InitialOrderERCCaseNo2016 081RC

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IN THE MATTER OF THE

APPLICATION
FOR
APPROVAL
OF
THE
ELECTRIC
POVVER
PURCHASE
AGREEMENT
BETVVEEN THE
AKLAN
ELECTRIC
COOPERATIVE,
INC.
AND
PALM
CONCEPCION
POWER
CORPORATION,
WITH
A
PRAYER
FOR
THE
ISSUANCE
OF
A
PROVISIONAL AUTHORITY
2016-081
RC
AKLAN
ELECTRIC
COOPERATIVE, INC. AND
PALM CONCEPCIONPOVVER
CORPORATION,
Joint Applicants.
DO,' C..KCE TED
DE
2 8
2016
"""'7JiZ-"-'' ,,,,,~'-B
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Date.
Po-.
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~~~pprove:';
~~]i~
Republic of the Philippines

l~:'
ENERGY RE.GULATORYC~M~ISSIOtt
San MIguel Avenue, PasIg CIty
\
ERC CASE NO.
t,
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ORDER
On 29 April 2016, Applicants Aldan Electric Cooperative, Inc.
(AKELCO) and Palm Concepcion Power Corporation (PCPC) filed an
Application for the Approval of the Electric Power Purchase
Agreement with a Prayer for the Issuance of a Provisional
Authority, seeking the Commission's approval of the Electric Power
Purchase Agreement (EPPA) entered into by both parties on 22
August 2013 and amended through two (2) Letters of Agreement
(LOA) dated 11August 2014 and 14 April 2016.
AKELCO and PCPC alleged the following in their Application:
1.
Applicant AKELCO is an electric cooperative duly
organized and existing under and by virtue of the laws of the
Republic of the Philippines, with principal office address at
AKELCO Central Office Mayor Saturnino Fernandez Compound
Poblacion, Lezo, 5605 Aldan. It has been granted an exclusive
franchise by the National Electrification Administration (NEA) to
ERC CASE NO. 2016-081 RC

ORDER / 05 DECEMBER 2016
PAGE 2 OF 22
distribute electric service in the municipalities of Malay including
the Island of Boracay, Buruanga, Nabas, Ibajay, Makato, Tangalan,
Numancia, Kalibo, Lezo, Malinao, New Washington, Batan, Altavas,
Balete, Banga, Libacao and Madalag all in the province of Aldan and
the municipalities of Pan dan and Libertad. A Copy of its NEA
Certificate of Registration is attached to this Application as Annex
"A",
2.
Applicant PCPC is a domestic corporation duly
organized and existing under the laws of the Republic of the
Philippines with principal office address at Brgy. Nipa, Municipality
of Concepcion, Province of Iloilo. PCPC is in the process of testing
and commissioning Unit 1 of the 2 x 135 MW clean coal-fired power
plant (the "Power Plant"), which it shall own, operate, and
maintain, located at Brgy. Nipa, Municipality of Concepcion,
Province of Iloilo.
3.
Copies of PCPC's Certificate of Registration, Articles of
Incorporation, latest General Information Sheet, latest Audited
Financial Statements and Board of Investments
Certificate of
Registration for the Concepcion Power Plant Project are attached
hereto as Annexes "B", "C", "D", "E" and "F", respectively and all
made integral parts hereof.
4.
A summary of the relevant technical characteristics of
the Power Plant with a certification as to its heat rate is attached
hereto as Annex "G" and made an integral part hereof.
5.
A summary of the transmission projects or grid
connection projects necessary to complement the Power Plant is
attached hereto as Annex "H" and made an integral part hereof.
Nature of the Application
6.
Pursuant to Rule 20 (B) of the Energy Regulatory
Commission's 2006 Rules of Practice and Procedure (the "ERC
Rules") and other pertinent rules and regulations, this Application
is being submitted to this Honorable Commission for the approval
of the Electric Power Purchase Agreement ("EPPA") entered into by
and between Joint Applicants AKELCO and PCPC. A copy of the
EPPA is attached as Annex "I" of this Application and made an
integral part hereof.
7.
As will be elaborated further below, the subject EPPA
and Letters of Agreements (LOAs) were entered into by Joint
Applicants in August 2013 and April 2015. Thus, in accordance with
Resolution NO.1, Series of 2016 promulgated by the Honorable
Commission last 15 March 2016, the EPPA is not yet covered by the
requirement for a competitive selection process in the procurement
of power supply for captive customers of distribution utilities. As
will be seen below, the rates in the subject EPPA between Joint
Applicants herein are exactly the same as the rates approved by the
Honorable Commission for Joint Applicant PCPC in the respective
decisions in ERC Case Nos. 2013-205RC, 2014-108RC and 2014125RC.

