Republic of the Philippines

ENERGY REGULATORY COMMISSION

San Miguel Avenue, Pasig City
IN THE MATTER OF THE
APPLICATION FOR APPROVAL OF
THE POWER SUPPLY AGREEMENT
(PSA) BETWEEN THE ABRA
ELECTRIC COOPERATIVE, INC.
(ABRECO) AND AP RENEWABLES
INC. (APRI), WITH PRAYER FOR
PROVISIONAL AUTHORITY,
ABRA ELECTRIC
INC. (ABRECO,
COOPERATIVE,
Applicant.
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ERC Case No. ____ RC
Applicant, ABRA ELECTRIC COOPERATIVE, INC. (ABRECO), thru the
undersigned counsel, unto this Honorable Commission, respectfully alleges,
that:
1. Applicant is an electric cooperative duly organized and existing by
virtue of the laws of the Republic of the Philippines, with principal office address at
Calaba, Bangued, Abra;
2. It is the exclusive franchise holder issued by the National
Electrification Commission (NEC) to operate an electric light and power
distribution service in the twenty-seven (27) municipalities of the province of
Abra, namely: Bangued, Baay-Licuan, Boliney, Bucay, Bucloc, Daguioman,
Danglas, Dolores, Lacub, Lagangilang, Lagayan, La Paz, Langiden, Luba,
Malibcong, Manabo, Penarrubia, Pidigan, Pilar, Sallapadan, San Isidro, San
Juan, San Quintin, Tayum, Tineg, Tubo, Villaviciosa ;
3. Pursuant to Rule 20 (B) of the ERG Rules of Practice and
Procedure, and other pertinent rules and regulations, this Application is being
submitted to this Honorable Commission for its due consideration of the Power
Supply Agreement (PSA) executed by and between ABREGO and the AP
Renewables, Inc. (APR/);
STATEMENT OF THE FACTS
4. ABREGO, in the delivery of its services, sources one hundred
percent (100%) of its electricity requirements for distribution to its customers
pursuant to a Contract for the Supply of Electric Energy (CSEE) with the
National Power Corporation ("NPC") which was subsequently assigned to the
Power Sector Assets & Liabilities Management Corporation (PSALM). The
CSEE is due to expire on December 26, 2011.
5. PSALM however, has manifested to ABREGO its total inability to
supply the latter's power requirements after expiration of the CSEE;
6. Presently, the AP Renewables, Inc. (APR/) owns and has
assumed the operation of two (2) geothermal power plants in southern Luzon
namely, the Mak-Ban Geothermal Power Plant located in MI. Makiling, Makban,
Laguna and the Tiwi Geothermal Power Plant located in Tiwi, Albay, as the
winning bidder in the public bidding conducted by PSALM for the privatization of
said assets, pursuant to Section 47 of Republic Act No. 9136, otherwise known
as the Electric Industry Reform Act (EPIRA).
7. APRI is a domestic corporation duly organized and existing by
virtue of the laws of the Republic of the Philippines, with office address at 6F
2
Twin Cities Condominium, 110 Legazpi Street, Legaspi Village, 1229, Makati
City.
8. Due to PSALM's insufficient capacity to supply ABREGO's total
energy requirements, the latter was constrained to source available power
suppliers to be able to meet the requirements of its customers.
9. Accordingly, ABREGO published an invitation to submit proposals,
and only the San Miguel Energy Corporation (SMEC) and APRI responded.
However, SMEC subsequently manifested that it has no more available capacity
to supply ABREGO's electricity requirements. APRI, while being the only
remaining available supplier, proposed a competitive rate, which ABREGO
found acceptable.
10. Consequently, on December 9, 2011 ABREGO and APRI signed
and executed a Power Supply Agreement (PSA) for the supply of electricity
under terms and conditions provided therein, subject for the instant Application.
THE POWER SUPPLY AGREEMENT
11. Term. The obligation of APRI to deliver electric energy to
ABREGO shall commence on 26 December 2011. This obligation shall
subsist for a period of five (5) years, or until 25 December 2016.
