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IN THE MATTER OF.

THE
APPLICATION
FOR
APPROVAL
OF
THE
ELECTRIC
POVVER
PURCHASE
AGREEMENT
(EPPA) BETVVEEN ILOILO I
ELECTRIC
COOPERATIVE,
INC. AND PANA.Y ENERGY
DEVELOPMENT
CORPORATION
WITH
PRAYER FOR PROVISIONAL
AUTHORITY

ERC CASE NO. 2016-097 RC


ILOILO
I
COOPERATIVE,
PANAY
DEVELOPMENT
CORPORATION

ELECTRIC
INC .. AND
ENERGY

DOCKETED

:;~e:....~~~::::::~:~

Applicants.

x---------------~--------x
NOTICE OF PUBLIC HEARING
TO ALL INTERESTED PARTIES:
Notice is hereby given that on 29 April 2016, the Iloilo I Electric
Cooperative, Inc. (ILECO I) and Panay Energy Development
Corporation (PEDC) filed an Application for approval of the electric
power purchase agreement (EPPA), with prayer for the issuance of
provisional authority.
In the said Application, ILECO I and PEDC alleged the
following:
1.

Applicant ILECO I 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 Brgy. Namucon, Tigbauan, Iloilo. It is a

ERC Case No. 2016-097 RC


Notice of Public Hearing/3 August 2016
Page 2 of 13
franchised electric utility servIcmg its memberconsumers in the Province of Iloilo, specifically the
Municipalities of Alimodian, Cabatuan, Guimbal,
Igbaras, Leganes, Leon, Maasin, Miagao, Dton, Pavia,
San Joaquin, Sta. Barbara, San Miguel, Tigbauan, and
Tubungan.
2.

Applicant PEDC is a corporation duly organized and


existing under the laws of the Republic of the
Philippines with principal office address at Brgy. Ingore,
La Paz, Iloilo City. PEDC owns and operates a 2x82 MW
coal-fired power plant ("Existing Plant") located in Brgy.
Ingore, La Paz, Iloilo City. It has embarked on an
expansion project through the construction of a 1X150
MW coal-fired power plant ("Expansion Plant") in the
same location.
Statement of Facts and of the Case

3.

Pursuant to Rule 20 (B) of the 2006 Rules of Practice


and Procedure of the Energy Regulatory Commission
("ERC"), this Application is submitted to this Honorable
Commission for its review and approval of the Electric
Power Purchase Agreement dated 14 April 2015 between
PEDC as Seller and ILECD I as Buyer (the "EPPA").

4.

Prior to the execution of the EPPA, in November 2013, a


competitive selection process was undertaken by ILECD
I, through
the Panay-Guimaras
Power Supply
Consortium (PPSC), using the Swiss Challenge method.
The initial offer/bid of PEDC was published in two
separate newspapers of general circulation in the
Philippines, each newspaper publishing the notice for
two consecutive weeks. Since, the consortium did not
receive any offers or challenges despite the time given
for other generation companies to submit their offers,
PPSC awarded the supply contract of the consortium to
PEDC. As a result of the award by the consortium, each
cooperative member, including ILECD I executed
separate EPPAs with PEDC.
Salient Features of the EPPA

5.

The salient features of the EPPA are indicated below:


Type of Plant

Coal-fired power plant


expansion located in Brgy.
Ingore, La Paz, Iloilo City

ERC Case No. 2016-097 RC


Notice of Public Hearing/3 August 2016
Page 3 of 13
Installed Capacity

1X150 MW

Cooperation Period

Twenty Five (25) years


commencmg
on
the
Commercial
Operation
Date and ending on the
25th year anniversary of
such commencement date

Commercial
Operation Date

When the Expansion Plant


has
been
completed,
inspected, tested and is
ready
to
commence
operation as confirmed in
a written communication
from PEDC to ILECO I,
which date should not be
later than 26 July 2016 or
such later date as PEDC
and ILECO I may agree
upon in writing

Contracted Capacity

BMW

In addition, subject to
availability of capacity of
the
Expansion
Plant,
PEDC is given priority to
supply
ILECO I any
additional
capacity
requirements it may have,
subject
to
mutually
acceptable
terms
and
conditions.
Minimum Energy
Off-Take

Billing Month

Minimum
Contracted
Energy,
kWh

ERC Case No. 2016-097 RC


Notice of Public Hearing/3 August 2016
Page 4 of 13
November
December

6.

