(SEC-DASURECO) ERC Notice of Public Hearing D 8.22.14URECO) ERC Notice of Public Hearing D 8.22.14

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DA 1E; ....
Republic of the Philippines
ENERGY REGULATORY COMMISSION
San Miguel Avenue, Pasig City
IN THE MATTER OF THE
APPLICATION FOR APPROVAL
OF THE POWER SALES
AGREEMENT (PSA) BETWEEN
DAVAO DEL SUR ELECTRIC
COOPERATIVE, INC.
(DASURECO) AND SARANGANI
ENERGY CORPORATION (SEC),
WITH PRAYER FOR
PROVISIONAL AUTHORITY
DAVAO DEL SUR ELECTRIC
COOPERATIVE, INC.
(DASURECO) AND SARANGANI
ENERGY CORPORATION (SEC),
Applicants.
x------------------------x
ERC CASE NO. 2014-107 RC
NOTICE OF PUBLIC HEARING
TO ALL INTERESTED PARTIES:
Notice is hereby given that on July 18, 2014, Davao Del Sur
Electric Cooperative, Inc. (DASURECO) and Sarangani Energy
Corporation (SEC) filed an application for the approval of their Power
Sales Agreement (PSA), with prayer for provisional authority.
In the said application, DASURECO and SEC alleged, among
others, the following:
1. DASURECO is an electric cooperative duly organized and
existing under the laws of the Republic of the Philippines
with principal office at Cogan, Digos City, Davao Del Sur.
It has a franchise to distribute electricity in the City of
Digos and the Municipalities of Bansalan, Don Marcelino,
Jose Abad Santos, Hagonoy, Kiblawan, Magsaysay,

NOTICE OF PUBLIC HEARING/August 22, 2014
Page 2 of 26
Malalag, Malita, Matanao, Padada, Sarangani, Sulop,
Sta. Cruz, and Sta. Maria, all in the Province of Davao Del
Sur.
A copy of its Certificate of Franchise is attached to the
joint application as Annex "A";
2. SEC is a generation company duly authorized and
existing under and by virtue of the laws of the of
the Philippines, with principal address at 4
1
Floor,
Alphaland Southgate Tower, 2258 Chino Races Avenue
corner EDSA, Makati City.
Copies of its Certificate of Incorporation and Certificate of
Filing of Amended Articles of Incorporation issued by the
Securities and Exchange Commission, Amended Articles
of Incorporation and By-Laws, latest General Information
Sheet (GIS) and latest Audited Financial Statements
(AFS) are attached to the joint application as Annexes "B"
and series;
NATURE OF THE APPLICATION
3. Pursuant to Rule 20 (B) of the ERG Rules of Practice and
Procedure, approved by the Commission on June 22,
2006 in Resolution No. 38, Series of 2006, the instant
application is submitted to the Commission for its review
and approval of their PSA dated March 29, 2014;
A copy of the PSA is attached to the joint application as
Annex"C"
'
COMPLIANCE WITH PRE-FILING REQUIREMENTS
4. In compliance with Rule 6 of the ERG Rules of Practice
and Procedure, they have furnished the legislative bodies
of each of the Local Government Units (LGUs) where
they principally operate a copy of the joint application with
all its annexes and accompanying documents.
The corresponding proofs of receipt are attached to the
joint application as Annexes "D" and series;
Page 3 of 26
---------
5. They caused the publication of the joint application in its
entirety, excluding its annexes, in a newspaper of general
circulation within DASURECO's franchise area.
Copies of the newspaper and the corresponding Affidavit
of Publication are attached to the joint application as
Annexes "E" and "E-1," respectively;
STATEMENT OF FACTS
6. Shortage of Power Supply in the Mindanao Grid. The
Mindanao Grid has long been suffering from a deficit in its
power supply. The generating capacity in the grid is no
longer sufficient to meet the power requirements of
Mindanao;
7. As a result, Mindanao, including the franchise area of
DASURECO, has experienced and is at risk of suffering
power outages adversely affecting local businesses and
the daily lives of all electricity consumers. The lack of
sufficient and reliable power supply has long been a
barrier to much needed capital investment that would spur
the local economy not only in the franchise area of
DASURECO but in greater Mindanao as well;
8. Drastic Reduction in the National Power
Corporation/Power Sector Assets and Liabilities
Management Corporation's (NPC/PSALM) Supply.