12. Volume. Under the PSA, APRI shall supply the following energy
levels for the periods indicated:
3
26-=e::J-::.2 :o
2E-.J<-::.:: :o 2:J-.. <i-l2
215-K'Jg-::.2 :o 25-Se:J-12
26-iV1ar-::.3 w 2'::!-Aor-.:.3
215-\C'J-.:...: :c 23-)ec-l4
:o 25-'-/ar-::s
Zt-'>,;iar<-3 25-Apr-.:.s
.26-A;Jr-15 :o 2:->-'/av-1::;
2r::-_.; -.:.::; :o 2" JJ:-.:.s
26-0ct-::.s 25- \iov-::. 'i
26- \:c'v-:.:.s :c 25-Dec-.:.s
2t-oc:-16 :,_::, 25-'.ov-10
7,724
7,716
7,788
7,831
7,570
7.385
7,656
7,606
7,673
7.644
7,948
7.940
8,014
7,790
8.141
7,805
7,87Y
7,827
7,898
7.866
7,850
7.937
8,172
8,164
8,01(:
8,2.:+0
8,379
8,025
8,1Cl
8.047
8.121
8.088
8,071
8,161
8,397
8,388
8,230
8.466
3,245
8,323
3,268
8,3.:4.4
8,310
8,293
8.385
3.621
8.612
SASC
3,692
8,741
8,465
SA89
8,.367
8,.532
8,514
8,609
2,969, 763 3,563,715.45
3 .. 008.999
3,051,000 3,66.1.,:99.55
3 .. 733,128 753,48
3,517,160 4,220.-59::..85
3,662,060
3,.305,925
3 .. 305,925
3,305,925
3,.366,977 4,0-!C,372.68
3 445,214
3.021,019
3.118.388
3,159,587
3 . .203.690 3.84,428.55
3,693,180
3,919.957
3,845,332
3,471.374
3,471,374
3,471.374 ...:.::.cs 6,:,.9.02
4,2..:;::',577.8.1
3.617.634
3,172.209 3.8C6.6"i::..18
3.267.013
3,310,176
:>,,356,381 .:..G27,657.S:i
3.869,2C1
.:1,106,785
4,028,6(:5 .:!..834_325.43
3,636.823
3.6:;6.823
3.636.823
3 703.986
3. 790.054
3,9SS_.C79.6S
3,415 .. 639
3.460.765 ..+,2.52,918.05
3,509 .. 072 4,210,886.55
4.045,221
4.293.614 :>,_;_ ">2,336.92
4,211.877
3.802.272 4-,Sr:l. 726. 3..'..
::.,,SOL272 4, '162,726. 3..:.
3.802.272 726.3--:.
3.87'2.490
3,962.474 .,:;._ 754 908.49
3,474.590
.:..277_116.62
3.611.354 4.333.62..!..65
3.661.763
4.221.2-H
4.480.443 ::,,37b.S3:.:..40
4395.149 5,274.1.78.42
.::. .. n.::.:..265.0C
3_.967,721 4, 7tSl,265.CC
3,967,721
4,040.994 "'-.8.19,::.93 .. 31
4,134.894 4,.901,872 .. 2")
3_.625.781
4
a) Where ABREGO reduces the Contract Energy, it shall pay APRI the
Buy-Out Charge equivalent to Php2.50/kWh x reduction in monthly
Maximum Contract Energy multiplied by the remaining Contract Billing
Periods.
b) If ABREGO shall have taken Additional Energy, it shall pay to
Supplier the amount equivalent to: (a) the WESM ex-ante Nodal
Energy Price for the hour during which the Additional Energy was
supplied at the Receiving Node; or (b) the contract price for the hour
during which the Additional Energy was supplied at the Receiving
Node, whichever is higher, including all incidental charges attendant
to the transactions at the WESM.
c) For Back-up Power and Replacement Power, ABREGO shall pay the
corresponding Back-up Power Charge and Replacement Power
Charge. Back-up Power Charge is the price per kWh of Back-up
Power consumed by ABREGO, equal to the WESM ex-ante Nodal
Energy Price for the period during which the Back-Up Power was
supplied at the Receiving Node. For any other outages not arising out
of Force Majeure, APR I shall provide Replacement Power for a period
of up to one hundred forty four (144) hours per calendar year, for
which APRI shall charge ABREGO according to the terms specified in
Schedule 6.1.2 (Electricity Fees). If the outage exceeds such one
hundred forty four (144)-hour period, APRI shall charge ABREGO the
Back-Up Power Charge.
d) In case of shortfall in the consumption of ABREGO, it shall pay an
amount equivalent to the Minimum Energy Charge computed as to the
load weighted average price of APRI for the Billing Period multiplied to
the difference between the Contract Energy and the actual Energy
consumed by ABREGO in case the latter consumes less than the
Contract Energy
13. Electricity Fees. APRI shall supply and deliver energy at the rates
computed in Schedule 6.1.2 of the PSA, thus
5
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End of Billing Period refers to the 25th of a calendar month, and when used
in the calculations for base fuel and fixed costs in Table 1 of this Schedule
6.12, means that the relevant indices as published on the 25th of the calendar
month shall be applied in those calculations. If there is no published index on
that day, then the most recently published index shall apply.
