w.-..-..-- · epira,rules 5, section 4(e) and 11,section 5ofits implementing rules and regulations...

Republic of the PhilippinesENERGY REGULATORYCOMMISSION

San Miguel Avenue, Pasig City

IN THE MATTER OF THEJOINT APPLICATION FORAPPROVAL OF THE POWERSUPPLY CONTRACT (PSC).ENTERED INTO BY ANDBETWEEN CAMARINESSUR II ELECTRICCOOPERATIVE, INC.(CASURECO II) AND LIMAYPREMIERE POWERCORPORATION (LPPC),~TH PRAYER FORCONFIDENTIALTREATMENT OFINFORMATION

'.'

•

CAMARINES SUR IIELECTRIC COOPERATIVE,INC. (CASURECO II) ANDLIMAY PREMIERE POWER .CORPORATION (LPPC),

Applicants.,x------------------~--x

ERC CASENO. 2016-117 RC

DOCKETEl,.&l.IMte: ~EP-0 -5 n 2018,'11lT: •...~..w.-..-..--

NOTICE OF PUBLIC HEARING

TO ALL INTERESTED PARTIES:

Notice is hereby given that on 29 April 2016, Camarines Sur IIElectric Cooperative, Incorporated (CASURECO II) and LimayPremiere Power Corporation (LPPC) filed a Joint Application withPrayer for Confidential Treatment of Information asking for theCommission's approval of their Power Supply Contract (PSC).

In their Joint Application, CASURECO II and LPPC alleged thefollowing:

The Joint Applicants

ERC CASE NO. 2016-117 RCNOTICE OF PUBLIC HEARING/ 22 JULY 2016PAGE20F22

1. CASURECO II is an electric cooperative dulyregistered and existing under and by virtue of the lawsof the Republic of the Philippines, with principaloffice address at Del Rosario, Naga City, CamarinesSur. It holds a franchise to operate light and powerservices in the City of Naga and in the Municipalitiesof Bombon, Calabanga, Canaman, Magarao, Milaor,Minabalac, Pili, Siruma, and Tinambac, all in theProvince of Camarines Sur (Franchise Area). It shallalso be herein referred to as the "Buyer";

2. LPPC is a corporation duly created and existing byand under the laws of the Republic of the Philippines,with business address at the No. 40 San MiguelAvenue, Mandaluyong City. It shall also be hereinreferred to as the "Seller";

3. The Joint Applicants may be served with the orders,notices and other processes of the HonorableCommission through their respective undersignedcounsels at the addresses indicated herein;

Nature of the Application

4. The Joint Application for approval of the PowerSupply Contract (PSC) dated 26 January 2015 enteredinto by and between CASURECO II and SMCConsolidated Power Corporation (SCPC) which wassubsequently assigned to LPPC, is being submitted tothe Honorable Commission for its review andapproval pursuant to Sections 25 and 45(b) ofRepublic Act No. 9136, otherwise known as theElectric Power Industry Reform Act of 2001 or theEPIRA, Rules 5, Section 4(e) and 11, Section 5 of itsImplementing Rules and Regulations (IRR), Rule20(B) of its Rules of Practice and Procedure, andother pertinent rules and regulations;

Statement of Facts

5. Competitive Selection Process (CSP).CASURECO II had come up with an analysis asregards the increase in its load growth for the year2014 and onwards. It anticipated that by the end of2014, the demand will surge due to connection of newbig load customers in its distribution system, theexpected total increase of which is 11.4 MW.CASURECOII cannot risk sourcing thirty-five percent(35%) to forty percent (40%) of its powerrequirements from the Wholesale Electricity SpotMarket (WESM) given the fact that during summerseason, prices in the spot market is higher;


5.1 It deemed necessary that the projectedrequirements be sourced from a new powerprovider or at least to request its existingsuppliers, Bac-Man Geothermal, Incorporated(BGI) and Masinloc Power Partners Company,Incorporated (MPPCL), to increase theirrespective contract capacities. CASURECOII'sManagement sent invitations from variousgeneration companies for the supply ofapproximately 10 MW during peak hours,however, only FDC Utilities, Incorporated(FDCUI) and SMC Global Power HoldingsCorporation (SMC GLOBAL), the parentcompany of SCPC,responded;