5,952,000
5,760,000

Delivery
Point

The delivery point shall


mean the physical point(s)
at which ILECO I receives
power from PEDC where
billing meters to measure
electricity energy flowing
to ILECO I's electric
system are installed

Outages

The allowable scheduled


and unscheduled outages
are forty (40) days per
year.

As indicated above, PEDC agreed to supply and deliver,


and ILECO I agreed to take and pay for electricity
supplied by PEDC at a contracted capacity of 8 MW (the
"Contracted
Capacity"), at 100% load factor,
commencing on the Commercial Operation Date of the
Expansion Plant (i.e., the date when the Expansion
Plant has been completed, inspected, tested, and is
ready to commence operation as confirmed in a written
communication from Seller to Buyer, which date should
not be later than 26 July 2016 or such later date as the
parties may agree upon in writing), at an Electricity Fee
(Schedule 4 ofthe EPPA) computed as follows:

LoadFactor

100%

Electricity Fee

= Energy Fees

Fuel Cost

Energy Fees

= Tariff Fee

Tariff Fee

= CRF

( USDO&M

Cost of Coal

Fuel Cost

Cost of Coal

= ( Base, Coal

1,000

Pnce

PhpO&M

USCP~
USCPlb
Consumption
Rate

PhCPl,
X

PhCPlb

Forex

Forex

J
x

En

Newcastlec
x

Newcastle.

Transport Cost

ERC Case No. 2016-097 RC


Notice of Public Hearing/3 August 2016
Pages of 13
Where:
CRF

= Capital Recovery Fee

Php 2.3096 per kWh

PhpO&M

= Peso-based O&M Fee

Php 0.2736 per kWh

PhCPI,

= Philippine Consumer Price Index (CPI) for all items forthe Current month as
published by the National Statistics Coordination Board, www.nscb.gov.ph

= Base Philippine CPI

USDO&M

= USD-based D&M Fee

USCPI,

= US Consumer Price Index (CPI)for all items for the Current Month as

138.30

published by the U.S. Bureau of laborStatistics,

Base US CPI

May-14

0.0092 per kWh

www.bls.gov

May-14

237.07

= Reference exchange rate On Php perUSD) ont he meter reading date, as

Forex

published by the Bangko Sentral ng Pilipinas (BSP),www.bsp.gov.ph


E

= in kWh, Minimum Contracted Energy (MCE) or Actual Energy Delivered,


whichever is higher

Base Coal Price

= Base reference coal price

Newcastlec

= Preceding qua rter's average coa I price for 6,700kca I/kg ADB per the Gloa bl

56.33 USD per MT

Coal Newcastle Physical Trading Index, www.globalcoal.com

lin USD/MTI

NewcastleB

= .Base Newcastle Index

Trans port Cost

= Cost of freight, i ns ura nee, brokerage, ta xes, a nd othe r costs in USD per MT

77.31 USD per MT

Consumption Rate = 0.68kg/kWh, escalated at a rate of 1.5% peryearoraetual,


En

7.

whichever is lower

= NominatedEnergyofBuyertoSelierinkWh

Nonetheless, during Testing and Commissioning of the


Expansion Plant, PEDC will deliver to ILECO I on a
non-firm basis electric power, subject to the payment of
Electricity Fees for actual energy taken by ILECO I
computed as follows:

ERC Case No. 2016-097 RC


Notice of Public Hearing/3 August 2016
Page 6 of 13
Testing and Commissioning
Load Factor

at

100%

Load Factor

100%

Electricity Fee

Energy Fees

Tariff Fee

Energy Fees
50%

USDO&M

Cost of Coal
=-----

1,000

Fuel Cost

CRF

Fuel Cost

Tariff Fee

PhpO&M

USCP~
USCPlb

Consumption
Rate

E
PhCPI,
PhCPlb

Forex

Forex

j
J

En

~
Cost of Coal

lBas~ Coal
Pnce

Newcastlec

NewcastleB

Transport Cost

Where:
CRF

capital

PhpO&M

Peso-based O&M Fee

PhCPI,

Recovery Fee

Php 2.3096 per kWh

Php 0.2736 per kWh

Philippine Consumer Price Index (ePI) for all items forthe Current month as
by the National Statistics Coordination Board, www.nscb.gov.ph

