Decision+ERC+Case+No +2015-002+RM

IN THE MATTER OF THE
ADOPTION OF THE
AMENDMENTS TO RESOLUTION
NO. 10, SERIES OF 2012,
ENTITLED "A RESOLUTION
APPROVING THE FEED-IN
TARIFF (FIT) RATES" (FIT
RULES),. PARTICULARLY FOR
WIND. FIT RATES, AS
NECESSITATED BY THE REVIEW
AND RE-ADJUSTMENT OF THE
WIND FIT SINCE THE
INSTALLATION TARGET FOR
WIND TECHNOLOGY HAS
ALREADY BEEN ACHIEVED
ERC CASE NO. 2015-002 RM

)(- - - - - - - - - - - - - - - - - - - - - - - - )(
DECISION
Before . the Commission for resolution is the .National

Renewable Energy Board's (NREB) proposed Feed-in Tariff 2 (FIT)
for wind technology (WIND FIT 2) equivalent to PhP7.93/kWh.
In Resolution No. 10, Series of 2012, entitled "A Resolution

Approving the Feed-In Tariff (FIT) Rates" (FIT Rules), the
Commission approved a WIND FIT of PhP8.53/kWh, linked to an
installation target issued by the Department of Energy (DOE) of 200
MW. Based on the latest information available to the Commission,
the total capacity of Wind Power Plants built and commissioned or to
be commissioned within the year, already exceeded the said
installation target of 200 MW, as fOIlOW%
y
DECISION/October 06, 2015
Page 2 of 31
Nameplate
No. of
Name of Plant Location Rating
Units (MW)
LUZON GRID
1. EDC Burgos Wind Burgos,
50WTG 150
PQwer Corp. . , lIocos Norte
2. Northwind Power Bangui,
Development 6WTG 18.9
lIocos Norte
Corporation (Phase 3)
3. North Luzon
Renewable Energy Pagudpud,
27WTG 81
Corp. (Caparispisan lIocos Norte
Wind Farm Project)
4. Alternergy Wind One 54
27WTG Pililla, Rizal
Corp.
VISAYAS GRID
5. Trans Asia Renewable
Energy Corp. (San San Lorenzo,
27WTG 54
Lorenzo Wind Farm Guimaras
Project)
6. Petrowind Energy, Inc.
Nabas and
(Nabas Phase 1 Wind 18 WTG 36
Malay, Aklan
Project)
TOTAL
. 393.9
Given the foregoing, on April 13, 2015, the Commission motu

proprio initiated the review of the FIT for the wind technology (WIND
FIT) considering that the installation target for wind technology has
already been achieved. This review and re-adjustment of the WIND
FIT is pursuant to Section 7 of the FIT Rules, which provides that a
review and re-adjustment of the FITs shall be conducted under the
following conditions: (1) when the installation target per technology is
achieved; (2) when the installation target per technology is not
achieved within the period targeted; (3) when there are significant
changes to the costs; and (4) other analogous circumstances.
In its letter dated April 15, 2015, the Commission directed

NREB to submit a proposal regarding the review of the WIND FIT,
withinfifteen(15)daysfrom receiptthere~
Page 3 of 31
NREB, in a reply-letter dated May 5, 2015, submitted its

calculation of the proposed WIND FIT at PhP8.49/kWh for wind
projects beyond the original 200 MW installation target. This
proposed WIND FIT is equivalent to the existing Commission-
approved WIND FIT of PhP8.53/kWh, degressed by 0.5%.
,
On May 12, 2015, the Commission issued an Order and a
Notice of Proposed Rule-Making, setting NREB's proposed new
WIND FIT of PhP8.49/kWh for public hearing and, directing all
interested parties to submit their respective comments thereon at
least seven (7) days before the scheduled hearing.
The following interested parties filed their respective comments

on the NREB's proposed WIND FIT of PhP8.49/kWh:
1. Petrowind Energy, Inc.'s (PWEI) "Matrix of Comments"

filed on June 2, 2015;
2. Alternergy Wind One Corporation's (AWOC) "Petition for

Intervention [To Support the Proposed PhP8.49/kWh
Second Wind FIT]" filed on June 3, 2015;
3. Trans-Asia Renewable Energy Corporation's (TAREC)

"Comment" filed on June 5, 2015; and
4. Visayan Electric Company's (VECO) "Comments to the

Proposed Amendment to the FIT Rules, Particularly Wind
FIT Rates" filed on June 8, 2015.
On June 3, 2015, NREB filed a "Notice of Compliance"

submitting the Judicial Affidavit of Mr. Gerry Magbanua, a member of
NREB's Technical Working Group (TWG) to support the approval of
the WIND FIT of PhP8.49/kWh.
During the June 9, 2015 public hearing, NREB manifested that

it would be proposing a new tariff in light of the current developments
in wind technology and moved that the hearing be deferred. The
Commission granted the said motion and directed NREB to submit a
revised recommended FIT for the wind capacities, which have/
y
Page 4 of 31
been certified by the DOE as eligible for the first round of FIT
implementation.
In compliance therewith, in its letter dated June 10, 2015,