PAGE 3 OF 22
Compliance with Pre-Filing Requirements
8.
In compliance with the pre-filing requirements
mandated under Rule 3, Section 4 (e) of the Implementing Rules
and Regulations of Republic Act No. 9136, otherwise known as the
Electric Power Industry Reform Act of 2001 or the EPIRA, and Rule
6 of the ERC Rules, Joint Applicants furnished the legislative bodies
of the local government units where they principally operate with a
copy of the present Application together with all the annexes and
accompanying documents. Copies of the Affidavits of Service on the
Presiding
Officer or Secretary or their duly authorized
representatives, of the legislative bodies of the Province of Iloilo and
Aklan and the Municipalities of Lezo, Aklan and Concepcion, Iloilo
where Applicants principally operate, attesting to the fact of such
service are attached hereto as Annexes "J" to "J-3".
9.
In addition, Joint Applicants caused the publication of
the instant Application in its entirety in a newspaper of general
circulation within the Franchise Area of Applicant AKELCO. Copies
of the newspaper where the publication of this Application appeared
and the corresponding Affidavit of Publication from the publisher of
such newspaper attesting to such publication are attached hereto as
Annexes "K" and "K-1".
Statement
of Facts and of the Case
10.
Applicant PCPC sent a letter to the Board of Directors
of AKELCO offering to supply a portion of its power requirements
from Unit 1 of the PCPC Power Plant by 2016. The representatives
of PCPC thereafter made multiple presentations to the Board of
Directors of AKELCO on the proposed supply of power from Unit 1
of the PCPC Power Plant.
11.
J oint Applicants PCPC and AKELCO thereafter
commenced negotiations for the execution of the EPP A. Applicant
AKELCO considered the need to address the security of the long
term power supply requirements of the consumers in its franchise
area which is projected to increase yearly up to 2016 and onwards
and the prudence and wisdom of sourcing a portion of its power
requirements from a new power plant in Panay that is not its
current supplier in order to improve the reliability and security of
the supply of power to its franchise area.
AKELCO DEMAND-SUPPLY PROJECTIONS
12.
The franchise area of AKELCO is projected to have a
total peak power demand of 47.591 MW this year. Currently,
AKELCO sources its electric power requirements from the following
suppliers:
a)
12 MW from Panay Energy Development Corp.

under a Power Supply Contract until April 2036;
b)
18 MW from the Green Core Geothermal Inc. under a

Power Supply Agreement until December 2022;

PAGE 4 OF 22
c)
4.8 MW from SPC Island Power Corp. under a Power

Supply Contract until August 2017;
d)
3MW from Panay Power Corp.;
e)
8 MW balance is sourced from the Wholesale

Electricity Spot Market (WESM).
13.
Further, the demand within the AKELCO franchise
area is projected to grow by at 5.94% in 2016 as demonstrated in its
Distribution Development Plan. Thus, by 2017, AKELCO will need
an additional 4MW of power supply. This load growth of AKELCO
is what is sought to be supplied under the Unit 1 EPPA with PCPC as
amended by the LOAs. Further, the supply from PCPC is also
intended to displace the more expensive supply from PPC and SIPC
which are from bunker fired power plants. This is consistent with
the Distribution Development Plan of Applicant AKELCO a copy of
which is attached hereto as Annex "L" with its load curve.
14.
The Department of Energy (DOE) has projected that
the Visayas Grid will need an additional 100 MW of generating
capacity by 2015. A copy of the supply demand-scenario for 2012 to
2030 as projected by the DOE in the 2012 Supply-Demand Outlook,
as available in http://www2.doe.gov.ph/news/2013
SupplyDemand Outlook.pdf is attached hereto as Annex "M" and made an
integral part hereof.
15.
In the attached 2012 DOE Supply-Demand Outlook, it
is clearly indicated that the DOE has programmed the first 135 MW
unit of PCPC in Concepcion, Iloilo to address the additional
generating capacity requirements of the Visayas Grid by 2016.
16.
AKELCO does not source any of its power
requirements from NPCjPSALM and does not have any TSCjCSEE
with NPCjPSALM.
Details on the Procurement
Process undertaken
17.
As stated earlier, Applicant
Applicant AKELCO offering to supply base
of its Power Plant beginning in 2016.
presentations to the Board and Management
by applicant AKELCO
pepc sent a letter to

load power from Unit 1
Applicant PCPC made
of Applicant AKELCO.
18.
After a due diligence evaluation, Applicant AKELCO
determined that the offer of PCPC to supply a portion of its power
requirements by 2016 was very suitable since it was from a brand
new power plant in Panay that could be reasonably expected to add
new capacity to the Panay Grid by 2016 since at such time, it already
had an ECC and construction was already commencing on the
Power Plant;
19.
Applicant AKELCO also determined that the PCPC
Unit 1 power supply offer had a tariff that was cheaper than its
current coal power plant supplier.

PAGE 5 OF 22
20.
Applicant AKELCO further determined that it would
be better to contract with a new power plant in Panay that was not
yet its current supplier so that it would have an additional source of
power supply which could continue to provide power supply to
AKELCO should any of its current suppliers suffered outages thus
improving the reliability and security of its power supply.
21.
Copies of ECC No. 0606-006-402 for the Power Plant
issued by the DENR on 27 May 2007 and the approved
amendments thereto dated 12 October 2012 are attached hereto as
Annexes "N" and "N-1" and made integral parts hereof.
22.
A Copy of the Certification from the DOE dated 03
January 2014 certifying that the PCPC Power Plant Project is
consistent with the DOE Power Development Plan is attached
hereto as Annex "0" and made an integral part hereof.
23.
With the completion and coming in of the PCPC
power plant, it will address the growing power requirements of the
AKELCO consumers and will prevent a shortage of power supply in
its franchise area as well as for the whole of the Panay and Visayas
Grids. In addition, sourcing power from the PCPC Power Plant will
insulate AKELCO consumers from the potential volatility of prices
in the spot market. Also, since the PCPC Power Plant will be coalfired, the electricity it will generate will be much less expensive than
other available capacities in Panay which utilize bunker or diesel.
Further, Applicant AKELCO determined that its supply of electricity
for its franchise area would be more secure if it sourced its
requirements from more generating plants/suppliers especially new
baseload power plants in Panay Island.
24.
Further, since the PCPC Power Plant is also located in
Panay Island and connected to the Panay Grid and the power that it
will supply to AKELCO need not pass through any submarine cables
and will be free from potential line congestion charges or any
outages of such cables.
25.
Further, Applicants were informed that the Honorable
Commission in ERC Case No. 2014-024RC has already approved
the application of NGCP for the early implementation of its planned
Northern Panay Transmission Backbone project which includes the
Associated Transmission
Facilities for the 2X135MW PCPC
Concepcion Coal Power Plant that will connect the said plant to the
Panay grid via two connection points.
26.
Given the foregoing determinations,
Applicant
AKELCO entered into the subject EPPA with PCPC for the Supply of
12MW on 22 August 2013 to ensure the security, affordability and
reliability of its supply of power to meet the demand growth of the
consumers in its franchise area and to avoid the potential exposure
to spot market price volatility.
The delivery of this 12MW
Contracted Capacity was subject to the condition that the NabasCaticlan Transmission Line would be upgraded from the current
69kV to 138kV by the National Grid Corporation of the Philippines
(NGCP) as agreed by AKELCO and PCPC in a LOA dated 22 August

