~ ..•...••• ,,'fG\l\.ATORy c: /~ 0«: I.}' ~J' !!~~ ,~nj'o".ed for ~ Republic of the Philippines . iLfj t",. \, ~:::.", . z, ENERGY REGULATORY COMMISSloIN !.'":~~ San Miguel Avenue, Pasig City \ r,.?,~h " IN THE MATTER OF THE "--., JOINT APPLICATION FOR THE APPROVAL OF THE POVVER SUPPLY AGREEMENT (PSA) ENTERED INTO BY AND BETVVEEN LEYTE IV ELECTRIC COOPERATIVE . INC., (LEYECO IV) AND FDC UTILITIES, INC. (FDCUI) WITH PRAYER FOR THE ISSUANCE OF PROVISIONAL AUTHORITY (PA) ERC CASE NO. 2015-187 RC LEYTE IV ELECTRIC COOPERATIVE INC., (LEYECO IV) AND FDC UTILITIES, INC. (FDCUI) Applicants. x- - - - - - - -,- - - - - - - - - - - - -x DOO,x,.1l'fl!ilil fJ&t". ~1:6 t 2 2016 . ... _~._---=-0 R., . . ~.~- NOTICE OF PUBLIC HEARING TO ALL INTERESTED PARTIES: Notice is hereby given that on 28 October 2015, Leyte IV Electric Cooperative, Inc .. (LEYECO IV) and FDC Utilities, Inc. (FDCUI) filed an Application for approval of their Power Sales Agreement (PSA), with prayer for provisional authority. In the said application, LEYECO IV and FDCUI alleged, among others, that: THE APPLICANTS 1. LEYECO IV was created pursuant to the provisions of the National Electrification Administration Act (RA 6038) as amended by Presidential Decree No. 269. Pursuant to this decree, LEYECO IV was incorporated and registered on November 7, 1977 'Yith
Transcript
~ ..•...•••,,'fG\l\.ATORy c:
/~ 0«:I.}' ~J'!!~~,~nj'o".ed for ~Republic of the Philippines . iLfj t",. \, ~:::.", . z,
ENERGY REGULATORY COMMISSloIN ! . '" :~~San Miguel Avenue, Pasig City \ r,.?,~h
"
IN THE MATTER OF THE "--.,JOINT APPLICATION FORTHE APPROVAL OF THEPOVVER SUPPLYAGREEMENT (PSA)ENTERED INTO BY ANDBETVVEEN LEYTE IVELECTRIC COOPERATIVE .INC., (LEYECO IV) ANDFDC UTILITIES, INC.(FDCUI) WITH PRAYERFOR THE ISSUANCE OFPROVISIONALAUTHORITY (PA)
ERC CASE NO. 2015-187 RCLEYTE IV ELECTRICCOOPERATIVE INC.,(LEYECO IV) AND FDCUTILITIES, INC. (FDCUI)
DOO,x,.1l'fl!ililfJ&t". ~1:6 t 2 2016. ..._~._---=-0R.,. . ~.~-
NOTICE OF PUBLIC HEARING
TO ALL INTERESTED PARTIES:
Notice is hereby given that on 28 October 2015, Leyte IVElectric Cooperative, Inc .. (LEYECO IV) and FDC Utilities, Inc.(FDCUI) filed an Application for approval of their Power SalesAgreement (PSA), with prayer for provisional authority.
In the said application, LEYECOIV and FDCUI alleged, amongothers, that:
THE APPLICANTS
1. LEYECO IV was created pursuant to theprovisions of the National Electrification AdministrationAct (RA 6038) as amended by Presidential Decree No.269. Pursuant to this decree, LEYECO IV wasincorporated and registered on November 7, 1977 'Yith
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principal office at Lamak, Hilongos, Leyte. LEYECO IVserves the power requirements of the Municipalities ofInopacan, Baybay, Matalom, Hilongos, Hindang andBato, all in the Province of Leyte.
2. FDCUI is a Corporation duly organized andexisting under Philippine Laws, with principal officeaddress at 30th Floor PBCom Tower, 6795 Ayala Avenuecor. V. A. Rufino St., Makati City. FDCUI was formerlyknown and registered under the name ALG RenewableEnergy Holdings, Inc. FDCUI is a wholly ownedsubsidiary of Filinvest Development Corporation.