NREB submitted to the Commission a revised recommended new
WIND FIT of PhP7.93/kWh for the second batch of Wind Power Plant
Projects that have been commissioned or are to be commissioned
within the year 2015. This recommendation is pursuant to NREB's
Resolution No.4, Series of 2015, entitled "Resolution to Recommend
Adoption of Feed-In Tariff for the Second Batch of Wind Power Plants
(WIND FIT2)", adopted on June 10, 2015.
In the said letter, NREB averred that in computing for the WIND
FIT2, it adopted several common assumptions under the second FIT
rate for solar (SOLAR FIT2) approved by the Commission on April 28,
2015.
In its Order and Notice of Proposed Rule-Making both dated

July 1, 2015, the Commission set NREB's proposed WIND FIT2 for
public hearing on July 30, 2015 and directed it to present evidence in
support of its proposed WIND FIT2 of PhP7.93/kWh.
In the same Order, the Commission directed all interested

parties to submit their respective comments on NREB's proposed
WIND FIT2 of PhP7.93/kWh at least seven (7) days before the
scheduled hearing. The following interested parties filed their
respective comments thereon:
1. VECO's "Comments" filed on July 21,2015; and
2. PWEI's "Matrix of Comments" filed on July 21,2015.
On July 24, 2015, NREB filed a "Notice of Compliance"

submitting the Judicial Affidavit of Mr. Gerry Magbanua, a member of
NREB's TWG, as evidence in support of the approval of the WIND
FIT2 of PhP7.93/kWh.
On July 23, 2015, NREB filed a "Motion to Withdraw Prior

Filings" praying that all prior filings made by NREB in connection with
this case be withdrawn and expunged from the records ther~
y
Page 5 of 31
Relative thereto, on July 27, 2015, the Commission issued an

Order granting NREB's motion. Thus, all the filings made by NREB
relative to the WIND FIT2 of PhP8.49/kWh are considered
withdrawn/expunged from the records of this case.
At the continuation of the hearing on July 30, 2015, the

following appeared: 1) NREB; 2) VECO; 3) AWOC; 4) MERALCO; 5)
DOE; and 6) PWEI.
In the said hearing, NREB conducted an expository

presentation of its proposed WIND FIT2 of PhP7.93/kWh. Thereafter,
MERALCO, PWEI, VECO and some consumers propounded
clarificatory questions.
At the termination of the expository presentation, NREB

presented its lone witness, Mr. Gerry Magbanua, a member of its
TWG, who testified, among others, on the following: a) NREB's
proposed WIND FIT2 of PhP7.93/kWh; b) the increase in the
installation target for wind energy; c) NREB's basis for computing the
proposed Wind FIT2; d) the particular assumptions approved by the
Commission for the SOLAR FIT2 that were also used by NREB in
determining the proposed WIND FIT2; e) the reason of NREB for
assuming a reduced Equity IRR target of 14.71 % and for adopting
2013 data in computing for the proposed Equity IRR; f) the reason of
NREB in adopting the same assumptions under WIND FIT1, such as
EPC Cost; and, g) the reasonableness and fairness of the proposed
WIND FIT2 of PhP7.93/kWh. In the course of his direct examination,
various documents were presented and marked as exhibits.
MERALCO and VECO moved that they be furnished with

copies of the Judicial Affidavit of the said witness and be given a
period of five (5) days from the date of the said hearing within which
to file their respective comments thereon. VECO reserved its right to
present evidence in this case.
The Commission directed MERALCO and VECO to include in

their comments their intention to present evidence. On the other
hand, NREB was given the same period of five (5) days from receipt
thereof within which to file its reply and thereafter, to file its formal
offer of evidence (FOE).
On August 5, 2015, MERALCO filed its "Comment and Motion"

praying that the same be considered in the resolution of this case and
that tt be allowedto file additionalcommentswithina periodof fift~
Page 6 of 31
(15) days from receipt of NREB's estimated rate impact as a result of

the new installation targets for wind and solar energy.
On August 12, 2015, the Commission issued an Order directing

NREB to submit its comment thereon, within ten (10) days from
receipt thereof.
On August 17, 2015, NREB filed its "Reply [To MERALCO's

Comment and Motion Dated August 5, 2015]".
On August 19, 2015, TAREC and AWOC filed their respective

comments on NREB's proposed Wind FIT2 of PhP7.93/kWh.
On August 27,2015, NREB filed its "Comment [To MERALCO's

Motion Dated August 5, 2015]" praying that MERALCO's motion be
denied for being improper and premature.
On August 28, 2015, the Commission issued an Order denying

MERALCO's request for the rate impact simulation since said matter
should be raised and addressed in the FIT-Allowance (FIT-All)
application of the National Transmission Corporation (TRANSCO).
On even date, the Commission issued a separate Order

directing NREB to submit, within five (5) days from receipt thereof,
the EPC Contracts and other supporting documents to prove the
actual EPC Cost of each of the WIND FIT2-certified Projects of
Petrowind Nabas, Alternergy Pililla and TAREC Guimaras, in the
amounts of 2.245 Million USD/MW, 1.911 Million USD/MW and 1.711
Million USD/MW, respectively, as presented by NREB during the July
30, 2015 hearing.
Relative thereto, on September 7, 2015, NREB filed a "Notice

of Compliance [Order Dated August 28, 2015]" and its "Formal Offer
of Evidence With Motion for Urgent Resolution".
On September 16, 2015, MERALCO filed a "Manifestation and