The main power supplier in Mindanao significantly
reduced its allocations to distribution utilities, further
aggravating the power shortage.
8.1 PSALM, which took over all the power generation
assets of NPC pursuant to Republic Act No. 9136,
otherwise known as the "Electric Power Industry
Reform Act of 2001" (EPIRA), supplies the bulk of
the power requirements of Mindanao.
NPC/PSALM, likewise, supplies majority of
DASURECO's current power supply;
Page 4 of 26
8.2 Recently, NPC/PSALM reduced by about one-third
(1/3) its firm supply commitments to distribution
utilities in Mindanao, inCluding DASURECO. This
has resulted in further widespread power shortages;
and
8.3 NPC/PSALM Certification. DASURECO has
requested NPC/PSALM for a certification on
whether it will have available capacity and energy to
supply DASURECO during the term of the PSA.
DASURECO undertakes to submit the certification
to this Honorable Commission once it is obtained.
A copy of the said request is attached to the joint
application as Annex "F";
9. Necessity for a Long-term Power Supply Solution. It
is necessary for a distribution utility, like DASURECO, to
ensure that the power supply requirements within its
franchise area are adequately covered by supply
contracts;
1 0. DASURECO's power demand is expected to increase
steadily in the coming years. Hence, there is a need for it
to procure sufficient long-term power supply so that the
long-term power requirements of its customers are
adequately addressed;
11. In 2012, DASURECO started rece1vmg offers from
Independent Power Producers (IPPs) for the supply of
baseload and peaking power, among them, SEC;
12. After an assessment of the offers and to ensure sufficient,
reliable and long-term power supply in its franchise area,
DASURECO executed the subject PSA with SEC for the
supply of up to fifteen (15) MW of baseload power over
the long-term;
13. Under the law, no contract for the supply of power can
become legally effective unless approved by the
Commission. Hence, the instant joint application;
Page 5 of 26
ABSTRACT OF THE POWER SALES AGREEMENT
AND RELATED INFORMATION
14. The Generation Facilities. To supply power under the
PSA, SEC shall construct, own, operate, manage and
maintain a 2x120 MW Circulating Fluidized Bed
Combustor Boiler Coal-Fired Power Plant in the
Municipality of Maasim, Sarangani (SEC Power Station);
14.1 The SEC Power Station is being implemented in
two (2) phases, each for one (1) unit with a net
generating capacity of 1 05 MW;
14.2 The power to be supplied under the subject PSA
shall be sourced from the second phase of the SEC
Power Station (SEC Phase II Plant).
A copy of the Certification on the Plant's Heat Rate
is attached to the joint application as Annex "G";
and
14.3 Expected Commercial Operations. The SEC
Phase II Plant is scheduled to commence
commercial operations within thirty-six (36) months
from the effectiveness of the PSA, as discussed
below, or such later date as may be agreed by the
Parties;
15. Salient Features of the PSA:
15.1 Contracted Capacity. Under the PSA, SEC shall
supply or cause to supply to DASURECO the
latter's baseload electric power requirements up to
the Contracted Capacity in accordance with the
following schedule and the Dispatchable Energy as
indicated in and subject to the terms and conditions
of the PSA:
Page 6 of26
Contract Year Contracted Capacity
1 to 2 10MW
3 to 25 15 MW
15.2 Within twenty-four (24) months after the Effective
Date, DASURECO may increase the Contracted
Capacity for the first and second contract years to
15 MW, subject to an adjustment of the Capital
Recovery Fee (CRF);
15.3 Term. The term of supply and purchase under the
PSA shall be for twenty-five (25) years commencing
on the date the SEC Phase II Plant is ready to
commence commercial operations; and
15.1 Effectiveness. The Parties' obligations under the
PSA shall become effective upon, among other
conditions, the Commission's approval of the PSA
and the pricing structure therein, and the attainment
or waiver of financial close for the project;
16. Stages of Supply. SEC shall supply power to
DASURECO during the commissioning of the SEC Phase
II Plant and thereafter, during the full commercial
operations of the Plant. As discussed below,
DASURECO shall pay a lower rate during commissioning;
17. Tariff Lower than Appropriate Tariff. SEC understands
that it may be allowed to charge an appropriate tariff that
will enable it to recover allowable costs to build and
operate the SEC Phase II Plant at an approved rate of
return consistent with recent rulings of this Honorable
Commission;
18. However, due to the request of its customers for lower
rates and for parity of pricing for its customers, SEC
agreed to a tariff that is lower than the tariff that it would
have been allowed to charge;
19. A comparison between the tariff in the subject PSA and
the appropriate tariff is summarized in the table below.