3.Applicants may be served Orders and otherprocesses through their undersigned counsels.
COMPLIANCE WITH PRE-FILINGREQUIREMENTS
4. In compliance with Rule 6 of the ERC Rules andin support of the instant Joint Application for theapproval of the PSA, a copy of the instant JointApplication (including Annexes) was furnished therespective legislative bodies of the Municipality ofHilongos and the Province of Leyte, where LEYECO IVprincipally operates.
5. Likewise, a copy of the instant Joint Application(including Annexes) was furnished to the City of Makatiwhere FDCUI principally operates.
6. The entire Joint Application, excluding theAnnexes, was published in a newspaper of generalcirculation within the Franchise Area or area whereLEYECOIV and FDCUI principally operate.
LEYECOIV POWER SITUATION
7.At present, Applicant LEYECO IV sources itselectricity requirements from various suppliers, however,due to increasing energy demand and volatility of WESMprices, Applicant LEYECOIV deemed it necessary to lookfor additional capacity to address its electricityrequirements, aggregating with other Region 8 ECs to
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ensure bargaining power III negotiating with potentialpower suppliers;
Regretfully, sometime in November 2013, TyphoonYolanda severely hit the region which requiredrehabilitation efforts and the restoration of reliableelectric service which is essential for the economicrecovery of the re~ion.
8. To ensure continuous supply and security ofelectricity within its franchise area, LEYECOIV signed aPower Supply Agreement (PSA) with FDCUI on 22December 2014 for a contracted demand of 1MW for 1year from December 26, 2015 to December 25, 2016. Thepower requirements for LEYECOIV shall be sourced fromthe Unified Leyte Geothermal Power Plant (ULGPP)Output administered by FDCUI.
9.Applicant LEYECO IV has simulated andforecasted the effect of the inclusion of FDCUI's supplyfrom the ULGPP as follows:
" LEYTE IV ELECTRIC COOPERATIVE, INC.LEYfi:CO
Generation Rate Impact
Simulation ofGenemon Mr. Rate wIth FOCUIforthe Year 2016
Power SupplierForecasted 2016 quantity
Amount (PhP)PercentShare Resultlnc Capadty facto 2016 Average Rate Well:hted Averajl:e!We
THE SELECTION OF IPPA ADMINISTRATOR FOR THESTRIPS OF THE UNIFIED LEYTE GEOTHERMAL POWER
PLANT
10. On November 7, 2013, PSALM conducted theopening of bids for the Selection and Appointment ofIndependent Power Producer Administrator (IPPA) for
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the Strips of Energy of the ULGPP located in Tongonan,Leyte;
11.FDCUI was selected as the Winning Bidder for40MW strips of Energy of the ULGPP. The Notice ofAward was issued by PSALMon January 29, 2014;
COMPETITIVE SELECTION PROCESS
12.In view of the power supply and demandsituation in the region and due to the damage broughtabout by Typhoon Yolanda, the eleven (11) electriccooperatives of Region 8 composed of Don OrestesRomualdez Electric Cooperative, Inc., LeyteII ElectricCooperative Inc., Leyte III Electric Cooperative Inc., LeyteIV Electric Cooperative Inc., Leyte V Electric CooperativeInc., Southern Leyte Electric Cooperative Inc., BiliranElectric Cooperative, Inc., Samar I Electric Cooperative,Inc., Samar II Electric Cooperative Inc., Eastern SamarElectric Cooperative, Inc. and Northern Samar ElectricCooperative, Inc. (the "Region 8 ECs") agreed through aMemorandum of Agreement to conduct a jointprocurement of their short-term aggregated baseloadrequirement. A Bids and Awards Committee (BAC) wascreated to conduct the R8 Joint Competitive PowerSupply Procurement ("R8 JCPSP").
13. The Region 8 ECs initially prepared theirrespective least-cost power supply plans and subsequentlytheir aggregated demand for competitive bidding.Thereafter, a competitive selection process was launchedwith the publication and announcement of invitations toprospective Bidders (GENCOs, IPP Administrators andWholesale Aggregators) in the franchise areas of theRegion 8 ECs.