Motion" praying that NREB be directed to furnish it a copy of its
Compliance to the Commission's Order dated August 28, 2015 and
that it be allowed to file its comment thereon within ten (10) days from
receipt thereof. The Commission noted that MERALCO was already
furnished a copy of the said compliance by NREB on September 7,
2015 by registeredmai~
Page 7 of 31
On even date, MERALCO filed a "Motion for Reconsideration

(ERC Order Dated August 28, 2015)" praying that the said Order be
reconsidered on the following grounds: a) the estimated rate impact
as a result of the new installation targets for wind and solar energy is
relevant to the resolution of this case; and' b) TRANSCO's FIT-All
Application is not the proper forum to resolve the issue on rate
impact.
On September 21, 2015, MERALCO filed its "Comment and

Motion (To NREB's Formal Offer of Evidence With Motion for Urgent
Resolution Dated September 7, 2015)" praying, among others, that
NREB's motion for urgent resolution be denied and that MERALCO
be given a period of thirty (30) days to file its Memorandum.
On even date, MERALCO filed its "Comment (To NREB's

Notice of Compliance Dated September 7,2015)".
On October 5, 2015, the Commission issued an Order resolving

MERALCO's motion and admitting NREB's exhibits contained in the
"Formal Offer of Evidence" for being relevant and material in the final
resolution of this case and declaring the instant application submitted
for resolution.
DISCUSSION
FEED-IN TARIFF (FIT) REVIEW AND RE-ADJUSTMENT
Section 7 of the Feed-In Tariff Rules (FIT Rules) provides that,

a review and re-adjustment of the FITs may be made by the
Commission under the following cases:
1. When the installation target per technology is achieved;

2. When the installation target per technology is not achieved
within the period targeted;
3. When there are significant changes to the costs; and
4. Other analogous circumstances.
On July 27, 2012, the Commission approved a PhP8.5300/kWh

Feed-In-Tariff (FIT) for Wind Power Plants within the 200 MW
installation target set by the Department of Energy (DOE)4
'ERG c.~ No.201 Hl06 RM.01."" "'0 Ih. M".,

of the Feed-In Tariff for Electricity Generated
ofthep.lm" '0 'o",1e R,Ie-M,k'o,
from Biomass, Ocean, Run-of-River
fo"L.,oo
Hydropower, Solar and
Wind Energy Resources"
Page 8 of 31
On April 13, 2015, the Commission's examination of updated

information and submitted data disclosed that the total capacity of
Wind Power Plants built and commissioned or to be commissioned
within the year already exceeded the 200 MW installation target set
for Wind technology, to wit:
Capacity
RE Developer RE Plant Location
(MW)
Luzon Grid
EDC Burgos Wind Burgos Wind Power Burgos,
150
Power Corporation Project (Phase 1 & 2) lIocos Norte
Northwind Power
Bangui Wind Power Bangui,
Development 18.9
Project (Phase 3) lIocos Norte
Corporation
Northern Luzon UPC Caparispisan Wind Pagudpud,
81
Asia Corporation Energy Project lIocos Norte
Alternergy Wind One Pililla Wind Power
Pililla, Rizal 54
Corporation (AWOC) Project
Visayas Grid
Trans-Asia Renewable
San Lorenzo Wind San Lorenzo,
Energy Corporation 54
Power Project Guimaras
(TAREC)
Petro Wind Energy, Inc. Nabas Wind Energy Nabas and
36
(PWEI) Project Malay, Aklan
Total Wind Power Plants Capacity 393.9
Upon determination that the installation target for the wind

technology has already been achieved, the Commission motu proprio
initiated the review of the existing PhP8.5300/kWh WIND FIT. Thus,
on April 15, 2015, the Commission directed NREB to submit a
proposal for its consideration in theon-going review on the WIND
FIT.
NREB's Proposed Revised WIND FIT2 of PhP7.9300/kWh
On June 10, 2015, NREB submitted its proposed revised WIND

2
FIT2 of PhP7.9300/kWh for the second batch of Wind Power Plant
Projects that have been commissioned or are to be commissioned
within the year 2015.
2Pursuant to NREB's Resolution No.4, Series of 2015, entitled "Resolution to Recommend Adoption of
Feed-In Tariff for the Second Batch of Wind Power Plants (WIND FIT2)" dated June 10, 2015 ~
r
Page 9 of 31
In calculating for the revised WIND FIT2, NREB submitted that

it adopted several common assumptions used by the Commission in
its determination of the new Solar FIT3 (SOLAR FIT2) for the second
batch of FIT eligible solar projects. These include debt interest rate,
local inflation rate, escalation adjustment period and Philippine Peso
to US Dollar (PhP-USD) exchange rate.
NREB likewise submitted that it has also considered the

following factors in calculating for the PhP7.9300/kWh revised WIND
FIT2:
a. The total capacity of wind power plants built and commissioned

or to be commissioned within the year, which amounts to 393
MW',
b. The following projects which have obtained FIT Certificate of

Compliance (COC) under the approved FIT for the first batch
(FIT1 ):
i) EDC Burgos Project (150 MW);

ii) Northwind Power (Phase 3) (18.9 MW); and
iii) NLREC Caparispisan Project (81 MW);
c. The likely projects eligible under FIT2, as follows:
i) TAREC Guimaras Project (54 MW);

ii) Petrowind Nabas Project (36 MW); and
iii) AWOC Pililla Project (54 MW);
d. The assumed Equity IRR target of 14.71% in FIT2, which is a

reduction from the 16.44% under FIT1, to reflect project risks
during 2013 when these FIT2 eligible projects have committed
to construct or started construction activities; and
e. The assumed EPC Cost for FIT2 eligible projects amounting to