The difference represents a reduction in revenue which
Page 7 of26
SEC has agreed to absorb fcir the benefit of its
customers:
Appropriate
PSA Tariff Tariff Difference
Foreign Local Foreign Local Foreign Local
(USD) (PhP) (USD) (PhP) (USD) (PhP)
CRF (/kW/mo)
Year1 20.32 427.32 23.57 495.69 3.25 68.37
Year2 23.33 490.56 27.06 569.05 3.73 78.49
Year3 28.69 490.56 33.28 569.05 4.59 78.49
Year 4 and
28.69* 603.37* 33.28 699.91 4.59 96.54
Onwards
FOMF
-
(PhP/kW/mo) 333.23 333.23
VOMF
-
(PhP/kWh) 0.3170 0.3170
Fuel Cost Pass-through Pass-through -
* The CRF for Year 4 and onwards shall be $30.69/kW/mo and PhP668.68/kW/mo if
DASURECO does not exercise its option to increase the Contracted Capacity from 10
MW to 15 MW during the first two (2} years of commercial operations.
A detailed explanation of the comparison is attached to
the joint application as Annex "H";
20. In view of the foregoing, SEC submits that the evaluation
of the present application should be based on the
appropriate tariff, and not on the tariff in the PSA;
21. Purchased Power Rate. The rates to be paid by
DASURECO to SEC depend on whether the power is
delivered during commissioning or during commercial
operations of the SEC Phase II Plant. These rates and
their corresponding adjustments are reflected in the
formulas below:
.Page 8 of 26
1. Monthly Payments
The Monthly Payments shall be paid to the Seller on a monthly
basis in accordance with the following formula:
Monthly Payments= CRF + FOMF + VOMF + AFC + SC + RCEC + BCEC +Taxes
Where:
CRF = Capital Recovery Fees
FOMF = Fixed Operation and Maintenance Fee
VOMF = Variable Operation and Maintenance Fee
AFC = Actual Fuel Cost
sc = Start-up Costs
RCEC = Replacement Capacity and Energy Costs
BCEC = Backup Capacity and Energy Costs
Taxes = Value-Added Tax, other applicable taxes and
Government impositions, if any
1.1 CRF
The CRF shall be computed as follows:
1. 1. 1 During the First Contract Year:
CRF
1
= (FCRF
1
+ DCRF
1
) X CC X F
Where:
=
=
Capital Recovery Fee for the First
Contract Year
$20.32 per kW per month which shall be
converted to Philippine Pesos on the
Commercial Operation Date at the
Page 9 of 26
=
cc
=
F =
Where:
ED =
TMED =
F
=
weighted average US Dollar to
Philippine Peso exchange rate provided
in Schedule I (Power Plant Foreign
Capital Recovery Fee Conversion)
PhP427.32 per kW per month
Contracted Capacity
ED
TMED
Electricity delivered during the billing
period in kWh
Theoretical Maximum Energy Delivered
being the Contracted Capacity multiplied
by the hours in the relevant month, less
any adjustments made for Allowed
Outage, limitation due to dispatch order,
Force Majeure of SEC Power Plant, and
allowable start-up time due to period of
non-generation due to a Buyer dispatch
order or an Allowed Outage, and any
other hours as a consequence of
Buyer's failure. to perform any of its
obligations
1 if the foregoing formula results in F
being greater than 1
1.1.2 During the Second Contract Year
CRF
2
(FCRF
2
+ DCRF
2
) X CC X F
Where:
CRF2 = Capital Recovery Fee for the Second
Contract Year
Page 10 of 26
---------
.