PAGE 6 OF 22
2013 a copy of which is attached to this Application as Annex "1-1"
and made an integral part hereof.
27.
After reassessing its supply and demand projections,
particularly with the projected entrance of new large resort projects
in Boracay Island, and determining that the supply offer from PCPC
was the most advantageous, AKELCO entered into another LOA
with PCPC for the supply of a further 10MW of Contracted Capacity.
This was agreed by AKELCO and PCPC in a LOA dated 11 August
2014 a copy of which is attached to this Application as Annex "1-2"
and made an integral part hereof;
28.
However, AKELCO was thereafter informed that the
largest resort project in Boracay would not meet its original
projected completion and operation target date. Thus, it would not
need the electricity supply originally projected for the project and
the demand of AKELCO would not grow as originally projected.
Based on this, AKELCO negotiated with PCPC for a staggered
delivery of the 10MW Contracted Capacity (7MW in 2016 and 1MW
increment per year from 2017 to 2019). This was agreed to by
AKELCO and PCPC in a LOA dated 14 April 2016 a copy of which is
attached to this Application as Annex "1-3" and made an integral
part hereof;
29.
As stated above, under Resolution NO.1, series of 2016
issued by the Honorable Commission, power supply contracts like
the EPPA between Joint Applicants, executed before 30 April 2016
need not undergo a competitive selection process.
EXECUTIVE SUMMARY AND ABSTRACT OF THE
ELECTRIC POWER PURCHASE AGREEMENT
30.
Executive Summary. Under the EPPA as amended
by the LOAs, PCPC agreed to supply and deliver, and AKELCO
agreed to take and pay for electricity supplied by PCPC, at a total
contracted capacity of 10MW (the "Contracted Capacity"), to be
delivered on a staggered basis of 7MW in 2016 and 1MW
increments yearly from 2017 to 2019 in accordance with the
Minimum Contracted Energy and the Daily Generation Schedule
(DGS) which is fixed on a daily and hourly basis in accordance
with the EPP A as amended by the LOAs. In all Intervals as
provided under the EPP A, AKELCO shall nominate no less than
50% of its Contracted Capacity.
31.
Monthly Contracted Capacity and Energy. The
agreed monthly contracted capacity and minimum contracted
energy under the EPP A as amended by the LOAs between
Applicants PCPC and AKELCO is as follows:

PAGE70F22
SCHEDULE 1
CAPACITYAND MINIMUM CONTRACTED ENERGY
Billing Month
January
Capacity
MW
7
February
7
March
7
April
7
May
7
June
July
7
7
August
7
September
October
November
December
7
7
7
Minimum Contracted
KWH
Energyl
5,208,000
4,704,000
(4,872,000 leap year)
5,208,000
5,040,000
5,208,000
5,040,000
5,208,000
5,208,000
5,040,000
5,208,000
5,040,000
5,208,000
32.
Delivery Point.
The Contracted Capacity and
electricity shall be delivered by PCPC to AKELCO at the delivery
point which is the High Voltage side of the transformer at the Power
Plant as designated in the EPPA (Schedule 3) on the Initial Delivery
Date. PCPC shall deliver or cause the delivery of such electricity in
accordance with good utility practice and in compliance with
appropriate rules and regulations such as the Grid Code and the
to be adjusted for allowed outages in the billing period upon commercial operations of the
power plant provided that the total contract energy shall not exceed 53,348,400 kWh in an
ordinary year based on 7MW contracted capacity. This maximum Contract Energy shall be
increased by 8,760,000 kWh for every 1MWincrease in the Contracted Capacity.
The Minimum Contract Energy shall be adjusted by 720,000 kWh for 30 day months,
744,000kWh for 31 day months, 672,000kWh for 28 day months and 696,000 kWh for 29 day
months for every 1MW increase in the Contracted Capacity.
When AKELCOis unable to take the Contract Energy or a portion thereof for reasons other
than Force Majeure, the nominated quantity under the DGS is deemed taken by AKELCOand
it shall settle for the entire nominated quantity in accordance with the terms of the EPPA.
AKELCO shall, in accordance with the WESM Rules, claim any proceeds on such shortfall
from the Market Operator.

PAGE 8 OF 22
Distribution Code, the WESM
Transmission Service Rules.
Rules
and
the
Open
Access
33.
Initial Delivery Date. The Initial Delivery Date
upon which Applicant PCPC must deliver the Contracted Capacity
and Energy to Applicant AKELCO under the terms of the EPPA is
26 June 2016. The Electricity Fees under the EPPA as amended by
the LOA (Schedule 4) are as follows:

PAGEg OF
22
SCHEDULE 4
ELECTRICITY FEES
(Commercial Operations)
At Load Factor of 100%
Rate Components: (As of August 2012)
Capacity Recovery Fee
o & M Fee (PhP)
o & M Fee (USD)
Fuel
=
TOTAL
=
=
=
=
PhP 2.550/kwh
0.364/kwh
0.386/kwh
2.310/kwh
PhP 5.610/kwh
Formula:
Electricity Fees
Energy Fees +
Actual Fuel Cost
Energy Fees
Tariff Fees
Tariff Fees
CRF
O&M Fees
C..
x uscP's
O&M Fees = [PhPO&IM
x PhCPI
iPhCPlb
Actual Fuel Cost
+ USOO&M
~
Fuel Cost
1.
x !Forex
USCPlb
Fuel Cost =
Fees &T es
1,000
= New C Price
Current Fuel Cost

discount rate)
kcalfkg GAD
I[dex x 5400 kcaJkg GAD
x (100% -17%
6700
'Where:
CRF
Capacity Recovery Fee
P2.55/kwh
PhPO&M
Peso-based O&M Fee
PO.364/kwh
PhCPlc
Philippine CPI for the current month for all items as published by the
NSO
PhCPIb
(August 2012)
USDO&M
USCPlc
USCPIb
Base Philippine CPI
U.S. Dollar-based O&M Fee
$0.009/kwh
U.S. CPI for the current month for all items as published by the U.S.
Bureau of Labor Statistics (USBLS)
Base U.S. CPI
230.379 (August 2012)
Forex = Reference exchange rate (in PhP per US$) on the meter reading date,
as published by the Bangko Sentral ng Pilipinas (BSP), www.bsp.gov.ph

PAGE 10 OF 22
E
NewCPrice
Minimum Contract Energy or Energy Delivered, whichever is higher
Transport Cost
Consumption Rate
Running average of the preceding three-month weekly

reference price for thermal coals delivered on an FOB basis
at Newcastle port
Actual Transport Price per MT unit
= Actual consumption rate or the ceiling of 0.647kg/kWh

whichever is lower escalated at a rate of 1.S% per year
34.
Price Formula for Coal. The agreed coal price
formula in the coal supply contract of Applicant PCPC with P.T.
Pevensey, its contracted coal supplier is reflected in the Schedules 4,
sa and Sb of the EPPA in accordance with the established policy of
the Honorable Commission that fuel costs are on a pure passthrough basis. In the same coal supply contract of Applicant PCPC
as submitted and approved by the Honorable Commission in the
other Applications for the Approval of EPPA's with other customers
of PCPC. The coal price formula is exactly the same as approved by
the Honorable Commission for Joint Applicant PCPC in the
respective decisions in ERC Case Nos. 2013-20SRC, 2014-108RC
and 2014-12SRC.
3S.
Details of the Fuel Procurement.
The sworn
statement on the details for the fuel procurement of Applicant PCPC
for the coal requirements of the Power Plant are attached as, Annex
"P" and made an integral part of this Application.
36.
Term. The EPPA shall have a term of twenty (20)
years commencing on the Initial Delivery Date and ending on the
fifteenth (ISth) anniversary of such commencement date, unless
sooner terminated pursuant to the terms of the EPP A. The Initial
Delivery Date is the date of the commencement of PCPC's obligation
to deliver to AKELCO, and for AKELCO to purchase the Contract
Capacity and Contract Energy, provided the Honorable Commission
has approved the EPPA.
37.
Allowed Schedule of Outage. Under the EPPA,
PCPC is allowed a Scheduled Outage which shall not exceed thirty
(30) days year and an Allowed Unscheduled Outage period of fifteen
(IS) days per calendar year. Any unutilized Allowed Scheduled
Outage periods may be used for Allowed Unscheduled Outages and
vice versa but any unutilized Allowed Scheduled and Unscheduled
Outage allowances within a calendar year will not be accumulated
for use during the succeeding years of the Cooperation Period.
38.
Reduction or Increase in the Contracted
Capacity. AKELCO shall be entitled to a reduction in its
Contracted Capacity as a result of the transfer of any of its
contestable market to another supplier upon at least sixty (60) days
prior notice to PCPC and provided further that: (i) the transfer is
direct to the PCPC or (ii) if the PCPC is able to contract with a
suitable alternative market to sell the portion of the Contracted
Capacity reduced by such contestable market.
If a contestable
market of AKELCO ceases operations, it is allowed under the EPPA

PAGE 11 OF 22
to reduce its Contracted Capacity to the extent of the aforesaid
contestable market's contribution to the total Contracted Capacity
contracted by the AKELCO under the EPPA, provided that such
reduction shall be distributed proportionately by AKELCO among
all its suppliers of electricity. Further, under the LOAs, AKELCO
shall prioritize sourcing any of its additional power requirements
from PCPC at the same terms and conditions agreed in the EPPA,
until the full Contracted Capacity is taken.
39.
Billing Month. A Billing Month under the EPPA
means the period commencing on the first hour of the twenty sixth
(26th) day of a calendar month and ending on the last hour of the
twenty fifth (25th) day of the next calendar month. Within ten (10)
working days after the end of each Billing Month, PCPC shall deliver
to AKELCO an invoice in respect of Electricity Fees payable for the
previous Billing Month. The due dates for such invoice shall be
fifteen (15) calendar days after receipt of such billing.
40.
Prompt Payment Discount. In the event that the
full and proper payment for the Electricity is made by AKELCO
within seven (7) days from receipt of the invoice, PCPC shall grant
to AKELCO a prompt payment discount equivalent to one percent
(1%) of the CRF portion of the Electricity Fees (exclusive of, O&M
fees, fuel cost and any applicable charges and taxes), corresponding
to the energy billed for such Billing Month. All payments under the
EPPA shall be made in Pesos. Further, Applicant AKELCO shall
not be required to post a Security Deposit prior to the effectivity
of the EPPA.
41.
Charges, Expenses and Taxes. In relation to the
supply of electricity by PCPC to AKELCO, any charges, costs,
expenses, and fees that may be charged to, incurred andf or
assumed by PCPC or otherwise imposed by NGCP, any
Governmental Authority, the Market Operator or any other third
party, for transmission andf or Ancillary Services, market fees and
other related services in connection with the delivery of electricity
under the EPP A shall be paid by AKELCO.
42.
Causes For Termination. In the event that the
EPPA is terminated by PCPC on the grounds of (a) the failure of
AKELCO to pay the Electricity Fees or any other amounts payable
under the EPPA; (b) breach by AKELCO of any of the provisions of
the EPP A and its failure to cure the breach within the prescribed
period; and (d) termination
by PCPC of the EPPA upon the
occurrence of any events of default under the EPP A, AKELCO shall
be liable to pay liquidated damages in the form of a termination
penalty amounting to capital recovery fees for the remainder of the
Cooperation Period but not to exceed three (3) years. Upon the
termination of the EPPA in bad faith by PCPC, it shall pay AKELCO
liquidated damages in the form of a termination penalty amounting
to the capital recovery fees as approved by the ERC for the
remainder of the Cooperation Period but not to exceed three (3)
years.