US$1,836 Million per MW, which is the same as the EPC Cost
under the approved FIT1.
NREB further submitted that all other input parameters

considered in the FIT1 calculations were maintained. A comparison
3ERC Case No. 2014-004 RM, entitled "In the Matter of the Adoption of the Amendments to Resolution No.
10. Series of 2012. A Resolution Approving the Feed-In Tariff (Fin Rates, As Necessitated by the New
Installation Target for s~ergy Generation set by the Department of Energy (DOE)", Decision dated
March 27, 2015. /1/
Page 10 of 31
between the assumptions used in the determination of the ERC-

approved WIND FIT1 and the NREB revised WIND FIT2 is shown
below, to wit:
. ';'
Commission . NREB-
Item -Approved .P.r6posed Remarks
WIND FIT 1 WIND FIT 2
Gross Installed Capacity (MW) 30 30 No Change
Due to lower
Total Project Cost ($OOO/MW) 2,492 2,462
interest rate
~ EPC Cost ($OOO/MW) 1,836 1,836 No change although

actual average cost
for FIT2 eligible
projects is slightly
higher
~ TIline Cost ($OOO/MW)
60 60 No Change
~ Substation Cost ($OOO/MW) 63 63 No Change
No change
although the
weighted average
Net Capacity Factor (NCF) 27.5% 27.5% NCF of FIT2 eligible
projects is lower
based on 3rd party
technical studies.
o & M Cost ($OOO/year) 1,500 1,500 No Change
Foreign Exchange Rates: Based on the

~ Base 47.81 44.40 ERC-Approved
~ Forward 43.00 44.00 new Solar FIT
Escalation Adjustment from

Base:
3 Yrs. 0
~ Base Based on the
1 Yr. 0
~ Forward ERC-Approved
2 Yrs. 0 new Solar FIT
~ Capex
Local CPI (% p.a.) 4.0% 3.28%
Debt Interest Rates Based on the

~ Base 10.0% 8.0% ERC-Approved
~ Forward 8.0% 6.5% new Solar FIT
Page 11 of 31
Commission NREB.
Item -Approved Proposed Remarks
WIND FIT 1 WIND FIT2
Based on CAPM
',' 'J
formula updated as
of 2013 reflecting
project risk when
Equity IRR 16.44% 14.71% FIT2 eligible
projects committed
or started
construction
activities.
Due mainly to
lower Equity IRR
Feed-In-Tariff (PhP/kWh) 8.5300 7.9300 and lower interest
rate
The PhP7.9300/kWh NREB revised WIND FIT2 is 7.03% lower

than PhP8.5300/kWh Commission-approved WIND FIT1.
WIND FIT Parameters
Based on current data available to the Commission, the

updated information submitted by NREB, and the recent development
in the wind technology industry, the Commission re-visited the key
input assumptions and made its evaluation on what would be the
reasonable updated level of FIT for the FIT2 eligible wind projects.
A. Net Capacity Factor (NCF)
NREB proposed to maintain the 27.5% Commission-approved

NCF for the FIT2 Eligible Wind Projects. It submitted that the results
rd
of Renewable Energy Developers' (RE developer) commissioned 3
party technical studies revealed that the weighted average NCF of
FIT2 eligible projects is lower than the 27.5% NCF level adopted by
the Commission in its determination of the PhP8.5300/kWh WIND
FIT1, to wit
a
?
Page 12 of 31
Installed Estimated Net

Third Party Capacity
Project Capacity Annual Output
Consultant at P75 (MWH) Factor (%)
(MW)
Petrowind Nabas
COWl ""I 36 c 109,745 34.80%
Project
AWS True Alternergy Pililla
54 124,410 26.30%
Power Project
TAREC Guimaras
COWl 54 103,606 21.90%
Project
Weighted Average Net Capacity Factor 26.78%
NREB further submitted that, although the 26.78% resulting

weighted average NCF of FIT2 eligible projects based on the 3rd party
technical studies is lower, it still adopted the higher 27.5%
Commission-approved NCF in calculating the proposed
PhP7.9300/kWh WIND FIT2.
It will be recalled that NREB originally proposed4 a 25% NCF

for the representative wind power projects based on the following:
1. The proposed NCF level represents the average condition in

the Philippines, considering wind turbine availability, grid
availability, power curve, transformer and line losses;
.2. It is based on the average NCFs of planned wind plants in
Burgos, Pasuquin, Pagudpud, all in \locos Norte, and
Guimaras whose capacity factors ranges from a low of 23% to
a high of 27.5%, with an average NCF of 25.4%; and
3. It is higher than Northwind's Bangui Bay project 23.5% actual
average NCF for the five-year period covering 2006 to 2010.
After referring to current data and independent reports on wind

technology by reputable authorities in the Renewable Energy
industry, The Commission has resolved to adopt as an input an NCF
equivalent to 27.5%5 grounded on the following considerations:
1. Northwind's 2011 actual Net Capacity Factor of 30.15%
The Commission was convinced that Northwind's low 23.5%

average NCF for the 5-year period covering 2006 to 2010 was
affected by the power plant several downtimes/forced outages
reported during the period. Absent said downtimes and forced
4ERC
51bid
d
/1
Case No. 2011-006 RM, Decision dated July 27,2012
Page 13 of 31
outages, the plant is capable of achieving a higher capacity

factor noting its reported 26.10% actual average NCF during
2007 and its record high 30.15%6 reported average NCF for
2011.
2. Forecasted NCF of future wind projects representing the initial

installation target
~ ~
Based on submitted data,' a study of future projects
representing the initial Installation Target for wind disclosed that
these projects are capable of operating at higher capacity
factors:
Project Net Capacity Factor