'
FCRF
2
DCRF2
cc
F
Where:
ED
TMED
F
=
=
=
=
=
=
=
converted to Philippine Pesos on. the
Contracted Capacity
ED
TMED
period in kWh
Outage, limitation duei to dispatch order,
Buyer's failure to perform any of its
obligations
1 if the foregoing formula results 1n F
1.1.3 During the Third Contract Year
CRF
3
(FCRF
3
+ DCRF
3
) X CCX F
Page 11 of 26
Where:
CRF
3
FCRF3
DCRF3
cc
F
Where:
ED
TMED
F
=
=
=
=
=
=
=
=
Capital Recovery Fee for the third
Contract Year
converted to Philippine Pesos on the
in Schedule (Power Plant Foreign
Contracted Capacity
ED
TMED
period in kWh
obligations
Page 12 of 26
1.1.4 From the Fourth Contract Year up to the End of the Term
CRF (FCRF + DCRF) X CC X F
Where:
CRF
FCRF
DCRF
cc
F
Where:
ED
TMED
=
=
=
=
=
=
=
Capital Recovery Fee for the Fourth
Contract Year up to the end of the Term
converted to Philippine Pesos on
Capital Recovery Fee Conversion); or, if
either of the conditions 1n Section
6.19(b)
1
of this Agreement applies,
$28.69
PhP668.68 per kW per month; or, if
either of the conditions 1n Section
6.19(b)
1
of this Agreement applies,
Contracted Capacity
ED
TMED
period in kWh
1
The entry "Section 6.19(br in Schedule B, Sec. 1.1.4., page 40 of the PSA is a typographical
error. The correct entry is "6.1(b)".
Page 13 of 26
F =
obligations
1.2 Fixed Operation and Maintenance Fee
The Fixed Operation and Maintenance (O&M) Fee covers the
operating and maintenance costs of the SEC Power Plant. It shall be
computed according to the following formula:
FOMF OMR X {[(o.44 X FCP,,) X Fxn] + [o.56 X LCPJJ X CCX F
FCP
0
Fx
0
LCP
0
Where:
FOMF
=
OMR
=
cc
=
..
F
=
Where:
ED
=
TMED =
Fixed Operation and Maintenance Fee
in Philippine Pesos
Contracted Capacity
ED
TMED
Electricity delivered during the
billing period in kWh
Theoretical Maximum Energy
Delivered being the Contracted
Capacity multiplied by the hours in
the relevant month, less any
NOTICE OF PUBLIC HEARING/Aug11st 22, 2014
Page 14 of 26
------------
F
FCPn
FCPo
adjustments made for Allowed
Outage, limitation due to dispatch
order, Force Majeure of SEC
Power Plant, and allowable start-
up time due to period of non-
generation due to a Buyer
dispatch order or an Allowed
Outage, and any other hours as a
consequence of Buyer's failure to
perform any of its obligations
= 1 if the foregoing formula results in
F being greater than 1
= The arithmetic average of the values of
the United States Consumer Price Index
for all Items, as last published on or
before the last day of such billing month
by the International Monetary Fund;
provided that if the International
Monetary Fund ceases to publish such
indices, the relevant indices as
published by the U.S. Department of
Labor Bureau of Labor Statistics shall
apply.