PAGE 12 OF 22
STAGES OF SUPPLY
43.
The Electricity Fees correspond to the different stages
of supply of the Power Plant computed in accordance with
Schedules 4, sa and Sb of the EPPA.
44.
Testing
and
Commissioning
and
PreCommercial Operation. In accordance with the Decisions of the
Honorable Commission in ERC Case Nos. 2013-20SRC, 2014108RC and 2014-12SRC which were the applications for the
approval of the respective EPPA's between PCPC and NORECO 1,
NOCECO and CEBECO II, under the EPPA, Applicant PCPC shall
only charge, during the testing, commissioning and pre-commercial
operations period the approved Variable O&M Fee of PO.1426/kWh
and pass on fuel costs for electricity actually delivered during the
said periods to Applicant AKELCO.
4S.
Commercial Operation.
During the commercial
operations period which shall commence on the Initial Delivery
Date, PCPC will deliver to AKELCO on a firm basis, the Contracted
Capacity and Minimum Contracted Energy from the Power Plant,
subject to the payment of Electricity Fees by AKELCO computed in
accordance with the formula specified in the amended Schedule 4 of
the EPP A as approved by the Honorable Commission in ERC Case
Nos. 2013-20SRC, 2014-108RC and 2014-12SRC which were the
applications for the approval of the respective EPP A's between
PCPC and NORECO 1, NOCECO and CEBECO II respectively.
46.
The EPPA thus proposes separate rates on the power
delivered by PCPC to AKELCO, depending on the stage of the
operations of the Power Plant development (Le., during testing and
commissioning, during Pre-Commercial Operation Period, or on
Commercial Operations), which rates have been approved by the
Honorable Commission in ERC Case Nos. 2013-20SRC, 2014108RC and 2014-12SRC.
IMPACT OF EPPA ON AKELCO GENERATION COSTS
47.
Should the Honorable Commission approve the
Electricity Fees under the EPPA as amended by the LOA, there is a
projected increase in the generation cost of AKELCO of Phpo.2630
per kWh on the Initial Delivery Date in 2016, upon commercial
operations of the Power Plant.
48.
Should the Honorable Commission approve the
Electricity Fees under the EPPA as amended by the LOAs and allow
PCPC to deliver and AKELCO to receive power during the testing
and commissioning and pre-commercial operation periods, there
will be a decrease in the generation costs of AKELCO of Php0-4389
per kWh. A copy of the simulation on the impact of the proposed
rates of Applicant PCPC on the generation cost of Applicant
AKELCO is attached hereto as Annex "Q" and made an integral part
hereof;
49.
The expected additional capacity from PCPC even as
early as the testing and commissioning and pre-commercial

PAGE 13 OF 22
operations of the Power Plant will contribute greatly to the
improvement of the quality, reliability and affordability of electric
power delivered to the consumers of AKELCO and the security of
supply and stability of the Panay and Visayas power grids.
50.
Under the terms of the EPPA, among the conditions
precedent to the performance by AKELCO and PCPC of their
respective obligations thereunder is the approval by the Honorable
Commission of this Joint Application.
51.
Thus, for PCPC to be able to deliver and AKELCO to
be able to receive power from the former as early as the testing and
commissioning and the pre-commercial operations of the Power
Plant, it is imperative that the Honorable Commission issue a
Provisional Authority and after full consideration on the merits, a
final approval for the EPP A between Joint Applicants.
52.
Certificate of Compliance. Applicant PCPC has
applied with the Honorable Commission for the issuance of a
Certificate of Compliance (COC) that will allow it to generate
electricity from Unit 1 of the Concepcion Power Plant. A copy of the
Certification from the Market Operations Service of the Honorable
Commission certifying that Applicant PCPC has filed an application
for a COC for Unit 1 of the Concepcion Power Plant on November
12, 2015 is attached hereto as Annex "z" and made an integral part
hereof;
53.
Project Cost.
A summary of the relevant
information on the project cost for the 135 MW coal-fired power
generation facility of PCPC is provided in the Summary of Project
Cost attached as Annex "R" hereto and made an integral part hereof.
54.
Funding and Sources of Funds, Cash Flow and
Basis for the Purchased Power Rate. The Project shall be
funded through loans from financial institutions and equity from
the shareholders. Summaries of the relevant information on PCPC's
sources of funds for the Power Plant including the debt-equity ratio
for the Project, cash flow and basis for the purchased power rate in
the EPPA is hereto attached as Annexes "S", "T" and "U"
respectively and made integral parts hereof.
55.
Bank Certification.
A Certification from BDO
Capital and Investments, Inc., the Lead Arranger of the financing
for the Project, on the principal amortization, term and interest of
the respective loan agreements for the Project is attached hereto as
Annex "V" and made an integral part hereof.
56.
Rates Schedule. The Electricity Fees are computed
and specified in Schedules 4, 5a and 5b of the EPPA;
57.
Capital Recovery Fee of PhP2.SS/kWh. The
Project Cost for the Power Plant would actually yield a higher
Capital Recovery Fee (CRF). However, Applicant PCPC decided not
to adopt an increased CRF since it already had a contractual
commitment to AKELCO under the EPPA and further for the Power
Plant to remain competitive in the Visayas Grid. The purchased