Burgos 26.0%
Pasuquin 25.0%
Pagudpud 27.5%
3. Recent technology developments in wind turbine generators
The Commission likewise referred to recent technology

developments in wind turbine generators, particularly, the Global
Wind Energy Council (GWEC) report that the prevailing 25%
average capacity factor is expected to increase to 28% by 2015
and even 30% by 2036.7 The increasing trend was likewise
projected by Bloomberg New Energy Finance (BNEF)8 in its
presentation on the state of wind innovation during the 2012
Bloomberg New Energy Finance Summit:
IMPROVEMENTS IN TURBINE TECHNOLOGY
...................................................
AVERAGE CAPACITY FACTOR
~(f".JJ) ,
''''''
35% - _. -.- _.- ----.-- -~ . - _.". ----.. ._ ..
-
100m
'Om
''''''_;;1i I~"

1QCln
TI:r r.~.-.....
1QQol:. ~ '--'---~
n
2010 ~:;;;;:;J Source: Btoomberg New EMrgy
n
Finance
!!!~~g I I I I I I
6Based on the Generation Company Management Report (GCMR) submitted by Northwind in compliance
with the terms and conditions of its COC
7The Global Wind Energy Outlook Scenarios 2010. page 8
http://www.gwec.netlfileadmin/documents/Publications/GWEOo/o20201O%20final.pdf
8 Amy Grace, BNEF University, AprilS. 2012
http://www.bnef.com/free-publications/presentations/BNEF delivers the analysis, data and news for its
.,"" to ,"=,,"11, "",,,.Ie d'" ""9Y,,' ~,~ '" m.~,".~
Page 14 of 31
While capacity factor is primarily an assessment of the wind

resource at a given site, the Commission affirms that the same is
also influenced by the turbine design (i.e. hub height, rotor blade
length and component parts) as illustrated above.
The Commission further notes that Northwind's low

performance can be attributed to the plants turbine specifications
given that its turbine hub height is only 70 meters and with 41 meters
length blades, thus giving a rotor diameter of 82 meters with only
5,821 square meters windswept area.9 The Commission is convinced
that the new wind projects will be more efficient considering the
NREB submission that future wind projects will use turbines with a
hub height of above 80 meters and rotor with a diameter of 90-100
meters, thereby increasing the windswept area to 6,500-7,900 square
meters resulting in improved performance and a higher capacity
factor, to wit:
Wind
RE Turbine IEC Hub Rotor
COD Capacity 10 swept
Developer Type Class Height Diameter
Area
June
Vestas 5,821 sq.
Northwind 20, 1.65 MW II-A 70m 82m
V82 m
2005
Alternergy 11 ... 201 Nordex 6,362 sq.

2.5MW I-A 85m 90 m
3 N90/2500 m
Siemens
Thai End of 8,000 sq.
SWT-2.3- 2.3MW 111-8 80m 101 m
Project12 2012 m
101
Further, the reasonableness of the 27.5% level is validated by

the following two (2) points:
9ERC Case No. 2011-060 RC entitled "In the Matter of the Adoption of the Feed-In Tariff (FIT) Pursuant to
the Feed-In Tariff Rules Specific to the Existing Renewable Energy Plants, With Prayer for Provisional
Authority, Northwind Power Development Corporation (NORTHWIND), Applicant"
10 Turbine Class: I - High Wind; II - Medium Wind; III - Low Windl Turbulence: A - High; B - Low
A leading international engineering consultancy commissioned by WEDAP for a wind farm cost study in Sept. 2010
suggested that Class I WTG is the suitable type of turbines for sites with extreme wind speeds (mostly across
outer northern Luzon). It also noted that only one of the planned wind power projects can be considered a Class II
site based on a desktop study (Annex "G-3-d" of NREB Petition). According to a report published Nov.1, 2011,
General Electric (GE) "has pulled out of a number of opportunities in the Philippines where the company was not
confident its equipment would survive an extreme storm, while competitors have used their usual machines."
("Turbine Makers Ponder Risk and Reward in Asia-Pacific Wind", RECHARGE,
www.rechargenews.com/energylwind/article286217.ece). The report quoted GE's Asia-Pacific sales manager,
Peter Cowling, saying: "The islands have very good average wind speeds, but very nasty extremes, which are not
to be taken lightly."
11 Quotation dated Jan 18,2011 attached as Annex "G-3-b" of NREB's Petition docketed as ERC Case No. 2011-
006 RM
12207 MW wind power plant in Northeastern Thailand,
_.,;.m'",.rom"re'~."","",rel ,.n"""~/."",re",rel."",~0121eo.",,Iw;"d.powe"~P20120203~
Page 15 of 31
1. The average condition on the ground by referring to the actual

performance the newly-commissioned wind power plants in
the country; and
2. The international performance trend of wind power plant

technology worldwide based. on independent reports and
assessment by RE Industry experts. ';
Average
RE Developer RE Plant Capacity Period NCF13
Northwind Power Bangui Wind Nov. 2014