5.2 FDCUI and SMC GLOBAL) presented theirrespective proposals before CASURECO II'sBoard and Management. Based on saidproposals, CASURECOII's Corporate Planning(CORPLAN) Department made a comparativeanalysis and found that SMC GLOBALhas abetter offer, particularly, the rates and terms ofthe bilateral contract, which are beneficial to itsmember-consumers;

5.3 On 25 September 2014, CASURECOII's Boardissued Resolution No. 2014-246b awarding andapproving the PSC with SCPC as well asauthorizing its Board President to sign thesame for and in behalf of CASURECOII; and

5-4 Thus, on 26 April 2015, CASURECO II andSCPC executed a PSC, subject of the JointApplication;

6. Assignment of the PSC to LPPC. Article 17.2(Assignability) of said PSC expressly states, that:"This Contract shall be binding between the Parties,their successors-in-interest and assigns. A Partymay not assign this Contract or its rights andobligations therein to a third party without the otherParty's written consent. However, the BUYERacknowledges that the SELLER has, without the needto secure the BUYER's consent, the right to a) assignor transfer this Contract any affiliate of the SELLERand b) to pledge, transfer, sell, encumber or assignthis Contract or the accounts, revenues or proceedshereof in connection with any project financing orfinancial arrangements; provided that the assigneeunder (a) and (b) hereof shall agree in writing toassume and be bound by the terms and conditions ofthis Contract, and upon such assumption, theassignor shall be relived from any further liabilityunder this Contract.";

ERC CASE NO. 2016-117 RCNOTICE OF PUBLIC HEARING/ 22 JULY 2016PAGE 4 OF 22

6.1 On 23 December 2015, SCPC and LPPCexecuted a Deed of Assignment whereby theAssignor SCPC assigned and transferred all itsrights, interests, and obligations under the PSCit executed with CASURECO II in favor of theAssignee LPPC. LPPC, likewise, agreed toacquire all of said rights and interests andassumed all of said obligations under the samePSC for the supply of electric energy toCASURECO II from its 2 x 150 MW CirculatingFluidized Bed Coal-Fired Thermal Power Plantlocated in Barangay Lamao, Limay, Bataan;and

6.2 CASURECO II is fully aware of the import ofthe aforementioned assignability clause underArticle 17.2 of the PSC it executed with SCPC.As such, it interposed no objection to theimplementation of its PSC with LPPC as itsnew power supplier inasmuch as LPPC agreedto acquire all of the rights and interests andassumed all of the obligations of SCPC undersaid PSC for the supply of electric energy toCASURECO II;

7. Salient Features of the PSC.

7.1 Contract Capacity. The Contracted Capacityfor the duration of the PSC shall be 10,000 kW.The Buyer shall maintain a minimum hourlynomination of at least forty percent (40%) ofthe Contract Capacity for the duration of thesaid PSC. The Contract Capacity shall besubject to a separate Nomination Protocol;

7.2 Generation Source. LPPC is constructing a2 x 150 MW Circulating Fluidized Bed Coal-Fired Thermal Power Plant (the Plant) locatedin Barangay Lamao, Limay, Bataan, which isexpected to be commercially operational by the3rd quarter of calendar year 2016;

7.3 Contract Term. The PSC shall take effectbetween the Parties on the date of signing(Execution Date) and shall remain effective fora period of ten (10) years from CommercialOperations Date (COD). The supply of electricpower by the Seller shall commence on CODand shall continue until the end of the ContractTerm;

7-4 Contract Charges. Under the PSC, theBuyer shall pay the following Contract Charges

ERC CASE NO. 2016-117 RCNOTICE OF PUBLIC HEARING/ 22 JULY 2016PAGESOF22

for the duration of the Contract, subject to theapplicable value-added tax (VAT), andcomputed as follows:

Particulars Unit AmountCapacity FeeCapital Recovery PhP/kW-month 1,371.2920FeeFixed Operationand Maintenance PhP/kW-month 383.8079FeeTotal Capacity Fee 1,755.0999Energy FeeVariable Operationand Maintenance PhP/kWh 0.2831FeeFuel Fee (pass PhP/kWh 1.6566through)Total Energy Fee 1.9397