2
The Newcastle Coal Index is the midpoint of the bid and offer rates for the
physical Newcastle forward market three (3) months subsequent to the current
Billing Period. If there is no midpoint published for that month, the midpoint of
the previous month (published on the same day) shall be used,
3
If the CPI for the current Billing Period is not published and available within two
days from the end of the same Billing Period, the most recent available
published CPI shall be used.
4
If the source of any of the foregoing indices is no longer available, or if any
index has not been published or has otherwise become unavailable for 2
consecutive Billing Periods], Supplier shall select a replacement index, and
any such replacement index shall supersede the then-current index and be
binding upon the Parties,
5
If any of the foregoing indices are re-based during the Contract Period,
Supplier has the option to apply a corresponding adjustment to the inflation
formula to conform to the re-basing of the subject indices.
6
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14. Indexation. The Basic Energy Charge shall be adjusted monthly
based on the current indexation to coal price, freight cost, consumer price
indices and peso-dollar exchange rates.
15. Discount. Provided that ABREGO has no overdue obligation to
APRI, APRI shall grant ABREGO the following discounts:
Nature of Discount Rate of Discount
Early Payment
Php 0.0319 per kWh if Supplier receives payment on or
before the 15
1
h day of the Payment Month.
Discount
Php 0.0953 per kWh if Customer maintains average
Operations systems loss not exceeding 14%, Collection Efficiency of
Efficiency Discount not lower than 90%, Load Factor not lower 50%
Security Deposit
Php 0.0973 per kWh if Customer maintains the full value
Discount
of the Security Deposit
16. Penalty. If ABREGO fails to pay the Electricity Fee or any other
amounts payable on the due date, it shall pay a penalty of 2% per month based
on the amount due, from the date when such payment is due until the date such
amount is received in full by APR I.
17. Security Deposit. The Security Deposit shall be in an amount
equivalent to PHP 32,000,000.00.
18. Buy-out Charge. Buy-out Charge is equivalent to Php 2.50 per
KWh x reduction in monthly Maximum Contract Energy multiplied by the
remaining Contract Billing Periods.
7
RATE IMPACT
19. The estimated power adjustment to ABREGO's purchased power
cost as impact of the purchase from APR I, is computed as follows:
Effective Generation Rates
PSAwith
TSC-CSEE APR I Increase/( decrease)
4.8100 6.2128 1.4028
20. The overall impact is an increase in rate equivalent to about
Php1.4028 /kWh using 26 October- 25 November 2011 billing data for APRI
and NPC.
PROVISIONAL AUTHORITY
21. Under Rule 14 of the ERG Rules of Practice and Procedure, the
Honorable Commission is authorized to issue provisional authority or interim
relief prior to a final decision, provided the facts warrant such remedy. The
present Application involves such facts warranting the issuance of a provisional
authority;
22. Section 1 of Department of Energy Circular No. 2003-12-11
declares as a State policy that:
"All distribution utilities must henceforth take cognizance
and assume full responsibility to forecast, assure and contract for
the supply of electric power in the respective franchise areas to
meet their obligations as a distribution utility." (Underscoring
supplied.)
23. By way of emphasis, ERG Resolution No. 21, Series of 2005 dated
19 October 2005 directed all distribution utilities "to enter into future bilateral
8
power supply contract with power producers to be subjected to a review by the
Commission"; (Underscoring supplied.)
24. To prevent a delay in the implementation of the PSA and to
mitigate the impact of the spot market prices in the WESM, a provisional
authority is respectfully prayed for;
RELATED INFORMATION
25. Finally, in compliance with the ERG Guidelines for the Recovery of
Costs for the Generation Component of the Distribution Utilities' (DUs) Rates as
well as Rule 20(8) of the ERG Rules of Practice and Procedure, ABREGO is
submitting herewith copies of the following documents which are attached
hereto as annexes of this Application, to wit:
I
ANNEX NATURE OF DOCUMENT
Certificates of Franchise issued by the National Electrification
A to A-1
Commission (NEC) in favor of ABREGO
!
B
Certificate of Registration issued by the Cooperative Development
Authority (CDA) in favor of ABREGO
I
C to C-2 APRI's Certificate of Incorporation issued by the SEC, Amended Articles
of Incorporation and latest General Information Sheet filed with the SEC
D APRI's 2010 Audited Financial Statements
E to E-1 General Plant Descriptions of the Mak-Ban Geothermal Power Plant and
I
Tiwi Geothermal Power Plant
..