PAGE140F22
power rate for the PCPC Power Plant including the Capital Recovery
Fee and the Base O&M Fee, upon Commercial Operations of the
said plant as stipulated in the EPPA between the Joint Applicants, is
exactly the same as the rate formula approved by the Honorable
Commission for the PCPC Power Plant in its decisions in ERC Case
Nos. 2013-205RC, 2014-108RC and 2014-125RC which were the
applications for the Approval of the respective EPPA's between
PCPC and NORECO 1, NOCECO and CEBECO II respectively.
58.
WESM Membership. Applicant AKELCO is already
a member of the WESM. Applicant PCPC is in the process of
applying to be a member of the WESM prior to the testing and
commissioning of the Power Plant in accordance with the WESM
rules.
59.
Agreements on Grid Connection.
The PCPC
shall be connected to the Visayas grid through the National Grid
Corporation of the Philippines.
Applicant PCPC has already
executed a Connection Agreement with NGCP a copy of which is
attached hereto as Annex "W". Applicant PCPC shall enter into a
Transmission Service Agreement and Metering Service Agreement
with NGCP prior to the time that the Power Plant will require
feedback power from the grid.
60.
Board Resolutions.
A copy of the Board
Resolution adopted by the Board of Directors of PCPC authorizing
the joint filing of the instant application with AKELCO, is attached
hereto as Annex "X" and made an integral part hereof. Likewise, a
copy of the Board Resolutions passed by the Board of Directors
AKELCO approving the execution of the EPPA and LOA's
respectively with PCPC and authorizing the joint filing of the instant
Application, are attached hereto as Annexes "X-I" to "X-3" and
made integral parts hereof;
ALLEGATIONS IN SUPPORT OF THE PRAYER FOR
PROVISIONAL AUTHORITY
61.
The PCPC Power Plant is now 95% complete and has
begun testing and commissioning already with the initial firing of its
boiler achieved last April 9, 2016. Joint Applicant PCPC is confident
that the Power Plant will be ready for commercial operations by the
Initial Delivery Date of 26 June 2016 agreed under the EPPA;
62.
Under the EPPA between Joint Applicants, in order
for PCPC to be able to deliver and AKELCO to be able to receive
power from the former as early as the testing and commissioning
and the pre-commercial
operations of the Power Plant, the
Honorable Commission must approve the EPP A.
63.
Joint Applicants foresee that the final decision for the
instant Application may not yet be released by the time that the
Power Plant is ready for testing and commissioning and commercial
operations. Thus, in order for PCPC to be able to comply with its
obligations under the EPPA as amended by the LOAs and deliver
the Contracted Capacity and Energy to AKELCO as early as the
testing and commissioning periods for the Power Plant and by the

PAGE 15 OF 22
Initial Delivery Date and for AKELCO to be able to take the
Contracted Capacity and Energy from the PCPC Power Plant under
the EPP A as amended by the LOAs and address the additional
supply requirements of its consumers and improve the reliability
and security of the power supply in its franchise area, it is
imperative that a Provisional Authority be granted by the Honorable
Commission pending consideration and approval of the Joint
Application. Otherwise, the delivery of power to AKELCO from the
PCPC Power Plant might be delayed, to the detriment of the security
of the power supply of the consumers of Applicant AKELCO. In
compliance with the Rules of the Honorable Commission, attached
as Annex "Y" of this Joint Application is the Affidavit of Roel Z.
Castro, President of Joint Applicant PCPC, in support of the Prayer
for Provisional Authority.
ALLEGATIONS IN SUPPORT OF
MOTION FOR NON-DISCLOSURE OF CONFIDENTIAL
INFORMATION
64.
Under Article 10 of the EPPA, the Joint Applicants
agreed to keep in strict confidence all "Confidential Information"
of PCPC, to ensure that no Confidential Information of Applicant
PCPC is disclosed to third parties and that they shall use utmost
efforts to prevent any unauthorized disclosure of Confidential
Information.
Such Confidential
Information
includes any
information
relating to the operations, businesses, technology,
practices, products, marketing, sales, services, finances or legal
affairs of PCPC, as well as actual or prospective customers,
business partners,
market
opportunities,
business,
sales,
marketing, technical, financial and legal plans, proposals
and
projections, product information, know-how, design rights, trade
secrets, concepts, techniques, processes, methods, systems, designs,
programs, codes, formula, research, experimental works and works
III progress.
65.
Joint Applicants
respectfully
request
that
pursuant
to their agreement to maintain in strict confidence all
confidential information of PCPC, Annexes "P", "R", "S", "T", "u"
and "V" which contain certain non-public information, data and
calculations involving business operations and financial trade
secrets reflecting PCPC's investment and business calculations,
be treated as confidential documents.
66.
Under Rule 4 of the ERC Rules, the Honorable
Commission may, upon request of a party and the determination of
the existence of conditions which would warrant such remedy,
treat
certain
information
submitted
to it as confidential.
Pursuant
to such provision,
J oint Applicants
respectfully
requests for the issuance of a protective order declaring the
foregoing
information,
data and calculations contained
in
Annexes "P" , "R" , "S", "T", "U" and "V" as confidential information .
67.
Further, in accordance with Section l(b), Rule 4 of the
ERC Rules, Joint Applicants hereby submit one (1) copy of Annexes
"P" , "R" , "S", "T" , "U" and "V" in a sealed envelope , with the