published

PhCPlb

USDO&M

Base Philippine CPI

USD-based O&M Fee

May-14

138.30

0.0092 per kWh

USCPI,

=-

US Consumer Price Index (ePI) forall items forthe Current Month as


published by the U,S. Bureau of laborStatistics, www.bls.gov

USCPlb

Base US CPI

Forex

237.07

May-14

Reference

exchange rate (in Php per U50) ont he meter reading

published

by the Bangko Sentral ng Pilip;nas (aSP), www.bsp.gov.ph

date, as

in kWh, Minimum Contracted Energy (MCE) or Actual Energy Delivered,


whicheveris higher

56.33 USD per MT

Base Coal Price

Base reference coal price

Newca stlee

Preceding qua rter's average coa I price for 6,700kca I/kg ADB per the Gloa bl
Coa I Newcastle Physical Trading Index, www.elobalcoal.com
fin USD/MTl

Newca sties
Transport Cost

Base Newcastle Index


=

77.31 USD per MT

Cost of freight, insurance, brokerage, taxes, and other costs in USD perMT

Consumption Rate =

O.68kg/kWh, escalated at a rate of 1.5% per year or actual, whichever is lower

En

Nom; nated Energy of Buyerto Sell er in kWh

ERC Case No. 2016-097 RC


Notice of Public Hearing/3 August 2016
Page70f13
8.

Moreover, upon completion ofthe commissioning of the


Expansion Plant, ILECO I shall take the proportionate
net electrical output of the Expansion Plant delivered by
PEDC during the Pre-Commercial Operation Period on
a firm basis, subject to the payment of Electricity Fees
computed as follows:

Pre-Commercial Operations at

Energy Fees

Energy Fees

75%

Tariff Fee

Fuel Cost

Fuel Cost

+
x

CRF

[ U5DD&M

Cost of Coal
1,000

= [

Cost of Coal

Load Factor

100%

Load Factor
Electricity Fee

100%

Tariff Fee

PhpO&M

U5CP~

E
PhCPlc
PhCPlb

Forex

Forex

USCP'b

B.s~ Coal

Consumption
Rate
Newcastlec

Pnce

Newcastles

J
En

Transport Cost

Where:
CRF

Capita I Recovery Fee

Php

2.3096

per kWh

PhpO&M

Peso~based O&M Fee

Php

0.2736

per kWh

Philippine Consumer Price Index (CPI)forall

items forthe

PhCPlt

published

by the National Statistics Coordination

Base Philippine
U5DO&M

CPI

Current month as

Board, www.nscb.govph
138.30

USD-based O&M Fee

0.0092 per kWh

us Consumer Price Index (CPI) for all items forthe Current Month as
published by the U.S. Bureau of laborStatlstics,
wwwbls gov
Ba se US CPI

237.07

Forex

Refe rence e xcha nge rate (i n Php pe r USD) ont he mete r rea di ng date. as
published by the Bangko Sentral ng Pilipinas (SSP), www.bsp.gov.ph

in kWh, Minimum Contracted Energy (MCE) or Actual Energy Delivered,


whicheveris
higher

Base Coal Price

Base reference coal price

Newcastlec

Precedi ng qua rter's average coa I price for 6,700kca I/kg ADB pe rthe Gloa bl
Coal Newcastle Physical Trading Index,www.globalcoal
com fin USD/MTl

Newca stieg

Base Newcastle

Transport Cost

Cost of fre ight, ins urance, brokerage, ta xes, a nd othe r costs in USD per MT

Consumption

O.68kg{kWh, escalated

En

Rate

Index

56.33

77.31

U5D per MT

USO per MT

at a rate of 1.5% per year or actual, whichever

Nomi nated Energy of Buyer to Sell er in kWh

is lower

ERC Case No. 2016-097 RC


Notice of Public Hearing/3 August 2016
Page 8 of 13
9.

The EPPA thus proposes separate rates on the power


delivered by PEDC to ILECO I, depending on the stage
of the plant development (i.e., during Testing and
Commissioning, during the Pre-Commercial Operation
Period, or on Commercial Operation Date).

10.

The cost of fuel shall be on a pass through basis in all


stages (i.e., during Testing and Commissioning, during
the Pre-Commercial
Operation
Period,
or on
Commercial Operation Date). In deriving Fuel Cost, the
actual consumption rate of coal or up to the
consumption cap, whichever is lower, shall always be
multiplied by the actual energy delivered.

11.