Development Power Project 18.9 to June 32.27%
Corporation (Phase 3) 2015
Burgos Wind Dec. 2014
EDC Burgos Wind
Power Project 150 to June 14.81%
Power Corporation
(Phase 1 & 2) 2015
Caparispisan Dec. 2014
Northern Luzon UPC 22.14%
Wind Energy 81 to June
Asia Corporation
Project 2015
San Lorenzo Jan. 2015

Trans-Asia Renewable
Wind Power 54 to June 27.59%
Energy Corporation
Project 2015
Average NCF 24.20%
The above tables show the actual capacity factors of the new
wind power plants during their initial operations, which lie between
14.81% and 32.27%.
The Commission noted that the reported 24.20% actual

average NCF of the recently-commissioned wind power plants. in the
country is lower than the existing Commission-approved 27.5% NCF
level, to wit:
Particulars Average NCF (%)
New Wind Power Plants 24.20%

ERC-Approved NCF 27.50%
13
romm."ood ~m;,,;o"t"' 0" tho mlddl. of tho mo"", '"' oom' t" tho "" ~.k
The first month of operations of the new power plants were excluded in computing for the capacity factor,
as they are assumed to be on commissioning phase and does not represent a full month operations (new
~~~t~'""
Page 16 of 31
To validate further the reasonableness of the existing 27.5%

NCF level, the Commission referred to the independent data on
14
capacity factor of Wind power plants during the period 2010-2014
reported by the International Renewable Energy Agency (IRENA)15,
viz:
;FKWRl' A .12: CM'Af:;1f'f fAf:;TORS IIY moJECf mo MlGH'lEO AVf!!ACE$ fOR COt.t14$:S1ONED .NO I'IlOPOSW \WolD FAIlM$.
201Q.2014
Capacity factor

Il16I Oc~ 01AN II QI""

S<>util
I NMiIfI
o \00
The IRENA report, as illustrated in the above figure, shows the

ranges for wind farm capacity factors for current and proposed
projects by country and region. IRENA reported that the average
capacity factors varied by region from around 24% in China and India
to around 43% in Brazil and by comparison, projects commissioned in
2012 in the United States had average capacity factors of 33.4% in
2013, with ranges of between 18% and 54% (Wiser and Bollinger,
2014). According to IRENA, the capacity factor ranges for Africa and
South America excluding Brazil are similar to those in the United
States.
141RENAreport entitled "Renewable Power Generation Cost in 2014" published in January 2015
1~he International Renewable Energy Agency (IRENA) is an intergovernmental organisation that supports
countries in their transition to a sustainable energy future, and serves as the principal platform for international
co-operation, a centre of excellence, and a repository of policy, technology, resource and financial knowledge
on renewable energy. IRENA promotes the widespread adoption and sustainable use of all forms of renewable
energy, including bioenergy, geothermal, hydropower, ocean, solar and wind energy, in the pursuit of
sustainable development, energy access, energy security and low-carbon economic growth and prosperiY
~~ ~
Page 17 of 31
The above figure likewise depicts that the capacity factors of

wind power plants in Other Asia, range from 19% to 48% with an
average of 28%. The Commission has noted that the existing
Commission-approved 27.5% NCF level is way above the 24%
reported average NCF for China and India, while it approximates the
performance of wind power plants in Other Asia 16, viz:
Country .
;.',
~.:'}~"~/~
,.;iJq~jcF(%)
';1- ":," ", .',
China and India 24.0%

Global Average 17 29.0%
Other Asia 28.0%
ERC-Approved NCF 27.5%
In view of the foregoing, the Commission finds the current

27.5% NCF level reasonable the same being comparable with the
IRENA reported average capacity factor of wind power plants located
in Other Asia and considering that it is still higher compared to the
reported actual capacity factors of the first batch of FIT eligible wind-
projects initial operations.
B. EPC Cost and Total Plant Installed cost
NREB's Proposed US$1,836/kW EPC Cost and US$2,462 Total

Plant Installed Cost
NREB submitted that the approved US$1,836/kW EPC Cost

level be maintained by the Commission in its determination of the
WIND FIT2 considering that it is even lower than the actual average
EPC cost of the following wind power projects:
Commission-
Actual EPC Difference
Capacity Approved EPC
RE Plant Cost (US$OOO/MW)
(MW) Cost
(US$/MW)
(US$OOO/MW)
San Lorenzo Wind 1,714
54
Power Project
Nabas Wind Energy 2,177
36
Project
Pillilla Wind Power 1,928
54
Project
Weighted Average EPC Cost 1,910 1,836 74
16
17
All of Asia excluding China and India
Page 33" IRENA report entitled "Renewable Power Generation Cost in 2014" published in January 201Y f
~
Page 18 of 31
To validate said assertion of NREB, the Commission referred to

the 2013 global weighted average installed costs for On-shore Wind