F to F-1 Board of Investment (801) Certificates of Registration for the Mak-Ban
Geothermal Power Plant and Tiwi Geothermal Power Plant
-
I
G to G-1 Certificates of Compliance issued by the ERC for the Mak-Ban
Geothermal Power Plant and Tiwi Geothermal Power Plant
9
H to H-1 DENR letter dated September 8, 2009 approving the transfer of
ownership of ECC No. 0112-871-203 from National Power Corporation to
AP Renewables, Inc.; Environmental Compliance Certificate (ECC) No.

0112-871-203 issued by DENR for the Mak-Ban Geothermal Power
Plant;
DENR letter dated September 28, 2009 approving the transfer of
!
!
I to 1-1 ownership of ECC No.0109-642-203 from National Power Corporation to
AP Renewables, Inc.; Environmental Compliance Certificate (ECC)
No.01 09-642-203 issuEld by DENR for the Tiwi Geothermal Power Plant
J NGCP Certification dated October 29, 2009 regarding APRI's contracts
for connection, transmission service and metering service
1- -
K Power Supply Agreement (PSA) between ABREGO and APR I dated
,
G;
December 9, 2011
Schedule 1.1 (a)- Allowable Downtime
K-2 Schedule 4.1 -Delivery Schedule
K-3 Schedule 6. 1.1- Meterinq Points
K-4 Schedule 6.1.2- Rates Schedule
K-5 Schedule 6. 7- Buv-out
K-6 Schedule 7.2.1- Security Deposit
L ABREGO Board Resolution authorizing the execution of the PSA with
APR I
M Details of the PSA - Executive Summary
M-1 APRI's Sources of Funds (in sealed envelope)
M-2 APRI's Cash Flow (in sealed envelope)
M-3 APRI's Purchased Power Rate (in sealed envelope)
'
M-4 APRI's Procurement Process of Fuel (in sealed envelope)
N ABREGO's Actual and Forecasted Data
I 0 ABREGO's Distribution Development Program for 2010
p
Rate Impact Analysis
Q
ABREGO Board Resolution approving the filing with the ERC for approval
of the PSA and authorizing its General Manager to cause the filing of the
Rt;Rt
application and to execute all necessary documents
-
Certifications issued by the Sangguniang Bayan of Bangued and
Sangguniang Panlalawigan of Abra
10
I--------,-------------------------,
I S to S-2 Publication of the Application in a newspaper of general circulation in the
L
franchise area of ABRECO or where it principally operates, with Affidavit

REQUEST FOR CONFIDENTIAL TREATMENT
OF INFORMATION
26. Applicant respectfully requests that the information contained in
the documents attached hereto in a sealed envelope and marked as Annexes P-
1 to P-4, respectively, be treated as confidential in nature pursuant to the
Confidentiality provisions contained in Article 13 of the Power Supply Agreement
(PSA) subject of the instant application. APRI treats said data and calculations
as not generally available to the public on a non-confidential basis, as the same
involves trade secrets reflecting APRI's investment and business calculations.
27. This request is likewise being made by virtue of Section 1 (b), Rule
4 of the ERC Rules of Practice and Procedure under which the Honorable
Commission may, upon request of a party and determination of the existence of
conditions which would warrant such remedy, treat certain information submitted
to it as confidentiaL
PRAYER
WHEREFORE, in view of all the foregoing, Applicant respectfully prays
that the Honorable Commission:
1) upon initial review of the Application and pending trial on the
merits, issue an order granting provisional approval/authority for the Applicant to
implement the provisions of the PSA, including the rates set forth in paragraph
12 hereof, effective on the billing period beginning on 26 December 2011;
11
2) after trial on the merits, issue a permanent approval of the PSA,
including the rates set forth in paragraph 12 hereof;
3) grant the request for confidential treatment of the information
contained in Annexes "M-1" to "M-4", respectively.
Other reliefs just and equitable are likewise prayed for.
Pasig City, Metro Manila, December 19, 2011.
By:
LERIOS-AMBOY & DELOS REYES LAW OFFICES
Counsel for the Applicant
Units 1609-1610 Tycoon Centre
Pearl Drive, Ortigas Center, Pasig City, Metro Manila
dv
DITAS A. LERIOS-AMBOY
Roll No. 40628
MCLE Compliance Ill Cert. No. 0006100/Nov. 12, 2009
PTR No. 6659777/Jan 13, 2011/Pasig City
IBP No. 850568/Jan 14, 2011/RSM
'
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~ F v J : . . ~ . -
soJ'i'AYDA M. OMAR
Roll No. 59470
PTR No. 6638339 Jun. 21, 2011/Pasig City
IBP No. 859585 Mar. 28, 2011/RSM Chapter
MCLE Compliance Cert. No.: N/A
12