14. The Bid required that the capacity offered by thewinning bidder shall be allocated among the eleven (11)Region 8 ECs in proportion to their declared demand. Abidder may offer to supply capacity that is less than orequal to the aggregated baseload requirement in any or allof the contract years in increments of 1MW. In the eventthat some winning bidders offered less than 11MW, theloads shall be optimally allocated in such a way that theblended price from the R8 JCPSP is almost the same. Inthe event multiple bidders are declared winners for any
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contract year, all winning bidders shall enter intoindividual power supply agreements with each of the 11ECs.
15. The BAC conducted Pre-Bid Conferences andissued Bid Bulletins and the Final Instruction to Bidderswhich prescribed the 2-envelope system: (i) the legalrequirements and proof of financial and technicalcapability and (ii) the commercial offer. Bids wereevaluated based on an Evaluation Framework released tothe Bidders.
16. After evaluation, on November 14, 2014, theBAC issued a Notice of Award declaring FDCUI as awinning bidder of 1 MW for Contract Year 2016 with aLowest Calculated Responsive Bid Effective Price of Php5.9517/kWh.
THE POWER SUPPLYAGREEMENT
17. After extensive negotiations, LEYECOIV signedon 22 December 2014, a Power Supply Agreement (PSA)with FDCUI from the Strips of Energy of ULGPP for acontracted demand of 1MW for 1year.
Executive Summary
18. The PSA governs the relationship betweenSupplier and Customer for the sale of electric power. Theelectric power supply will be drawn from the output ofULGPP. The Monthly Generation Charge is equal to FixedMonthly Charge and Energy Charge. The PSA is subject tocustomer's security deposit, assignment and, termination.
Salient Features
19. The PSA, between LEYECO IV and FDCUIcontains the following salient terms and conditions:
19.1 Term - This PSA shall have a term of one (1)year or from December 26, 2015 to December 25,2016.
19.2 Service Specification - The Applicants agreedto the following service specifications:
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19.3 Unutilized Contracted. Capacity - Theunutilized Contracted Capacity of the Buyer may bemade available for utilization of other Region 8 ECsor sold to the WESM in accordance with the WESMRules and WESM, Scheduling and DispatchProtocol of this PSA.
19-4 Reallocation of Contracted Capacities AmongRegion 8 - In order to maximize capacityutilization, the Buyer may, from time to time,reallocate to other load nodes, their ContractedCapacities in accordance with the WESM,Scheduling and Dispatch Protocol provided that theBuyer shall still be solely and exclusivelyresponsible for the settlement and payment of theContracted Capacities. All chargers against any ofthe Parties, related to the reallocation of thecontracted capacities such as but not limited to,Value Added Tax, Local Business tax, WESMCharges, Line Rentals and such other incidental orregulatory charges or penalties as may be imposedshall be for the account of the Buyer.
19.5 Reduced Generation Output - Should theContracted Capacity delivered for the Seller byUnified Leyte Geothermal Power Plant (ULGPP) beinterrupted or curtailed to a level below itsallocated strips of 40 MW, for the period, due tothe fault or lack of generation capacity of theoperator of the ULGPP, the Contracted Capacity ofthe Buyer shall be adjusted proportionately withthe other customers of the Seller.
The Total Customers' Contracted Capacity shall bethe sum of the Contracted Capacity of the Seller'sCustomers under a valid and binding power supplycontract with the Seller, but not to exceed 40 MW.For this purpose, the Seller shall update the Buyerof its total Customers' Contracted Capacity.
19.6 Replacement Power - In case of reducedGeneration Output of the ULGPP, the Buyer shallprocure Replacement Power at its own costs. The
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Seller shall cooperate to arrange for ReplacementPower from the WESM.
19.7 Contract Price and Total Monthly Charge -The total monthly charge, before taxes, for a billingshall be computed according to the following:
Total Monthly Charge = Fixed Monthly Charge +Energy Charge
Fixed Fixed Monthly Payment for Contracted CapacityMonthly (CC) in Php. E-VAT of 12% shall be applied to thisCharge Fixed Monthly Charge.FMFcy Fixed Monthly Fee at a given Contract Year (CY) in
Php/kWh. FMFcy values are given in the tablebelow.