7.5 Other Charges. The Buyer shall bear allother costs and charges including but notlimited to transmission line losses, anyinterconnection charges, and site specific lossadjustments, among others;

7.6 Adjustment Formula. The ContractCharges' are adjusted on a monthly basis inaccordance with the following AdjustmentFormula (Annex II-B of the PSC):

MONTHLY CONTRACT CHARGES;;;;:Capacity Chargesmonth+ Energy Chargesmonth

Where:

Capacity Charges =

Energy Charges =

Capital RecoveryFee (CRF) +Fixed OperationandMaintenanceFee (FOM)

VariableOperation andMaintenanceFee (VOM) +Fuel Fee + Start-up Charge

I. CAPITAL(CRFmonth)

RECOVERY FEE

CRFmonth;;;;: CRFadjusted x CC


Where:

CRFadjusted=(CRF(base)x 0.30) + (CRF(base)FX

x 0.70 x FX: )

CRFbase =

FXm =

FXo =

CC =

Capital Recovery Fee inPhPjkW-month containedin Annex II-A of the PSC

The simple average of thedaily exchange rate of thePhilippine Peso to the USDollar, as posted by theBangko Sentral ngPilipinas (BSP) for thecalendar month withinwhich the start of thecurrent Billing Periodoccurs

Exchange rate of thePhilippine Peso to the USDollar, Base = PhP44.00

Contract Capacity in kW

II. FIXED OPERATION ANDMAINTENANCE FEE (FOMmonth)

PHCPlmFOMmonth= FOM x -- x CCPHCPlo

Where:

FOM =

PHCPlm =

Fixed Operation andMaintenance Fee inPhPjkW-month containedin Annex II-A of the PSC

Philippine Consumer PriceIndex (CPI) for All IncomeHouseholds in thePhilippines - All Items(2006=100), as posted bythe Philippine NationalStatistics Office (NSO) forthe calendar month withinwhich the start of thecurrent Billing Periodoccurs


PHCPlo =

CC =

Philippine CPI for AllIncome Households in thePhilippines - All Items(2006=100), as posted bythe Philippine NSO for thecalendar month of theCOD


III. VARIABLE OPERATION ANDMAINTENANCE FEE (VOMmonth)

VOMmonth=

[(0.85 x YOM X USCPlm X FXm) + (0. 15 x YOM X PHCPlm)] X AEUSCPlo FXo PHCPlo

Where:

VOM = Variable Operation andMaintenance Fee inPhPjkWh contained inAnnex II-A of the PSC

USCPIm =

USCPIo =

FXm =

FXo =

United States (US) CPI forAll Urban Consumers - AllItems (1982-84=100), asposted by the Unites StatesBureau of Labor Statistics(USBLS) for the calendarmonth within which thestart of the current BillingPeriod occurs

US CPI for All UrbanConsumers - All Items(1982-84=100) for thecalendar month of theCOD

The average dailyexchange rate of thePhilippine Peso to the USDollar, as posted by theBSP for the calendarmonth within which thestart of the current BillingPeriod occurs

Exchange rate of thePhilippine Peso to the USDollar, Base=PhP44.00


PHCPIm =

PHCPIo =

Philippine CPI for AllIncome Households in thePhilippines - All Items(2006=100), as posted bythe Philippine NSO for thecalendar month withinwhich the start of thecurrent Billing Periodoccurs

Philippine CPI for AllIncome Households in thePhilippines - All Items(2006=100), as posted bythe Philippine NSO for thecalendar month of theCOD

AE = Associated Energy in kWhdelivered to the Buyer bythe Seller during thecurrent Billing Period atthe Delivery Points statedin Annex III of the PSC

The Parties agree to adopt changes in any ofthe inflationary indices subject to priornotification by the Seller to the Buyer for theoccurrence of any of the following events: a)shift made in the base year and otheradjustments to such inflation index made bythe relevant authorized entity; or b) theinflation index: i) becomes unavailable, ii) isreplaced by a new benchmark rate asdetermined by the relevant authorized entity orits successor-in-interest, iii) ceases to exist, oriv) in the reasonable determination of eitherParty, fails to reflect the real costs and forms anintegral part of this price adjustment formula;