It should be noted that the expenses to be incurred by


PEDC for the testing and commissioning the Expansion
Plant during Testing and Commissioning and the PreCommercial Operation Period were not included in the
rate agreed upon in the EPPA inasmuch as the Parties
agreed on a tariff formula for energy delivered during
Testing and Commissioning as well as the PreCommercial Period which PEDC intended to serve as
recovery for testing and commissioning costs to be
incurred by PEDC for the commissioning cost of the
Expansion Plant.

12.

It should also be pointed out however that during


testing and commissioning, the Parties agreed that
PEDC would deliver to ILECO I the proportionate net
electrical output of the Power Plant on a non-firm basis
and subject to the payment of the applicable Electricity
Fees. However, once testing has been completed but
prior to Commercial Operations, the proportionate net
electrical output of the Power Plant shall be delivered by
PEDC and shall be taken by ILECO I on a firm basis and
subject to the payment of the applicable Electricity Fees.

13.

As seen in the Rate Impact below, for the duration of the


term of the EPPA between PEDC and ILECO I, the
simulated delivered price thereunder would result in an
overall savings of PhPo.63, PhPo-46, and PhPo.28
during Testing and Commissioning Period, PreCommercial Operations Period, and Commercial
Operations Period, respectively.

ERC Case No. 2016-097 RC


Notice of Public Hearing/3 August 2016
Page 9 of 13
Projected
Rate
Impact
Commissioning, as follows:

during

Testing

and

Rate, PhP /kWh


5.75
5.12

Without PEDC EPP A


With PEDC EPP A
GENERATION RATE
INCREASE/(DECREASE)
(rounded offfiRUre)
Projected
Rate Impact
Operations, as follows:

2016

(0.63)

during

Without PEDC EPPA


With PEDC EPPA
GENERATION
RATE
INCREASE/(DECREASE)
(rounded offfiRUre)

2016

Pre-Commercial

Rate, PhP /kWh


5.75
5.29
(0.46)

Projected Rate Impact at Commercial Operation, as follows:

Without PEDC EPPA


With PEDC EPP A
GENERATION
RATE
INCREASE/(DECREASE)
(rounded offfiRUre)

Rate, PhP /kWh


5.75
5-47
(0.28)

14.

The foregoing agreed terms, among others, are


embodied in the EPPA, a copy of which is attached to
this Application as Annex "A" and made an integral part
hereof.

15.

Should the Honorable


Commission
approve the
Electricity Fees under the EPP A, there will be an
indicative decrease in generation cost of PhPo.28 per
kWh on the Commercial Operation Date.

Allegations in Support of the Prayer for Provisional


Authority
16.

The current demand of ILECO I is 46.129 MW. To meet


this demand, ILECO I sources 3.5 MW of its electric
power requirements from PEDC's Existing Plant, 18
MW from Green Core Geothermal, Inc. ("GCGI"), 8 MW

ERC Case No. 2016-097 RC


Notice of Public Hearing/3 August 2016
Page 10 of 13
from Panay Power Corporation and 4 MW from Salcon
Island Power Corp. It also sources about 12.629 MW
from the Wholesale Electricity Spot Market ("WESM")
during peak hours.
17.

It is expected that ILECO I's current demand will


increase to over 49 MW by 2016 and 52 MW by 2017
based on ILECO I's load forecast.

18.

Considering that ILECO I is in need of additional supply


of power beginning 2016, it is imperative that ILECO I
obtain this Honorable Commission's approval of the
EPPA with PEDC.

19.

The supply of additional 8 MW from the Expansion


Plant to ILECO I (and ultimately, to its consumers) will
not only secure the power requirements of ILECO I but
also lessen ILECO I's exposure to the volatility of the
Wholesale Electricity Spot Market (WESM) prices and
reduce its dependence on the Negros-Panay submarine
cable.

20.

Under the terms of the EPPA, among the conditions


precedent to the performance by ILECO I and PEDC of
their respective obligations thereunder is the approval
of this Application by the Honorable Commission.

21.

Thus, for PEDC to be able to deliver and ILECO I to be


able to receive power from PEDC as early as the Testing
and Commissioning and the Pre-Commercial Operation
Period of the Expansion Plant, it is imperative that a
provisional authority be granted for the EPPA to allow
PEDC to deliver and ILECO I to receive power during
these periods.

22.