CAPSched Scheduled Capacity in kW For Hour nWhere CAPsched= CC except during interruption orcurtailment as provided under Section 1.2
Hn Specific Hour during the billing period
19.7.2Energy ChargeEnergy Charge = EF Cy* I.( CAPSched'Hn)
Where:
Energy Monthly Payment for actual Energy delivered by the Seller toCharge Buyer in Php. ZERO E-VAT shall be applied to this Energy ChargeCAPSched Scheduled Capacity in kW For Hour n
Where CAPSched= CC except during interruption or curtailment asprovided under Section 1.2
EFcy Energy Fee at Contract Year (CY= 2015 or CY= 2016) in Php/kWhEnergy Monthly Payment for actual Energy delivered by the Seller toCharge Buyer in Php. ZERO E-VAT shall be applied to this Energy Charge
19.8 Security Deposit - The Buyer shall establish aSecurity Deposit, not later than thirty (30)Business Days after the Effective Date. TheSecurity Deposit shall be equivalent to onehundred percent (100%) of the projected highestmonthly Power Bill for the first Contract Year ofthe Agreement
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19.8.1 RENAGMEC Security Fund - The RPC hasestablished a fund exclusively for the R8 JCPSPTransaction Sellers as an additional security forthe amounts payable by the Buyer to the Seller.
If the Security Deposit is insufficient for theamount payable by the Buyer to the Seller, theSeller is entitled to draw the balance from theRENAGMEC Security Fund subject to drawingprocedures to be agreed upon by the parties.
OTHER RELATED DOCUMENTS
20. In further support of the instant Application,Applicants most respectfully submit to the HonorableCommission, the following documents:
ANNEXABCDE
E-1
FGH
H-1
I
JK
L
MNoP
NATURE OF DOCUMENTSPower Su 1 A reement between FDCUI and LEYECO IVLEYECO IV Certificate of FranchiseLEYECO IV Certificate of Re istrationLEYECO IV Articles of Incor orationALG Renewable Energy Holdings, Inc. Certificate ofIncor orationFDC Utilities, Inc.'s Certificate of Filing of AmendedArticles of Incor orationFDCUI General Information SheetFDCUI latest Audited Financial StatementsAffidavit of Service (including annexes) to the LegislativeBod of the Munici ali of Hilon os, Province of Le eAffidavit of Service (including annexes) to the LegislativeBod of the Province of Le eAffidavit of Service (including annexes) to the LegislativeBod ofthe Ci of MakatiCo of the Affidavit of PublicationCopies of Newspaper of General circulation within thefranchise area or area where LEYECO IV and FDCUIrinci all 0 erate.Letter to PSALM requesting for certification of insufficiencyof ca aci to su 1 Visa as Distribution Utilities.LEYECO IV Actual and Forecasted Load DataLEYECO IV Rate 1m act Anal sisLEYECO IV Board Resolution No. 201 -110Financial Runs and Pa ent Schedules to PSALM (in a
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sealed envelo e)Q PSALMNotice of Award to FDCUIR Judicial Affidavit of Roderick Z. FernandezS Region 8 Electric Cooperatives - Memorandum of
A reementT Re ion 8 Electric Coo eratives - Letter of InvitationU Re ion 8 Electric Coo eratives - News a er AdvertisementV Notice of Award declarin FDCUI as a winnin bidderW Information MemorandumX Final Instruction to BiddersY Su lemental Bid Bulletin No. 1Y-l Su lemental Bid Bulletin NO.2Y-2 Su lemental Bid Bulletin NO.3Y-3 Su lemental Bid Bulletin NO.4Z Meetin Notes of Pre-bid conferencesAA Bid Evaluation SliBB Com arison of BidsCC Region 8 Electric Cooperatives - Joint Competitive
Procurement Power Su I ProcessDD Region 8 Electric Cooperatives - Sequence of Calculation in
the Evaluation BidsEE NEA Certification for Standb Credit FaciliFF RENAGMECUndertakinGG LEYECOIVDistribution Develo ment Plan
ALLEGATIONS IN SUPPORT OF THEMOTION FOR CONFIDENTIAL TREATMENT OF
INFORMATION
21. The Honorable Commission may, upon requestof a party and determining that the disclosure ofinformation requested to be treated as confidentialinformation is justified, treat certain informationsubmitted to it as confidential.l LEYECO IV and FDCUIare bound by confidentiality agreement prohibiting thedisclosure of any business, technical, marketing,operational, organizational, financial or other informationand trade secrets and other confidential documents,papers and information.2 Accordingly, the Applicantsrespectfully request before the Honorable Commissionthat Annex "P" not be disclosed and be treated asconfidential in accordance with Rule 4 of the ERC Rules.These Annexes contain confidential information critical to
1 Rule 4 - Confidential Information, ERC Rules2 Article 12.4 of the PSA
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the business operation of FDCUI including trade secretsand business calculations, assumptions and projections.