Power Plants as reported by IRENA,18 as shown below:
----- -- -
2010.2014
2010 2013 2014 ("0lAKGE)
OJmlORl OICSltORi OJmlORI Olmtoa 0mlt0RI 0Imm OmltORl OIlSllOR!
NI."II'CUACm
AIlOfTIOIIS (GW)
._ .
ClIMULA11V! IImAWD
c.wcm(GW)
:.--~-~~~-.~- ..
_ . -~II ~ffi.!P~." fJeEP ~ ~W:> .~' ... ~..~ .....
- ..
!
I
I"
.
t
~ 002!) 00El OO!!) ~ ~ <W3 ~
..._111------' -- .- .
-r~l~ I~I~ :1: I~T~II:;1

I -----.-- .. - - .
Noles: 2014 ~t data llI'C es:imates. n.a. = dala ~s ,not evaa.,bIc or not ~h dala 10 prclYIdc a robust estimlllc. Offshorc
I'oindcost ~ ere fOtll~ prOJects,Onshore wind cost rengcs are tOl regioneI teighted ~.
It can be gleaned from the above figure, that the reported global
average wind plant installed cost during 2013 ranges from a low of
US$1 ,340/kW and a maximum of US$2,330/kW.
From the above independent data, the Commission finds the

upper bound of the reported average wind plant installed cost during
2013 of US$2,330/kW to be representative of an efficient level of
wind power plant total installed cost.. Thus, it adopted the
US$2,330/kW plant installed cost in the determination of the WIND
FIT2.
Shown below is the comparison between the Commission

adopted EPC and Total plant installed cost and NREB's proposal:
NREB
Cost Component ERC Difference
Proposal
EPC Cost (US$/kW) 1,836 1,730 106
Total Plant Installed Cost
2,462 2,330 132
(US$/kW)
WIND FIT (PhP/kWh) 7.9300 7.4000 0.5300
Page 19 of 31
C. Equity Internal Rate of Return (EIRR)
In calculating for the proposed PhP7.9300/kWh WIND FIT2,

NREB adopted the Capital Asset Pricing Model (CAPM) formula
being used by Commission. It used updated data to reflect 2013
prices and project risks, which resulted in a computed Equity IRR of
14.71%. According to NREB, the 14.71% Equity IRR level has been
used by the Commission in the evaluation of the rate cases it has
decided.19
NREB submitted that it is reasonable to use

parameters/estimates based on the project risks in the country in
2013 since the likely projects eligible under WIND FIT2 were
committed to be constructed or has started construction in 2013.
In fixing the existing Wind FIT of PhP8.5300/kWh, the

Commission adopted a 16.44% cost of equity computed using
parameters based on 2011 data and the Capital Asset Pricing Model
(CAPM) formula, to wit: '
rf + Setae x MRP
Where:
= the nominal cost of equity;

= risk free rate for the Philippines;
= the equity beta for benchmark generation
company; and
MRP = the Market Risk Premium (MRP)
Particulars Values
Market Risk Premium 10.13%
Multiply by Relevered beta 1.03
Equals 10.43%
Plus Risk free rate 6.01%
Cost of Equity 16.44%
19Such
others. f
as ERC Case No. 2013-205 RC, ERC Case. No. 2014-129 RC, ERC Case No. 2014-102 RC, amon~
/
DECISION/October 06, 2015 .
Page 20 of 31
To determine the appropriateness of the current level of the

cost of equity, the Commission referred to available data and
submitted information. Verification of said data disclosed that the
wind power projects that may become eligible for the proposed WIND
FIT2 were constructed in 2013:
Date of Commercial
Capacity
RE Developer 'il RE Plant Conver- Operations
(IViWf'
sion Date
WIND FIT1 Eligible Wind Projects
Northwind Power Bangui Wind

Development Power Project 18.9 12/3/2013 10/10/2014
Corporation (Phase 3)
Burgos Wind
EDC Burgos Wind 5/16/2013
Power Project 150 11/11/2014
Power Corporation 12/3/2013
(Phase 1 & 2)
Northern Luzon UPC Caparispisan Wind
81 7/2/2013 11/11/2014
Asia Corporation Energy Project
Total 249.9
Trans-Asia Renewable San Lorenzo Wind

54 5/16/2013 12/27/2014
Energy Corporation Power Project
Nabas Wind
Petro Wind Energy, Inc. 36 5/31/2013 6/10/2015
Energy Project
Alternergy Wind One Pillilla Wind Power
54 5/16/2013 6/9/2015
Corporation Project
Total 144.0
Total Wind Capacity 393.9
To reflect the risk and fair price for their investment, the
Commission deems it appropriate to recalculate the cost of equity
using 2013 parameters/estimates since said updated data represent
the prevailing economic situation at the time the investment decision
was made.
Particulars Values
Multiply by Re-Ievered beta 1.03
Equals 9.68%
Cost of Equity 14.71%
Page 21 of 31
The Commission referred to the independent measure of

Philippines' Country Risk Premium (CRP) which is provided by
Professor Aswath Damodaran of New York University, Stern. From
the data published in 2013, the Philippines is estimated to have a
CRP of 3.60% and Total Risk Premium of 9.40% based on a default
spread of 200 basis points and a country rating by Moody's of Ba1.
The Total Risk Premium of 8.60% is equal to the estimated Default
Spread plus the historical risk premium for a mature equity market
(estimated from historical US data). Thus, the Commission adopted a
Market Risk Premium of 9.40%.