IV. FUEL FEE (Fuelmonth)

F 1 = [(FUelcost+FreightCost) xCRxFX ] xAEue month 1 000 m,

Where:

Fuel Cost = Base Fuel Cost, III

USD /MTxN ewcastlemNewcastleo


Newcastlem = Average monthlycoal price index inUSD/MT as posted byglobal coal on the websitewww.globalcoal.com forthe calendar month withinwhich the start of thecurrent Billing Periodoccurs

Newcastleo

BaseFuelCost

= Coal priceequivalentUSD74;oo/MT

= BlendedequivalentUSD62.69/MT

indexto

Costto

Freight Cost = Actual TransportCosts in USD/MT whichincludes but not limited toport charges, fuelinsurance, wharfage fees,excise tax, handling,customs brokerage fees,custom duties, stevedoresand arrastre costs, tuggagecosts, survey fee, towage,pilotage, light dues,mooring and unmooring,berthing and de-berthing,and tonnage dues andsundries on the coal usedduring the current BillingPeriod. Freight costs shallinclude all other existingand future taxes, fees,imposts and other chargesthat may be imposed onthe transport of coal

CR = Consumption rate atO.7okg/kWh escalatedannually by one and a halfpercent (1.5%) or theactual plant fuelconsumption rate,whichever is lower

FXm = The averageexchange rate

dailyof the

http://www.globalcoal.com


Philippine Peso to the USDollar, as posted by theBSP for the calendarmonth within which thestart of the current BillingPeriod occurs

FXo

AE

=

=

Exchange rate of thePhilippine Peso to the USDollar, Base=PhP44.00

Associated Energy in kWhdelivered to the Buyer bythe Seller during thecurrent Billing Period atthe Delivery Points statedin Annex III of the PSC

The Parties further agree that when any or allof the above components of the Fuel Cost nolonger reflect the Seller's actual cost of coal(including the FOB price, coal indexation,premiums, among others), the Fuel Cost shallbe computed based on the Seller's actual cost offuel subject to the Seller's prior notification tothe Buyer;

V. Start-up Charge (per Unit and perStart-up) - to be added on top ofYOM& Fuel charges

Cold Start-up - downtime of eight (8)hours and above

Start Up Charge = 130,000 liters xccLFOmxm

Warm Start-up - downtime of less thaneight (8) hours

Start Up Charge

Where:

= 36,000 liters xcc

LFOmx TPC

LFOm = The actual price of dieseloil in phPlliter as billed bysupplier of diesel oilapplicable for the BillingPeriod

ERC CASE NO. 2016-117 RCNOTICE OF PUBLIC HEARINGf 22 JULY 2016PAGE 11OF 22

CCTPC

=

=


Total plant capacity (net)per unit in kW

7.7 Sources of Funds. SMC Global PowerHoldings Corporation, LPPC's parent company,advances the funds allowing for the on-goingconstruction of the Plant. LPPC is working onhaving a financial close by March 30, 2015 witha target Debt to Equity ratio of 70%:30%;

Discounts. The Seller provides forPrompt Payment Discount (PPD)Collection Efficiency Discount (CED);

bothand

a) PPD. The Buyer may avail of the PPDequivalent to one percent (1%) of the totalof the Capacity and Energy Charges andother components ofthe current power bill,provided that:

1. The Buyer has no arrears from previouspower billings including the SecurityDeposit or any unpaid charges orpenalties including VAT;

n. The Buyer has submitted all necessaryBureau of Internal Revenue (BIR) TaxCertificates for all taxes withheld;

iii. The Buyer pays the power bill in full onor before the 10th day of the calendarmonth following the current BillingPeriod; and

IV. The Buyer complies with other policiesand procedures as may be required bythe Seller, subject to prior notificationby the Seller to the Buyer;

b) CED. The Buyer shall be entitled to thefollowing CED:

Collection Efficiency Levels Discount,PhP/kWh

Below 65% None66% to 75% 0.0576% to 85% 0.1086% to 95% 0.1596% and above 0.20

In order for the Buyer to avail of the CED, itmust comply with the following conditions:

ERC CASE NO. 2016-117 RCNOTICE OF PUBLIC HEARING/ 22 JULY 2016PAGE 12OF 22

1. The Buyer has no outstandingobligations to the Seller from previouspower bills including VAT;and

ii. The Buyer shall submit to the Seller: aduly accomplished CED AvailmentForm; a copy of its Monthly Financialand Statistical Report(MFSR)/Collection Efficiency Reportsigned by its Finance Manager andGeneral Manager, stamped "received" bythe NEA; Audited Financial Statements(AFS) stamped "received" by the BIR (tobe submitted to the Seller within three(3) calendar days from receipt of theBIR; and zero (o)-rated VAT certificatesas updated monthly; and

7.9 Outages. The Seller shall not be obligated todeliver energy to the Buyer during the AnnualOutage Allowance of: seven hundred twenty(720) cumulative outage hours for eachContract Year for each Unit of the Power Plantfor Scheduled Outages, and four hundred thirtyeight (438) cumulative outage hours for eachContract Year for each Unit of the Power Plantfor Forced Outages;

The Seller shall be allowed an additional MajorMaintenance Outage Allowance of sevenhundred twenty (720) cumulative outage hoursonce every five (5) years from the first MajorMaintenance of each Unit of the Power Plant.The Seller is not obligated to deliver energyduring the said Major Maintenance Outage;

Unutilized Outage Allowance or MajorMaintenance Outage hours shall not be carriedforward to any subsequent Contract Year; and

7.10 Replacement Power. During the AnnualOutage Allowance or Major MaintenanceOutage hours, the Seller may procureReplacement Power from other sources, thecost of which shall be passed-on to the Buyer;

Rate Impact on CASURECOII's OverallGeneration Rate

8. The indicative rate impact on CASURECOII's overallgeneration rate with and without the supply fromLPPCare as follows:

ERC CASE NO. 2016-117 RCNOTICE OF PUBLIC HEARINGf 22 JULY 2016PAGE 13 OF 22

Scenario A: Generation Rate and Supply Mix WITHOUT LPPC

Contracted Actual Supply MixCapacity j Peak Actual kWh Based on Total Generation

Supplier Energy Demand Purchased Actual kWh Generation Rate(kWh) (MW) (kWh) Purchase (%) Cost (PhP) (PhPjkWh)

a b c d e f-e/cAES 12,135,800 18.500 12,135,800 57 52,097,934.22 4.29

BGI 8,236,000 20.000 8,236,000 38 33,169,760.00 4.03

BHPC 133,000 1 631,750.00 4.75

WESM 970,990 5 8,724,159.96 8.98

Total/Blended 21,475,790 100 94,623,604.18 4.41Rate

Scenario B: Generation Rate and Supply Mix WITH LPPCContracted Actual Supply MixCapacity j Peak Actual kWh Based on Total Generation

Supplier Energy Demand Purchased Actual kWh Generation Rate(kWh) (MW) (kWh) Purchase (%) Cost (PhP) (PhPjkWh)

a B C d e f=e/c

AES 12,135,800 18.500 12,135,800 49 52,097,934.22 4.29

BGI 8,236,000 20.000 8,236,000 33 33,169,760.00 4.03

BHPC 0.868 133,000 1 631,750.00 4.75

LPPC 10.000 3,124,000 13 21,081,292.69 6.75

WESM 970,990 4 8,724,159.96 8.98

Total/Blended 24,599,790 100 115,704,896.8 4.70Rate 7

Difference: Scenario A and B

Supporting Documents:

PhP0-43/kWh

a. Sample monthly electricity billfrom CASURECOII to its customers

b. Monthly power billsfrom suppliers toCASURECO II including its attachments anddetailed calculation, which contain the followinginformation:i. Contracted Demand or Minimum Energy Off-

take (MEOT)ii. Actual Demand/Energy for the monthiii. Calculation of the monthly CRF, Fixed O&M,

Variable O&M, and Fuel Feec. Monthly transmission billfrom NGCP including

its attachments

9. Environmental Compliance Certificate (ECC).On 17 September 2013, the Department ofEnvironment and Natural Resources (DENR) hasissued ECC No. ECC-CO-1305-0019 in favor of LPPC;