= The arithmetic average of the values as
of May 31, 2011 of the United States
Consumer Price Index for all Items; as
published by the International Monetary
Fund, provided that if the International
Monetary Fund ceases to publish such
indices, the relevant indices as
published by the U.S. Department of
Labor Bureau of Labor Statistics shall
apply.
= The arithmetic average of the values of
the Consumer Price Index in the
Philippines for all items and General
Wholesale Price Index in Metro Manila
for mineral fuels, lubricants and related
materials, both as last published on or
before the last day of such Billing Month
by the National Statistics Office.
Page 15 of 26
LCPo =
=
Fx
0
=
The arithmetic average of the values as
of May 31, 2011 of the Consumer Price
Index in the Philippines for all items and
General Wholesale Price Index in Metro
Manila for mineral fuels, lubricants and
related materials, both as published by
the National Statis!ics Office.
Actual Philippine Peso to US Dollar
exchange rate on the meter reading
date as published by the Bangko Sentral
ng Pilipinas, www.bsp.gov.ph
Actual Philippine Peso to US Dollar
exchange rate on May 31, 2011 as
published by the Bangko Sentral ng
Pilipinas, www.bsp.gov.ph.
1.3 Variable Operation and Maintenance Fee
The Variable Operation and Maintenance (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 SEC
Power Plant. It shall be computed according to the following formula:
[(
PPP,) Fx..] ( LCP,)}
VOMF ~ V O R x 0.35x-- x- + 0.65x-- xED
Where:
VOMF =
VOMR =
ED =
=
Pl'Po Fxo LCJ'o
Variable Operation and Maintenance Fee in
Pesos
PhP0.3170 per kWh
Electricity delivered during the billing period in
kWh
The arithmetic average of the values of the
United States Producers' Price Index for
industrial goods; as last published on or
before the last day of such billing month by
Page 16 of 26
the International Monetary Fund; provided that
if the International Monetary Fund ceases to
publish such indices, the relevant indices as
published by the U.S. Department of Labor
Bureau of Labor Statistics shall apply.
PPP
0
= The arithmetic average of the values as of
May 31, 2011 of the United States Producers'
Price Index for industrial goods; as published
by the International Monetary Fund, provided
that if the International Monetary Fund ceases
to publish such indices, the relevant indices as
published by the U.S. Department of Labor
Bureau of Labor Statistics shall apply.
LCP" = The arithmetic average of the values of the
Consumer Price Index in the Philippines for all
items and General Wholesale Price Index in
Metro Manila for mineral fuels, lubricants and
related materials, both as last published on or
before the last day of such Billing Month by
the National Statistics Office.
LCP
0
= The arithmetic average of the values as of
May 31, 2011 of the Consumer Price Index in
the Philippines for all items and General
Wholesale Price Index in Metro Manila for
mineral fuels, lubricants and related materials,
both as published by the National Statistics
Office.
Fx
0
= Actual Philippine Peso to US Dollar exchange
rate on the meter reading date as published
by the Bangko Sentral ng Pilipinas,
www.bsp.gov.ph.
Fxo = Actual Philippine Peso to US Dollar exchange
rate on May 31, 2011 as published by the
Bangko Sentral ng Pilipinas, www.bsp.gov.ph.
