-firm basis the electricity generated fromthe Loboc Hydroelectric Power Plant.

c. Commencement of Supply. The supply of powershall commence upon the provisional or permanentapproval by the Commission of the PSA. In theevent that the Commission approves with finality arate lower than the Electricity Fee in the PSA, bothparties shall meet within fifteen (15) days from the


finality of the decision and undertake to negotiate arate that is in accordance with the decision. If theparties do not agree on a revised rate within thirty(30) days, the PSA shall terminate and the partiesshall have no further obligation to each other.

d. Electricity Fee. For each billing month, BOHECO Ishall pay the Total Generation Fee pursuant to thefollowing formula and sample calculation:

Total Generation Fee (TGF) (Sample Computation)

TGF =Where:

TGF =ED =GR =

BCPlo =

CPln =

Adjustment =Discount =

(ED (net of line loss) X (GR X (CPln/BCPlo))) - Discount +/-Adjustments

Total Generation FeeEnergy Delivered during periodGeneration Rate (applied rate)Base CPI: CPI for period a month before the contract was signed.

CPI for period a month before the anniversary date of contract signing ofthe current yearPrevious billing period adjustments for over/under recoveryPrompt Payment Discount (PPD) (1.5%)

Sample ComputationApplied Rate 4.6163

BCPlo Dec 28, 2013 100BCPln Dec 28, 2014 104kWhr (net of line loss) 677,187TGF 677,187 kWhr X (PhP4.6163/kWhr* (104/100)) - Discounts +/-AdjustmentsTGF 677,187 kWhr x (PhP4.8009/kWhr - Discount (1.5%) +/- AdjustmentsTGF 677,187 kWhr x (PhP4.8009/kWhr - PhP.07201/kWhr) +/- AdjustmentsTGF 677,187 kWhr x (PhP4.72891/kWhr) +/- AdjustmentsTGF PhP3,202,355 +/- Adjustments

The Electricity Fee excludes: (1) the relevantcharges for Ancillary Services procured by SCPCfrom NGCP (which service SCPC may havecontracted from NGCP on behalf of BOHECO Ipursuant to the PSA), (2) market fees for theWESM, and (3) transmission charges of NGCP.

e. Obligations During Events of Force Majeure. In theevent of a force majeure, the party experiencing theevent shall be exempted from its obligations underthe PSA - i.e., SCPC is exempted from deliveringpower, or BOHECO I is exempted from receivingpower, as the case may be - for the duration of the


force majeure. If the force majeure that isexperienced by BOHECO I prevent it from receivingthe power from SCPC in full, BOHECO I shall payonly for the actual energy received from SCPC.

f. Extension of Cooperation Period Pursuant to ForceMajeure. On account of force majeure, the 2-yearterm of the PSA shall be extended by a period oftime equal to the period of time for whichperformance is excused as a result of the event offorce majeure.

g. Prolonged Force Majeure. Either party mayterminate the PSA by notice at least thirty (30) daysprior to intended termination date if the event offorce majeure prevents BOHECO I from receivingpower in excess of four (4) consecutive months.

h. Change in Circumstance. If there occurs a changein circumstance which includes, but is not limited to,change in interpretation of application of laws,regulations, codes of a Government Authorityresulting in a material reduction, prejudice oradverse impact upon SCPC's financial return on itsinvestment, the parties shall meet within fourteen(14) days from receipt by BOHECO I of SCPC'snotice to come to an agreement on an amount to bepaid to SCPC and the manner of payment orreimbursement to substantially preserve SCPC'sfinancial return at the least cost to BOHECO I. If noagreement is reached within ninety (90) days fromreceipt by BOHECO I of such notice from SCPC,SCPC may terminate the PSA upon 30 days' priornotice.

17. BOHECO I needs to source power primarily within theisland of Bohol because it is unable to source sufficientpower from other internal and external sources, especiallyafter typhoon Yolanda hit the Visayas Region;

18. In support of the instant application, BOHECO I andSCPC further append the following documents to formintegral parts thereof:


DOCUMENT ANNEXBOHECO I's Secretary's Certificateauthorizing the signing of the PSA and filing of "Q"this A licationSCPC's Secretary's Certificate authorizing the "R"si nin of the PSA and filin of this A IicationDetails on the load forecast projections inaccordance with the latest Distribution "S"Develo ment Plan of BOHECO IAlternative Demand Side ManagementPro ram of BOHECO I "T"Procurement Process of BOHECO I "U"Ex lanation on the Derivation of Electricit Fee "V"

19. If the Commission approves the PSA, including theElectricity Fee in toto, the simulated financial impact tothe rates of BOHECO I to its members-consumers for theperiod November 26, 2013 to April 25, 2014 issummarized as follows:

Nov.26- Dec. 26, 2013- Jan. 26- Feb. 26- Mar. 26-Particulars Dec.25,2013 Jan. 25, 2014 Feb. 25,2014 Mar. 25, 2014 Apr. 25, 2014Blended Rate:with ExistingSCPC Rate 4.6370 5.0540 5.1108 4.8472 6.4418(PhP/kWh)Blended Rate:with ProposedSCPC Rate 4.7260 5.1454 5.2039 4.9278 6.5124(PhP/kWh)Diff. betweenBlended Rateswith Existing & +0.0891 +0.0914 +0.0931 +0.0807 +0.0706ProposedRates(PhP/kWh)

Blended Rate:with WESM(PhP/kWh) 4.5759 5.1713 5.2546 4.8760 6.8973Diff. betweenBlended Rates -0.0611 +0.1173 +0.1438 +0.0288 +0.4555with ExistingRates & WESM(PhP/kWh)


The detailed simulation is attached as Annex "W" of theinstant application;

20. For comparison of rates in various power supply contractsand indicative rates of new entrants, Annex "X" is alsoattached and made an integral part of the instantapplication. This comparison shows that the ElectricityFee in the PSA is cheaper. In fact, comparing theElectricity Fee and the winning bid for the Unified LeyteGeothermal Power Plant-Strips of Energy ofPhP4.6629/kWh is more expensive than SCPC'sPhP4.54703/kWh in the PSA;

COMPLIANCE WITH PRE-FILING REQUIREMENTS

21. They have complied with the pre-filing requirementsunder Rule 3, Section 4(e) of the Implementing Rules andRegulations of the EPIRA and Rule 6 of the 2006 ERCRules of Practice and Procedure, as evidenced by thefollowing documents:

a) Affidavit of SelVice certifying to the personal serviceof the Application to the Municipal Council ofTubigon, Bohol, where BOHECO I has its principaloffice, as well as to the Provincial Council of theProvince of Bohol, attached as Annex "Y" of theinstant application;

b) Notarized Affidavit of Publication certifying to thepublication of the instant application in a newspaperof generation circulation within the franchise area ofBOHECO I, attached as Annex "z" of the instantapplication; and

c) A copy of the newspaper where the Application waspublished, attached as Annex "AA" of the instantapplication;

:. ERC CASE NO. 2014-082 RCORDER/August 18,2014 of 14

ALLEGATIONS IN SUPPORT OF THEPRAYER FOR PROVISIONAL AUTHORITY

22. Power supply is critical to the Province of Sohol to help inits rehabilitation following the devastation of the October15, 2013 earthquake and the November 8, 2013 typhoonYolanda. Considering the short term supply of two (2)years, a final approval may be issued towards the end ofthe term and after the termination of the hearings andevaluation of the instant application;

23. Moreover, the PSA provides that the delivery of power willcommence only upon the issuance of either a provisionalor final approval. Thus, a provisional authority issuedprior to the termination or conclusion of the hearings willensure the earliest implementation of the PSA and thedelivery of much-needed power to SOHECO I;

24. Finally, Rule 14, Section 3 of the 2006 ERC Rules ofPractice and Procedure allows the issuance of aprovisional authority, even prior to the conduct of ahearing on an application. Thus:

"Section 3. Action on the Motion. -Motions for provisional authority orinterim relief may be acted upon with orwithout hearing. The Commission shallact on the motion on the basis of theallegations of the application or petitionand supporting documents and otherevidences that applicant or petitionerhas submitted and the comments oropposition filed by any interestedperson, if there be any."

25. For these reasons, they jointly seek for the issuance of aprovisional authority for the PSA authorizing the deliveryof power even at the soonest possible time; and

26. Thus, they pray that:


a. A provisional authority be immediately issued afterthe filing of the instant application, authorizing themto immediately implement the provisions of the PSAincluding the Electricity Fee therein and authorizingBOHECO I to pass-on the provisionally-approvedrate to its members-consumers; and

b. After due notice and hearing, a final authority beissued for the PSA and authorizing BOHECO I topass-on the finally-approved rate to its members-consumers.

Finding the said application to be sufficient in form and insubstance with the required fees having been paid, the same ishereby set for jurisdictional hearing, expository presentation, pre-trialconference and evidentiary hearing on September 18, 2014,(Thursday) at two o'clock in the afternoon (2:00 P.M) at BOHECOI's Main Office, Cabulijan, Tubigon, Province of Bohol.

BOHECO I and SCPC are hereby directed to cause thepublication of the attached Notice of Public Hearing, at their ownexpense, twice (2x) for two (2) successive weeks in two (2)newspapers of general circulation in the Philippines, with the date ofthe last publication to be made not later than ten (10) days before thedate of the scheduled initial hearing. They are also directed to informthe consumers within BOHECO I's franchise area, by any othermeans available and appropriate, of the filing of the instantapplication, their reasons therefor, and of the scheduled hearingthereon.

Let copies of the application, this Order, and the attachedNotice of Public Hearing be furnished the Office of the SolicitorGeneral (08G), the Commission on Audit (COA) and the Committeeson Energy of both Houses of Congress. They are hereby requested,if they so desire, to send their duly authorized representatives at thescheduled hearing.