As mentioned in the foregoing paragraphs, should the


Honorable Commission grant a provisional authority for
PEDC to deliver and ILECO I to receive power during
Testing and Commissioning, there will be an indicative
net reduction in its generation cost of PhPo.63 per kWh
during this period. Should a provisional authority be
given for the Pre-Commercial Operation Period, there
will be an indicative net reduction in its generation cost
ofPhPOA6 per kWh during this period.

ERC Case No. 2016-097 RC


Notice of Public Hearing/3 August 2016
Page 11 of 13
Compliance with Pre-Filing Requirements
23.

Applicants manifest their 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 2011, or the "EPIRA", and Rule
6 of the 2006 ERC Rules of Practice and Procedures, as
evidenced by the following attachments:
23.1. Affidavit of Service re: service of the Application
with Annexes to the Sangguniang Panlungsod of
Iloilo City, a copy of which is attached as Annex

"B'" ,
23.2. Affidavit of Service re: service of the Application
with Annexes to the Sangguniang Bayan of
Tigbuan, a copy of which is attached hereto as
Annex "C'" ,
23.3. Affidavit of Service re: service of the Application
with Annexes to the Sangguniang Panlalawigan of
the Province of Iloilo, a copy of which is attached
as Annex "D";
23.4. Affidavit of Publication stating that the instant
Application had been published in a newspaper of
general circulation, a copy of which is attached as
Annex "E'" ,
23.5. Newspaper issue where the Application appeared,
as published, a copy of which is attached as
. Annex "F";
23.6. A copy of the Board Resolution authorizing
ILECO I to jointly file the instant application with
PEDC, which is herein attached as Annex "G";
23.7. A copy of the Board Resolution authorizing PEDC
to jointly file the instant application with ILECO I,
which is herein attached as Annex "H"; and
23.8. Proof of payment of filing fees, a copy of which is
attached as Annex "I".

ERC Case No. 2016-097 RC


Notice of Public Hearing/3 August
Page 12 of 13
24.

2016

ILECO I and PEDC pray that the Commission will:


a) Upon initial review of the instant Application and
pending trial on the merits, issue a provisional
authority for the terms of the 14 April 2015 EPPA
between PEDC and ILECO I, thereby authorizing
PEDC to charge and collect from ILECO I the
respective Electricity Fees corresponding to the
(1) Testing and Commissioning,
(2)
PreCommercial
Operation
Period,
and
(3)
Commercial Operation Date, and authorizing
ILECO I to pass the full amount thereof to its
consumers;
b) After trial on the merits, issue a permanent
approval of the terms of the 14 April 2015 EPPA
between PEDC and ILECO I, thereby authorizing
PEDC to charge and collect from ILECO I the
respective Electricity Fees corresponding to the
(1) Testing and Commissioning,
(2) PreCommercial
Operation
Period,
and
(3)
Commercial Operation Date, and authorizing
ILECO I to pass the full amount thereof to its
consumers; and
c) Grant such other reliefs just and equitable under
the premises are likewise prayed for.

The Commission has set the Application for initial hearing,


expository presentation, pre-trial conference and evidentiary hearing

on

October 2016 (Wednesday) at two o'clock in the


afternoon (2:00 P.M.) at the ILECO I's Main Office in Brgy.
Namucon, Tigbauan, Iloilo.
05

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 ERC'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.

ERC Case No. 2016-097 RC


Notice of Public Hearing/3 August 2016
Page 13 of 13
All other persons who may want their views known to the
Commissionwith respect to the subject matter of the proceeding may
file their opposition to the 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 wish to have a copy of the Application
may request from the Applicants that they be furnished with the
same, prior to the date of the initial hearing. The Applicants are
hereby directed to furnish all those making such request with copies
of the Application and its attachments, subject to the reimbursement
of reasonable photocopying costs. Any such person may likewise
examine the Application and other pertinent records filed with the
Commissionduring the standard officehours.
WITNESS, the Honorable Chairman, JOSE VICENTE B.
SALAZAR, and the Honorable Commissioners, ALFREDO J.
NON, GLORIA VICTORIA C. YAP-TARDC, JOSEFINA
PATRICIA A. MAGPALE-ASIRIT, and GERONIMO D. STA.
ANA, Energy Regulatory Commission, this 3rd day of August,
2016 at Pasig City.

ATTY. NA

J. MARASIGAN
Chief of Staff

Officeof the Chairman and CEO

LS: ~/~P/AP~:

ERC Case No. 2016-097 RC

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