1.4 Actual Fuel Cost
The Actual Fuel Cost is the fee paid to the Seller as payment
for the procurement and delivery of the coal used in the operation of
'
'
Page 17 of 26
the SEC Power Plant. The Actual Fuel Cost shall be computed as
follows:
(
FOB Coal Price+ TC +Other Charges)
Actual Fuel Cost= l,DDDkg X Consumption Rate X Fotex X ED
ton
Where:
l'OH Base 1\-icc x Calorific Value. x ll
FOB Coal Price =
GCN Ctilorilic Value
Where:
FOB Base Price = The price expressed in US Dollars
applicable for all Shipments for
which the Bill of Lading Date falls
within the period from and
including the date of this
Agreement until and including the
last day of the Quarter in which
the date of this Agreement occurs
(the "FOB Base ,Price"), shall be
equal to the globaiCQAL
Newcastle Index (which is the coal
price per ton, FOB Newcastle,
stated in USD, as published by
globaiCOAL on
www.globalcoal.com under the
heading "Weekly Index; NEWC
Index" (or under such other
replacement heading under which
such prices are published by
globaiCOAL) with calorific value
basis of 6,000 kcal/kg net as
received) for the week
immediately preceding the week in
which the date of signing of this
Agreement occurs. The FOB Base
Price shall be reset every Quarter
following the Quarter in which the
date of this Agreement occurs,
and such FOB Base Price
applicable for all Shipments for
which the B/L Date falls within and
NOTICE OF PU.BLIC HEARING/August 22, 2014
Page 18 of 26

Calorific Value" =
F =
TC =
Other Charges =
Consumption
Rate
Forex
ED
=
=
=
including the first day and the last
day of such Quarter shall be equal
to the arithmetic average of the
globaiCOAL Newcastle Index for
the immediately preceding
Quarter.
Average calorific value of the coal
used in the billing period
Discount or premium applied to
the coal used during the billing
period
Actual transport cost, including
transshipment cost of the coal
used during the billing period in
USD per metric ton
Actual insurance cost and port
charges (all charges incurred by a
vessel at a loading port and
discharge port including towage,
pilotage, light dues, moor or
unmoor, berthing and deberthing,
assist tugs, wharfage, tonnage
dues and sundries, including
agent's fees, communications
charges and other miscellaneous
expenses customarily regarded as
port charges) and applicable
customs duties and import taxes
of the coal used during the billing
period
0.7kg/kWh, escalated at 0.5%
annually
Actual Philippine Peso to US
Dollar exchange rate on the date
the Seller makes payment to the
fuel supplier .
Electricity delivered during the
billing period in kWh
Page 19 of 26
Note: In the event that the Seller procures coal from multiple
suppliers, the weighted average of the relevant values above shall be
used.
1.5 Start-Up Costs
The Buyer shall pay the Seller Start-Up Costs for the cost of
starting up the SEC Power Plant after a period of shutdown due to
any reason attributable to the Buyer. The Start-Up Costs shall be
paid in accordance with the following schedule:
Cost per Event
Type of Synchronization (PhP)
Cold Start-up to Synchronization 4,209,906
Warm Start-up to Synchronization 2,872,221
Hot Start-up to Synchronization 1,227,515
1.6 Replacement Capacity and Energy Cost
The Buyer shall pay the Seller Replacement Capacity and
Energy Cost in accordance with the invoice provided by the supplier
of Replacement Capacity and Energy.
1. 7 Backup Capacity and Energy Cost
The Buyer shall pay the Seller Backup Capacity and Energy
Cost equivalent to the Monthly Payment had there been no Forced
Outage. '
2. Commissioning Output Charge
The Buyer shall pay the Seller the Commissioning Output
Charge for electricity supplied prior to the Commercial Operation
Date. The Commissioning Output Charge shall be computed as
follows:
Page 20 of 26
~
CDC ~ FOMF + VOMF + ACF +Taxes
Where:
coc
=
Commissioning Output Charge
FOMF = Fixed Operation and Maintenance Fee
computed in accordance with Item 1.2 of this
Schedule B
VOMF = Variable Operation and Maintenance Fee
computed in accordance with Item 1.3 of this
Schedule B
ACF = Actual Cost of Fuel computed in accordance
with Item 1.4 of this Schedule B
For reference, a sample computation of the generation
rate is contained in Schedule C of the PSA.