10. Board of Investments (BOI) Certificate. On 22January 2015, LPPC filed an application for


registration with BOI for its Limay Power PlantProject;

11. Certificate of Compliance (COC). The PowerPlant is still under construction and thetarget/estimated COD is sometime in March 2017.Hence, it is not yet covered by a COC. Nonetheless,LPPC undertakes to file the necessary application fora COC at least three (3) months before the targetCOD;

12. Further, LPPC's Power Plant is considered as acommitted project, and is in the process of securing acertification from the Department of Energy (DOE)that the same is consistent with the PowerDevelopment Plan (PDP). It undertakes to submit thecertification as soon as the same becomes available;

13. Furthermore, LPPC undertakes to submit acertification from the National Power Corporation(NPC) on the insufficiency of supply within the LuzonRegion during the term of the PSC;

Compliance with the Pre-filing Reguirements

14. Copies of the foregoing documents and/ orinformation are attached to the Joint Application asannexes and made integral parts hereof:

Annex Documents/InformationA LPPC's Articles of IncorporationB LPPC's Certificate of Registration

issued by the Securities andExchange Commission (SEC)

C LPPC's Latest General InformationSheet (GIS)

D LPPC's Certificate of Registrationwith the BOI

E ECC issued by the DENR to theCirculating Fluidized Bed Coal-Fired Thermal Power Plant Projectof LPPC

F PSC entered into by and betweenCASURECOII and LPPC

ERC CASE NO. 2016-117 RCNOTICE OF PUBLIC HEARINGf 22 JULY 2016PAGE 15 OF 22

GandSeries

H

I, 1-1and 1-2

J

K

Details of the PSC:

a. Executive Summary

b. Sources of Funds/FinancialPlans• Debt/Equity Ratio• Project Cost• Computation of Return

on Investment(ROI)/Weighted AverageCost of Capital (WACC)

• Certification from theBank/Lending Institutionspecifying the principalamortization, term andinterest during thecooperation period of theloan agreement

c. Purchased Power Rate• Breakdown of the base

prices• Sample Computation of

Power Rates with thesupporting documents onthe assumptions taken

• Rate ImpactStudy/Simulation

• Statement of impact onthe overall rates ofCASURECO II once thecontract is approved

• Basis/Rationale ofindexation and level ofindexation

d. Cash Flow• Initial Costs• Breakdown of Operating

and Maintenanceexpenses

• Minimum Energy Off-take (MEOT)

Details of the Power RateCalculations and Financial Model(Confidential)Contracts for the Supply,Construction and Supervision forthe Power Plant (Colliidential)Details of the Fuel ProcurementProcessTransmission Service Agreement


(TSA) between the National GridCorporation of the Philippines(NGCP) and CASURECOII

Land Acknowledgment receipts by theSeries Sangguniang Panlalawigan of

Camarines Sur, and theSangguniang Panlungsod of NagaCity, of copIes of the JointApplication (including annexes)

15. Further, in compliance with Article VI, Sections 1 and2 of the Honorable Commission's Guidelines for theRecovery of Costs for the Generation Component ofthe Distribution Utilities' (DU) Rates, copies of theforegoing are, likewise, attached to the JointApplication as annexes and made integral partshereof:

Annex Documents/InformationN Relevant technical and economic

characteristics of the generationcapacity, installed capacity, modeof operation, and dependablecapacity

0 Costs analysis of the proposedpricing provisions of the PSC

Pand Details of the CompetitiveSeries Selection Process (CSP)

undertaken by CASURECO IIleading to the selection of LPPC asits supplier, including invitationsto participate and submitproposals, Terms of Reference(TOR), proposals and/or tenderoffers received by CASURECO II,CASURECO II's Special Bids andAwards Committee (SBAC)Evaluation Report; CASURECOII's Board Resolution confirmingthe said SBAC Evaluation Report,and the Notice of Award to LPPC

Qand Details of the interconnectionSeries facility of the LPPC Power PlantR CASURECOII's latest Distribution

Development Plan (DDP) andLoad Forecast Pro;ections

S Demand Side Management (DSM)Program that could beimplemented by CASURECO II ifapproved by the HonorableCommission