PAGE 16 OF 22
envelope and each page of the document stamped with the word
"Confidential".
PRAYER
WHEREFORE, premises considered, it
prayed that the Honorable Commission that:
IS
respectfully
68.
An Order be issued treating Annexes ''''p'', "R", "S",
"T", "U" and "V" of the instant Application, as confidential
documents and the information contained therein as confidential
and directing its non-disclosure pursuant to Rule 4, Section 1 of the
ERC Rules of Practice and
Procedure
and prescribing the
guidelines for the protection thereof;
69.
Pending hearing of the Joint Application on the
merits, issue a Provisional Approval approving the Electricity Fees
agreed upon by the Joint Applicants in the EPPA as amended by the
LOAs; and
70.
After full proceedings on the merits, issue a Decision
APPROVING the terms of the Electric Power Purchase Agreement
as amended by the Letter of Agreement between Joint Applicants
PCPC and AKELCO, thereby authorizing PCPC to charge and collect
from AKELCO the Electricity Fees corresponding to the (1) Testing
and Commissioning Period, (2) Pre-Commercial Operation Period,
and (3) Commercial Operations Date as contained in the EPP A as
amended by the LOA, and authorizing AKELCO to pass the full
amount thereof to its consumers;
J oint Applicants pray for all other reliefs just and equitable
under the premises.
Finding the said Application to be sufficient in substance with

the required fees having been paid, the same is hereby set for
determination of compliance with the jurisdictional requirements,
expository presentation, Pre-trial Conference, and presentation of
evidence on 02 February 2017 (Thursday) at ten o'clock in the
morning (10:00 A.M.) at AKELCO's Main Office, Mayor
Saturnino Fernandez Compound, Poblacion Lezo, Aldan.
Accordingly, AKELCO and PCPC are hereby directed to:
1)
Cause the publication of the attached Notice of Public

Hearing in two (2) newspapers of nationwide circulation in
the Philippines at their own expense, twice (2X) within two
(2) successive weeks, the dates of publication not being less
than seven (7) days apart and the date of the last
publication to be made not later than ten (10) days before
the date of the scheduled initial hearing;
ERC CASENO. 2016-081 RC

PAGE 170F 22
2)
Furnish with copies of this Order and the attached Notice

of Public Hearing the Offices of the Provincial Governors,
the City and Municipal Mayors, and the Local Government
Unit (LGU) legislative bodies within the affected franchise
area for the appropriate posting thereof on their respective
bulletin boards;
3)
Inform of the filing of the Application, its reasons therefor,

and of the scheduled hearing thereon, the consumers
within the affected franchise area, by any other means
available and appropriate;
4)
Furnish with copies of this Order and the attached Notice

of Public Hearing, the Office of the Solicitor General (OSG),
the Commission on Audit (COA), and the Committees on
Energy of both Houses of Congress. They are hereby
requested, if they so desire to send their duly authorized
representatives at the scheduled hearing; and
5)
Furnish with copies of the Application and its attachments

all those
making requests
therefor,
subject to
reimbursement of reasonable photocopYing costs.
On the date of the initial hearing, Applicants must submit to the

Commission their written compliance with the aforementioned
jurisdictional
requirements
attaching therewith,
methodically
arranged and duly marked the following:
1)
The evidence of publication of the attached Notice of Public

Hearing consisting of affidavits of the Editors or Business
Managers of the newspapers where the said Notice of
Public Hearing was published, and the complete issues of
the said newspapers;
2)
The evidence of actual posting of this Order and the

attached Notice of Public Hearing consisting of
certifications issued to that effect, signed by the
aforementioned Governors, Mayors, and LGU legislative
bodies or their duly authorized representatives, bearing the
seals of their offices;
3)
The evidence of other means employed by Applicants to

inform of the filing of the Application, its reasons therefore,
and of the scheduled hearing thereon, the consumers
within the affected franchise area;

PAGE 18 OF 22
4)
The evidence of receipt of copies of this Order and the

attached Notice of Public Hearing by the Office of the
Solicitor General (OSG), the Commission on Audit (COA),
and the Committees on Energy of both Houses of Congress;
5)
The evidence of receipt of copies of the Application and its

attachments by all those making requests therefor, if any;
and
6)
Such other proofs of compliance with the requirements

the Commission.
of
Applicants and all interested parties are also required to

submit, at least five (5) days before the date of initial hearing and Pretrial Conference, their respective Pre-trial Briefs containing, among
others:
(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 the

purposes thereof and proposed markings therefore; and
(d)
The number and names of the witnesses, with their

written testimonies in an individual affidavit form, to be
attached to the Pre-trial Brief.
A perusal of the Application dated 24 April 2016 shows that

Applicant AKELCO verified and certified the same through a single
document entitled Verification and Certification Against Forum
Shopping dated 22 April 2016, executed by its Board President,
WaYne T. Malilay.
Clearly, when Applicant AKELCO executed its Verification/
Certification on 22 April 2016, the Application dated 24 April 2016
did not yet exist. Considering that the affiant in the Verification and
Certification affirms, among other things, that he or she has read the
entire contents of the Application, it is impossible for an affiant to
attest to an Application that does not exist.
Thus, the instant Application is legally defective for want of a
valid Verification and Certification of Non-Forum Shopping.
However, in the interest of justice, Applicant AKELCO is hereby

PAGE 19 OF 22
directed to cure the said defect by submitting a valid Verification and
Certification of Non-Forum Shopping executed by AKELCO's duly
authorized representative, on or before the afore-mentioned initial
hearing.
Failure of Applicants to comply with the above requirements
within the prescribed period shall be a ground for cancellation of the
scheduled hearing, and the resetting of which shall be six (6) months
from the said date of cancellation.
AKELCO and PCPC must also be prepared to make an
expository presentation of the instant Application, aided by whatever
communication medium that they may deem appropriate for the
purpose, in order to put in plain words and explain, for the benefit of
the consumers and other concerned parties, what the Application is
all about and the reasons and justifications being cited in support
thereof.
SO ORDERED.
Pasig City,
05
December
2016.
FORAND BYAUTHORITY
OFT ECOMMISSION:
G ONIMO D. STA. ANA

OIC - iffice of the Chairman and CEO
r--~--
LS:~/icg/
~-081
RC AKELCO and PCPC.doc
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Copy Furnished:
1.
Atty. Ferdinand Menguito

Counsel for PCPC and AKELCO
Unit gD Belvedere Tower, San Miguel Ave.,
Ortigas Center, Pasig City
..