21.1 Basis for Indexation. As indicated in the formulae
above, the monthly fees to be paid by DASURECO
are subject to adjustments based on various indices
or factors;
21.2 The Foreign CRF component is fixed and is subject
only to a one-time conversion to Philippine Pesos
on Commercial Operation Date at the weighted
average exchange rate as computed in accordance
with the PSA. This will ensure that DASURECO
does not carry a long-term foreign exchange
exposure on the CRF component; and
21.3 The components of the O&M Fees representing
dollar-denominated costs are adjusted based on the
foreign exchange rate and the US Consumer Price
and Producer Price indices. Those representing
local costs are adjusted based on the local
Consumer Price Index. The Actual Fuel Costs vary
based on actual costs as well as the foreign
Page 21 of 26
exchange rate and on the Global Coal Newcastle
index;
22. Sources of Funds/Financial Plans. The project will be
financed through loans and equity, with an indicative
debt-equity ratio of 70:30.
22.1 Project Cost. The total estimated project cost for
the SEC Phase II Plant is US$ 303.8 Million.
A breakdown of the project cost, including the cost
of interconnection facilities, is attached to the joint
application as Annex "I";
22.2 Annual Interest. SEC is currently discussing with
prospective lenders the terms and conditions of the
project financing; and
22.3 Computation of Weighted Average Cost of
Capital (WACC). Consistent with previous rulings
of the Commission, the nominal pre-tax WACC is
13.59%.
A computation of the WACC is shown in Annex "J"
of the joint application;
23. Cash Flow.
23.1 Breakdown of Operating and Maintenance
Expenses. A breakdown of the operating expenses
which form the basis of the tariff is attached to the
joint application as Annex "K";
23.2 Offtake Arrangement. Under the PSA, SEC shall
make available, reserve, guarantee, and deliver to
DASURECO the Contracted Capacity, and
DASURECO shall pay for such quantity of electric
power. SEC shall utilize such Contracted Capacity
to generate energy for DASURECO; and
Page 22 of 26
23.3 There is no minimum energy offtake under the PSA.
As SEC will dedicate capacity to DASURECO, the
Capital Recovery and the Fixed Operations and
Maintenance Fees are computed based the
contracted capacity, and on the proportion of actual
energy delivered to the energy that could have been
delivered;
24. Prompt Payment Discount (PPD). DASURECO shall be
entitled to discount of 1.5% of the amount paid for the
CRF in case of prompt payment;
25. Fuel .Procurement. An international public tender was
conducted for the purpose of procuring fuel for the SEC
Phase II Plant. The conduct of the tender and the fuel
procurement process is summarized in Annex "L" of the
joint application;
26. The conduct of an international public tender assures
DASURECO of the best available cost of fuel supply. It
must be stressed that SEC derives no revenue
whatsoever from the fuel supply;
27. Environmental Compliance Certificate (ECC). The
Department of Environment and Natural Resources
(DENR) has issued ECC Ref. No. 0901-001-4021 for the
SEC Power Station.
A copy of the said ECC is attached to the joint application
as Annex "M"
'
28. DOE Certification. On February 25, 2014, the DOE
issued Certificate of Endorsement No. 2014-02-004,
certifying that the SEC Phase 11. Plant is consistent with
the Power Development Plan (PDP) of the Government.
A copy of the said certificate is attached to the joint
application as Annex "N";
29. Certificate of Compliance (COC). As the SEC Phase 1.1
Plant is still to be constructed, it is not yet covered by a
COC. In accordance with ERC Resolution No. 9, Series
Page 23 of 26
of 2010, SEC shall file the necessary application for a
COC no later than three (3) months before the
commencement of commercial operations;
30. Load Forecast. A copy of DASURECO's Distribution
Development Plan (DDP) showing its load forecast
projections is attached to the joint application as Annex
"Q"
'
RATE IMPLICATIONS OF THE POWER SALES AGREEMENT
31. In order to determine the impact of the implementation of
the PSA on DASURECO's generation costs, an analysis
was conducted taking into consideration the expected
supply from its other suppliers;
32. It should be emphasized that the analysis covers 2016 as
the sample year, and considers the forecasted power
requirements and expecte.d supply for that year. In the
analysis, two (2) scenario!> are considered: one without
supply from SEC under the PSA, and another with SEC
supply.