T LPPC's latest Audited FinancialStatements (APS), Balance Sheet,Income Statement, and Statement


of Cash FlowsT-l Bank Certification of Long-term

Loans, including Schedule ofOriginal Loan (principal amount,interest payable and term of theloan) and Updated Balances(principal amount, interestpayable and penalties, if any andremaining term of the loan)

T-2 Operating Expenses for the PowerPlant and General andAdministrative Expense

T-3 Certification from the engmemanufacturer or LPPC of the netheat rate in liters per kWh

T-4 Simulation on the number ofoperating units necessary to meetthe MEOT and/or additionalenergy/demand requirements ofCASURECOII

T-S Potential Cost (absolute amountsand PhP/kWh) of AncillaryServices as and when LPPC orCASURECOII is connected to themain grid

U Deed of Assignment between SCPCand LPPC

16. Furthermore, the Joint Application is consistent andin accordance with the first (1st) and fifth (5th)"Whereas clauses" of the DOE Circular No. 2003-12-11which are quoted hereunder:

"WHEREAS, Section 2 of Republic ActNo. 9136, also known as the Electric PowerIndustry Reform Act of 2001 or EPIRA,declared as a policy of the State, among others,[to ensure the quality, reliability, security andaffordability of the supply of electric power;"(first "whereas clause", Department of EnergyCircular No. 2003-12-11. Underscoringsupplied.)

"WHEREAS, pursuant to Section 23 ofEPIRA, all distribution utilities, as defined inthe law, SHALLHAVETHE OBLIGATION TOSUPPLY ELECTRICITY IN THE LEAST COSTMANNER TO ITS CAPTIVE MARKET subjectto the collection of retail rate duly approved bythe Energy Regulatory Commission;" (fifth"whereas clause", ibid. Underscoringsupplied.)


17. The Joint Application is, likewise, consistent withSection 1 of the same Department Circular whichdeclares as State policy, that:

"All distribution utilities musthenceforth take cognizance and assume fullresponsibility to forecast, assure and contractfor the supply of electric power in therespective franchise areas to meet theirobligations as a distribution utility."(Underscoring supplied.)

18. Byway of emphasis, Resolution No. 21, Series of 2005of the Honorable Commission dated 19 October 2005had directed all Distribution Utilities (DUs) "to enterinto future bilateral power supply contract with powerproducers to be subjected to a review by theCommission." (Underscoring supplied.)

19. The PSC with LPPC was made to ensure thecontinuous supply of power to CASURECOII and dueto the former's competitive pricing structure andother favorable terms of its contract, which willredound to the benefit of the latter and its end-consumers in terms of reliable and affordable powersupply;

Allegations in Support of the ConfidentialTreatment of Annexes "H", and "I", "1-1", and

"1-2"

20. Rule 4 of the Honorable Commission's Rules ofPractice and Procedure provides that CASURECOIIand LPPC may request that information may not bedisclosed;

21. LPPC prays for the confidential treatment of theinformation contained in the following annexes, andnot disclosed except to the officers and staff of theHonorable Commission and its staff:

Annex

H

1,1-1and 1-2

Documents and/orInformation

Details of the Power RateCalculations and FinancialModel (Con dential)Contracts for the Supply,Construction and Supervisionfor the Power Plant(Con dential)

22. Annex "H" contains the details of LPPC's power ratecalculations and financial model as well as themanner by which these were derived. These


information are proprietary in nature and should beprotected as trade secrets as contemplated by law andjurisprudence. In the case of Air PhilippinesCorporation us. Pennswell, Inc.1, the Supreme Courtdefined a trade secret, as follows:

"A trade secret may consist of anyformula, pattern, device, or compilation ofinformation that: (1) is used in one'sbusiness; and (2) gives the employer anopportunity to obtain an advantage overcompetitors who do not possess theinformation. Generally, a trade secret is aprocess or device intended for continuous usein the operation of the business, for example, amachine or formula, but can be a price listor catalogue. or specialized customerlist. It is indubitable that trade secretsconstitute proprietary rights. The inventor,discoverer, or possessor of a trade secret orsimilar innovation has rights therein whichmay be treated as property, and ordinarily aninjunction will be granted to prevent thedisclosure of the trade secret by one whoobtained the information "in confidence" orthrough a "confidential relationship".American jurisprudence has utilized thefollowing factors to determine if aninformation is a trade secret, to wit:

(1) the extent to which the informationis known outside of the employer'sbusiness;

(2) the extent to which the informationis known by employees and othersinvolved in the business;

(3) the extent of measures taken by theemployer to guard the secrecy ofthe information;

(4) the value of the information to theemployer and to competitors;

(5) the amount of effort or moneyexpended by the company indeveloping the information; and

(6) the extent to which the informationcould be easily or readily obtainedthrough an independent

1 G.R. No. 172835, December 13, 2007


source." (citationsemphasis supplied)

omitted,

23. The interest of the consuming public is sufficientlyprotected by the review and evaluation of the ratesunder the PSC by the Honorable Commission, withoutthe need to disclose the contents of Annex "H". Thereasonableness and transparency of the prices ofelectricity is to be assured by the HonorableCommission through its own review and verificationof LPPC's operating costs and expenses;

24. More importantly, LPPC's competitors, should theyobtain the information in Annex "H", will gainundue advantage thereon and have the opportunity touse the same in their operations. The negotiatingpower of LPPC with parties it plans to contract with orwho it is currently doing business with, will clearly bethwarted if it is compelled to disclose suchinformation;

25. Further, Annexes "I", "1-1", and "1-2" pertain tothe Supply, Construction, and Supervision Contracts,respectively, for the Power Plant. These contractshave counter-parties who are not parties to the JointApplication. They contain highly technical designs,drawings and other information which are theintellectual property and trade secrets of the counter-parties, and therefore should not be disclosed to thepublic. CASURECO II and LPPC, likewise, pray forthe confidential treatment of Annexes "I", "1-1",and "1-2", under the same premises above; and

26. Accordingly, CASURECO II and LPPC submit one (1)copy each of Annexes "H", "I", "1-1", and "1-2", ina sealed envelope, with the said envelope and eachpage of the documents and/or information stampedwith the word "Confidential".

Prayer

WHEREFORE, the foregoing premises considered, theJoint Applicants Camarines Sur II Electric Cooperative,Incorporated (CASURECO II) and Limay Premiere PowerCorporation (LPPC) most respectfully pray that after due notice andhearing, the Honorable Commission:

1. ISSUE an Order treating Annexes "H", "I", "1-1",and "1-2", and all the information contained thereinas confidential, directing their non-disclosure topersons other than the officers and staff of theHonorable Commission, continuously protectingthe said information from public disclosure bymaintaining the same separate and apart from

ERCCASENO. 2016-117RCNOTICE OF PUBLIC HEARING/ 22 JULY 2016PAGE 21OF 22

the records of the case, and ensuring that theseare not divulged to unauthorized persons, pursuant toRule 4 of its Rules of Practice and Procedure; and

2. ISSUE a Decision approving the Joint Applicationand the PSC between CASURECO II and LPPC, andauthorizing CASURECO II to charge and collect thefees therein from its member-consumers.

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

The Commission has set the Application for initial hearing,expository presentation, pre-trial conference and evidentiary hearingon 29 September 2016 at nine o'clock in the morning (9:00A.M.) at CASURECO II's Principal Office at Del Rosario,Naga City, Camarines Sur.

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 concise statementof the opposition or comment and the grounds relied upon.

All such persons who wish to have a copy of the Applicationmay request from the Applicants that they be furnished with thesame, prior to the date of the initial hearing. The Applicants arehereby directed to furnish all those making such request with copiesof the Application and its attachments, subject to the reimbursementof reasonable photocopying costs. Any such person may likewiseexamine the Application and other pertinent records filed with theCommission during the standard officehours.


WITNESS, the Honorable Chairman JOSE VICENTE B.SALAZAR, and the Honorable Commissioners ALFREDO J. NON,GLORIA VICTORIA C. YAP-TARUC, JOSEFINA PATRICIAA.MAGPALE-ASIRIT, and GERONIMO D. STA. ANA, EnergyRegulatory Commission, this 22nd day of July 2016 at Pasig City.

J. MARASIGANiefofStaff

Office of the Chairman and CEO

- ~LS:~APV