ALLEGATIONS IN SUPPORT FOR THEISSUANCE OF PROVISIONAL AUTHORITY
22. The Certificate of Closing and Effectivity for theturnover of the output of the Unified Leyte GeothermalPower Plant is scheduled to be issued on December 19,2014. FDCUI commences obligation on oo:ooH ofDecember 26, 2014 - the effectivity date of the IPPAAdministration Agreement dated October 20, 2014. Aprovisional approval of the PSAwith indicative rate, fromthe Honorable Commission will allow FDCUI to performits obligation to supply the requirements of LEYECO IVand for LEYECO IV to receive power from the powerplant. The issuance of the provisional authority will allowLEYECO IV to charge and collect the respective feesenumerated in the PSA as well as authorize it to pass onthe full amount to its consumers.
23. Pursuant to ERC Rules of Practice andProcedures, the Honorable Commission may exercise itsdiscretion by granting provisional authority or interimrelief prior to a final decision.
24. It is understood that the interim relief sought bythe Applicants that may be granted by Commission, shallbe subject to adjustments and other conditions that theCommission may impose after hearing and finaldetermination of the Honorable Commission.
PRAYER
WHEREFORE Applicants LEYECOIV and FDCUImost respectfully pray that the Honorable Commission:
(a) Approve the duly negotiated PSA between hereinApplicants;
(b) An Order be issued (a) treating Annexes and theinformation contained therein as confidential, (b)directing their non-disclosure pursuant to Rule 4 of the
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ERC Rules, and (c) prescribing the guidelines for theprotection thereof;
(c) A Provisional Approval of the PSAbetween LEYECOIV and FDCUI as a Provisional Authority authorizingLEYECO IV to pass on the full amount of the fees andcharges under the PSAto its consumers;
(d) LEYECOIV and FDCUI also pray that after trial onthe merits, the Honorable Commission issue a PermanentApproval of the PSA between LEYECO IV and FDCUIwhich would authorize LEYECOIV to charge and collectfees under the PSA as well as authorize LEYECO IV topass on the full amount to its consumers, retroactive tothe Effective Date of the PSA; and
Other relief just and equitable under the premised arelikewise prayed for.
The Commission has set the application for jurisdictionalhearing, expository presentation, pre-trial conference and evidentiaryhearing on 3 March 2016 (Thursday) at two o'clock in theafternoon (2:00 P.M.) at LEYECO IV's Principal Office,Lamak, Hilongos, Leyte.
All persons who have an interest in the subject matter of theproceeding may become a party by filing, at least five (5) days prior tothe initial hearing and subject to the requirements in the ERC's Rulesof Practice and Procedure, a verified petition with the Commissiongiving the docket number and title of the proceeding and stating: (1)the petitioner's name and address; (2) the nature of petitioner'sinterest in the subject matter of the proceeding, and the way andmanner in which such interest is affected by the issues involved in theproceeding; and (3) a statement of the relief desired.
All other persons who may want their views known to theCommission with respect to the subject matter of the proceeding mayfile their opposition to the application or comment thereon at anystage of the proceeding before the applicant concludes thepresentation of its evidence. No particular form of opposition orcomment is required, but the document, letter or writing shouldcontain the name and address of such person and a concise statementof the opposition or comment and the grounds relied upon.
All such persons who may wish to have a copy of the applicationmay request the applicant, prior to the date of the initial hearing, that
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they be furnished with a copy of the application. The applicant ishereby directed to furnish all those making such request with copiesof the application and its attachments, subject to reimbursement ofreasonable photocopying costs. Likewise, any such person mayexamine the application and other pertinent records filed with theCommission during the usual office hours.
WITNESS, the Honorable Chairman, JOSE VICENTE B.SALAZAR, and the Honorable Commissioners, ALFREDO J.NON, GLORIA VICTORIA C. YAP-TARDC, JOSEFINAPATRICIA A. MAGPALE-ASIRIT and GERONIMO D. STA.ANA, Energy Regulatory Commission, this 11thday of January, 2016at Pasig City.