A copy of the said analysis 1s attached to the joint
application as Annex "P";
33. The results of the said analysis are summarized in the
table below:
Without SEC Supply With SEC Supply
Year2016 Year2016
(PSALM+ TUDAYA + (PSALM+ TUDAYA +
Rate Impact
TSI +AEDC) TSI + AEDC + SEC)
(PhP/kWh)
Power Cost Power Cost
(PhP/ kWh) (PhP/kWh)
5.49 5.12 -0.37
34. The supply from SEC under the PSA will not only provide
additional stable and reliable baseload power supply but
Page 24 of 26
will also serve to reduce the power costs of DASURECO,
to the benefit of its customers;
ALLEGATIONS IN SUPPORT OF
THE MOTION FOR PROVISIONAL AUTHORITY
35. There is a need for DASURECO to procyre sufficient
long-term power supply so that the power requirements of
its customers are adequately addressed, especially as its
power requirements are forecasted to rise steadily in the
coming years due to the increasing demand of its
customers;
36. Moreover, NPC/PSALM, which currently supplies majority
of DASURECO's electricity requirements, drastically
reduced its firm supply commitments by about one-third
(1/3);
37. Thus, given DASURECO's increasing power
requirements, the procurement of additional power supply
is imperative in order to address its power requirements
adequately and in a timely manner;
38. The provisional approval of the instant application is
necessary for SEC to secure, in a timely manner, the
necessary financing for the SEC Phase II Plant. The
project of developing and construc::ting the Plant is capital-
intensive, and will take an extended period of
time. Consequently, obtaining financing in a timely
manner is critical to complete the Plant;
39. Thus, the issuance of a provisional approval will enable
SEC to complete the project and consequently, provide
the power needed by DASURECO under the PSA in a
timely manner;
40. Hence, they move for the provisional approval of the
instant application pursuant to Rule 14 of the ERC Rules
of Practice and Procedure.
A copy of the Sworn Statement supporting the said
motion is attached to the joint application as Annex "Q";
Page 25 of 26
41. They pray that the Commission:
a. Immediately issue an Order provisionally approving
the PSA subject of the instant joint application as
well as the generation rate and adjustment
mechanisms indicated therein; and
b. After due hearing, render judgment making such
provisional approval permanent.
The Commission has set the said joint application for
jurisdictional hearing, pre-trial conference, expository presentation
and evidentiary hearing on October 2, 2014 (Thursday) at one
thirty in the afternoon (1:30 P.M.) at DASURECO's Principal
Office, Barangay Cogan, Digos City, Davao Del Sur.
All persons who have an interest in the subject matter of the
proceeding may become a party by filing, at least five (5) days prior to
the initial hearing and subject to the requirements in the ERG's Rules
of Practice and Procedure, a verified petition with the Commission
giving the docket number and title of the proceeding and stating: ( 1)
the petitioner's name and address; (2) the nature of petitioner's
interest in the subject matter of the proceeding, and the way and
manner in which such interest is affected by the issues involved in the
proceeding; and (3) a statement of the relief desired.
All other persons who may want their views known to the
Commission with respect to the subject matter of the proceeding may
file their opposition to the joint application or comment thereon at any
stage of the proceeding before the applicants conclude the
presentation of their evidence. No particular form of opposition or
comment is required, but the document, letter or writing should
contain the name and address of such person and a concise
statement of the opposition or comment and the grounds relied upon.
All such persons who may wish to have a copy of the joint
application may request the applicants, prior to the date of the initial
hearing, that they be furnished with a copy of the joint application.
The applicants are hereby directed to furnish all those making a
request with a copy of the joint application and its attachments,
subject to reimbursement of reasonable photocopying costs.
Likewise, any such person may examine the joint application and
Page 26 of 26
other pertinent records filed 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 Regulatory
Commission, this 22nd day of August, 2014 at Pasig City.
V c ~
ATTY. FRANCIS SATURNINO C. JUAN
Executive Director Ill

(SEC-DASURECO) ERC Notice of Public Hearing D 8.22.14URECO) ERC Notice of Public Hearing D 8.22.14

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