Likewise, let copies of this Order and the attached Notice ofPublic Hearing be furnished the Offices of the Governor of Bohol andthe Offices of the Mayors of the Municipalities within the franchisearea of BOHECO I for the appropriate posting thereof on theirrespective bulletin boards.


BOHECO I and SCPC are hereby directed to furnish all thosemaking requests therefor with copies of the application and itsattachments, subject to reimbursement of reasonable photocopyingcosts.

On the date of the initial hearing and pre-trial conference,BOHECO I and SCPC must submit to the Commission their writtenCompliance with the jurisdictional requirements attaching therewith,methodically arranged and duly marked, the evidence of the actualposting and publication of the Notice of Public Hearing consisting ofcertifications issued to that effect, signed by the afore-mentionedGovernor and Mayors or their duly authorized representatives,bearing the seals of their offices, and the affidavits of the Editors orBusiness Managers of the newspapers where said Notice of PublicHearing were published together with the complete issues of the saidnewspapers, and such other proofs of compliance with therequirements of the Commission.

BOHECO I, SCPC and all interested parties are directed tosubmit, at least five (5) days before the date of initial hearing and pre-trial conference, their respective Pre-Trial Briefs containing, amongothers:

(a) A summary of admitted facts and proposed stipulation of facts;

(b) The issues to be tried or resolved;

(c) The documents or exhibits to be presented, stating thepurposes thereof and proposed markings therefore; and

(d) The number and names of the witnesses, with their writtentestimonies in an individual affidavit form, to be attached to thePre-Trial Brief.

Failure of BOHECO I and SCPC to submit the required Pre-Trial Brief and Judicial Affidavits of their witnesses within theprescribed period shall be a ground for cancellation of the scheduledhearing, and the resetting of which shall be six (6) months from saiddate of cancellation.


As part of the pre-trial conference, BOHECO I and SCPC mustalso be prepared to make an expository presentation of theirapplication, aided by whatever communication medium that they maydeem appropriate for the purpose, in order to put in plain words andexplain, for the benefit of the consumers and other concerned parties,what the application is all about and the reasons and justificationsbeing cited in support thereof.

SO ORDERED.

Pasig City, August 18, 2014.

FOR AND BY AUTHORITYOF THE COMMISSION:

~

f'v~. ENAIDA~. CRUZ-DUCUT

Chairperson y

. r/qO/N IE C CASE NO. 2014-082 RC SCPC BOHECO 1 PSA-ORDER


Copy furnished:

1. J.P. GARCIAAND ASSOCIATESCounsel for Applicant Sta. Clara Power CorporationUnits 1501-1502, 15th Floor Ayala Life-FGU CenterMindanao Avenue corner Biliran RoadCebu Business Park, Cebu City

2. ATTY. ELMERSALUS B. POZONCounsel for BOHECO I315 Jose Dual St., Pooc Or., Tubigon, Bohol

3. BOHOL I ELECTRICCOOPERATIVE,INC. (BOHECOI)Cabulijan, Tubigon, Bohol

4. Office of the Solicitor General134 Amorsolo Street, Legaspi Village,Makati City, Metro Manila

5. Commission on AuditCommonwealth AvenueQuezon City,Metro Manila

6. Senate Committee on EnergyGSIS Bldg., Roxas BoulevardPasay City, Metro Manila

7. House Committee on EnergyBatasan Hills, Quezon City, Metro Manila

8. Office of the Provincial GovernorProvince of Bohol

9. Office of the Municipal MayorAlburquerque, Bohol

10. Office of the Municipal MayorAntequera, Sohal

11. Office of the Municipal MayorSaclayon, Sohal

12. Office of the Municipal MayorSalilihan, Sohal

13. Office of the Municipal MayorSatuan, Bohol

14. Office of the Municipal MayorBilar, Sohal

15. Office of the Municipal MayorCalape, Sohal

t: i ERC CASE NO. 2014-082 RCORDER/August 18, 2014 of 14

16. Office of the Municipal MayorCarmen, Sohol

17. Office of the Municipal MayorCatigbian, Sohol

18. Office of the Municipal MayorClarin, Sohol

19. Office of the Municipal MayorCorella, Sohol

20. Office of the Municipal MayorCortes, Sohol

21. Office of the Municipal MayorDauis, Sohol

22. Office of the Municipal MayorDimiao, Sohol

23. Office of the Municipal MayorInabanga, Sohol

24. Office of the Municipal MayorLoay, Sohol

25. Office of the Municipal MayorLila, Sohol

26. Office of the Municipal MayorLoboc, Sohol

27 Office of the Municipal MayorLoon, Sohol

28 Office of the Municipal MayorMaribojoc, Sohol

29 Office of the Municipal MayorPanglao, Sohol

30 Office of the Municipal MayorSagbayan, Sohol

31 Office of the Municipal MayorSan Isidro, Sohol

32 Office of the Municipal MayorSevilla, Sohol

33 Office of the Municipal MayorSikatuna, Sohol

34 Office of the Municipal MayorTubigon, Sohol

in the matter of the application for approval of the …

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