PAGE 20 OF 22
2.
Office of the Solicitor General

134 Amorsolo Street, Legaspi Village, Makati City
3.
Commission on Audit
Commonwealth Ave., Quezon City
4.
The Senate Committee on Energy

GSIS Building, Roxas Boulevard, Pasay City
5.
The Committee on Energy

House of Representatives
Batasan Hills, Quezon City
6.
Office of the Mayor

Malay, Aklan
7.
Office of the LGU Legislative Body

Malay, Aklan
8.
Office of the Mayor

Boracay, Aklan
9.

Boracay, Aklan
10.
Office of the Mayor

Buruanga, Aklan
11.

Buruanga, Aklan
12.
Office of the Mayor

Nabas, Aklan
13.

Nabas, Aklan
14.
Office of the Mayor

Ibajay, Aklan
15.

Ibajay, Aklan
16.
Office of the Mayor

Makato, Aklan
17.

Makato, Aklan
18.
Office of the Mayor

Tangalan, Aklan
19.

Tangalan, Aklan

PAGE 21 OF 22
20. Office of the Mayor
Numancia, Aldan
2l.

Numancia, Aldan

Kalibo, Aldan
23. Office of the LGU Legislative Body
Kalibo, Aldan
Lezo,Aldan
Lezo, Aldan
Malinao, Aldan
Malinao, Aldan
28.
Office of the Mayor

New Wahington, Aldan

New Wahington, Aldan
30.
Office of the Mayor

Batan, Aldan
3l.

Batan, Aldan
32.
Office of the Mayor

Altavas, Aldan
33.

Altavas, Aldan
34.
Office of the Mayor

Balete, Aklan
35.

Balete, Aklan
36.
Office of the Mayor

Banga,Aldan
37.

Banga, Aldan
38.
Office of the Mayor

Libacao, Aldan

PAGE 22 OF 22
39.

Libacao, Aldan
40.
Office of the Mayor

Madalag, Aldan
4l.

Madalag, Aldan
42.
Office of the Mayor

Pandan, Antique
43.

Pandan, Antique
44.
Office of the Mayor

Libertad, Antique
45.

Libertad, Antique
46.
Office of the Governor

Province of Antique
47.

Province of Antique
48.

Province of Aldan
49.
Office of the Governor

Province of Aldan
50. TWG - Group 2

17IF, Pacific Center Bldg., San Miguel Ave.,
Ortigas', Pasig City

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I

IN THE MATTER OF THE

DO,' C..KCE TED

Republic of the Philippines

ERC CASE NO.

ERC CASE NO. 2016-081 RC

ERC CASE NO. 2016-081 RC

of Facts and of the Case

12 MW from Panay Energy Development Corp.

18 MW from the Green Core Geothermal Inc. under a

ERC CASE NO. 2016-081 RC

4.8 MW from SPC Island Power Corp. under a Power

3MW from Panay Power Corp.;

8 MW balance is sourced from the Wholesale

pepc sent a letter to

ERC CASE NO. 2016-081 RC

ERC CASE NO. 2016-081 RC

ERC CASE NO. 2016-081 RC

ERC CASE NO. 2016-081 RC

ERC CASE NO. 2016-081 RC

Actual Fuel Cost

O&M Fees = [PhPO&IM

Actual Fuel Cost

Current Fuel Cost

I[dex x 5400 kcaJkg GAD

Capacity Recovery Fee

Peso-based O&M Fee

Base Philippine CPI

U.S. Dollar-based O&M Fee

Base U.S. CPI

230.379 (August 2012)

ERC CASE NO. 2016-081 RC

Minimum Contract Energy or Energy Delivered, whichever is higher

Running average of the preceding three-month weekly

Actual Transport Price per MT unit

= Actual consumption rate or the ceiling of 0.647kg/kWh

ERC CASE NO. 2016-081 RC

ERC CASE NO. 2016-081 RC

ERC CASE NO. 2016-081 RC

ERC CASE NO. 2016-081 RC

ERC CASE NO. 2016-081 RC

ERC CASE NO. 2016-081 RC

Finding the said Application to be sufficient in substance with

Cause the publication of the attached Notice of Public

ERC CASENO. 2016-081 RC

Furnish with copies of this Order and the attached Notice

Inform of the filing of the Application, its reasons therefor,

Furnish with copies of this Order and the attached Notice

Furnish with copies of the Application and its attachments

On the date of the initial hearing, Applicants must submit to the

The evidence of publication of the attached Notice of Public

The evidence of actual posting of this Order and the

The evidence of other means employed by Applicants to

ERC CASE NO. 2016-081 RC

The evidence of receipt of copies of this Order and the

The evidence of receipt of copies of the Application and its

Such other proofs of compliance with the requirements

Applicants and all interested parties are also required to

A summary of admitted facts and proposed stipulation of

The issues to be tried or resolved;

The documents or exhibits to be presented, stating the

The number and names of the witnesses, with their

A perusal of the Application dated 24 April 2016 shows that