Moreover, the Commission used an updated risk free rate (rf) of

5.03%, which was bench marked from the daily average of Philippine
Dealing System Treasury Fixing (PDST-F) rates for the CY 2013 as
published by Philippine Dealing Exchange Rate (PDEx) in its official
website (www.pdex.com.ph).
2013 PDST-F
January 5.6835%
February 5.0829%
March 4.5899%
April 4.0457%
May 4.1842%
June 5.3932%
July 5.3077%
August 5.0313%
September 5.4529%
October 5.3234%
November 4.9149%
December 5.3818%
The Commission adopted the beta of 1:03, which was based on

the unlevered and re-Ievered betas of listed comparable companies
sourced from Bloomberg.
Using the CAPM formula, the Commission derived an adjusted

cost of equity of 14.71 %, to Wi~
Page 22 of 31
Particulars Values
Multiply by Re-Ievered beta 1.03
Equals 9.68%
Cost of Eq u ity 14.71%
The foregoing considered, from the 16.44% Cost of Equity used

in calculating for the PhP8.5300/kWh Wind FIT1, the Commission
adopted the updated 14.71% Equity IRR. The use of the adjusted
COE resulted in a 9.6% pre-tax WACC.
The resulting 9.6% WACC is reasonable as the same is

comparable to the 10% WACC20 assumed for the Rest of the World in
the calculation of the Levelised Cost of Electricity of Wind Power
Plant as shown in the figure below:
TABLE 1.1: ASSUMPTIONS FOR THE CALCULATION OF THE LMUSED COST OF EtECTRICITY NOT 0Il1VED fROM PROJECT DATA
________ J__ Ec_on_om_lc_ll_fe_~ Weighted average cost of capital, real
OECO and China Rest of the world

r-- --- ". --- - --
i Wind power 25
l_
: Solar PV 25
~ + ~ .__._. ._...~i
25
7.5'f, 10'f,
Hydropower
I,Biomass for power 20 " ,
"
Geothermal 25 ,
Ie
D. Transmission Interconnection Cost - US$74,202.95/km
The Commission adopted an updated US$74,202.95 per

kilometer 69 kV line cost bench marked to the National Electrification
Administration (NEA)21 current per kilometer cost estimate for a
similar three-phased 69 kV line project. The updated cost is higher
20IRENA report entitled "Renewable Power Generation Cost in 2014"

published in January 2015
21National Electrification Administration (NEA) Equipment and Materials Price Index 2015as per its
Memorandum dated June 15,2015 /
d
!f'
Page 23 of 31
than the US$69,767.00 per kilometer original approval per ERC

Decision on ERC Case No. 2011-006 MC dated July 27,2012.
E. Switchyard and Transformer Cost - US$1 ,741 ,872.22
The Commission adopted a US$1,741,872.22 Switchyard and

Transformer Cost based on the National Electrification Administration
(NEA) benchmark'cost for a complete 20 MVA Substation22. With this
as benchmark, the Commission used a Switchyard and Transformer
Cost of US$1,741,872.22 equivalent to the cost for 2 sets of 20 MVA
substations (complete) at US$870,936.11 per set in the WIND FIT2
calculation. The updated cost is based on the NEA Price Index for CY
2015, the detailed breakdown of which is shown below:
Price
Particulars
In PhP In US$23
20/25 MVA, Power Transformer, Off-
18,800,000.00 423,518.81
load, 67/13.2 KV
Substation Steel Structures 800,000.00 .18,066.85
69KV Protection and Metering Equipment 5,965,000.00 134,377.11
15KV Protection Equipment 5,055,000.00 113,877.00
69KV/15KV METERING, Control and
1,800,000.00 40,549.67
Protection Panel
Station Battery, Battery Charger 670,000.00 15,093.49
Service Station Distribution Transformer 93,854.00 2,114.31
15KV Power Cable and Termination Kit 527,000.00 11,872.04
Civil And other Electrical Works 4,950,000.00 111,511.60
Total 38,660,854.00 870,936.11
The NEA Equipment and Materials Price Index along with other
Price Benchmark serves as a tool in the Commission's evaluation of
Capital Expenditures Projects applications.
F. Operations and Maintenance (0 & M) Cost
The Operations and Maintenance (O&M) Cost including Spare

parts, tools and equipment accounts for 3.5% of the combined cost of
EPC, Substation and Interconnection line. As a result of the updates
22
1bid
) ~At2014
~mg' 10m,of PhP44.3QIU/{
Page 24 of 31
in the Substation and Interconnection Cost, a corresponding

adjustment in the O&M Cost was made by the Commission to
maintain the cost balance.
From the US$100,000/unit per year approved 2012 O&Mcost

level, the Commission reduced it to US$80,000/unit per year or lower
by about 20%. The Commission finds the reduction reasonable as it
is way below the Bloomberg New Energy Finance (BNEF) reported
36% reduction in the full-service operations and maintenance
contract costs between 2008 and 2013 based on compiled data for
the full-service maintenance contract costs of more than 6.4 GW of
installed onshore wind capacity.24 According to IRENA, increased
competition for O&M contracts has led to a decline in O&M costs as
O&M contractors look to lock-in long-term service contracts (MAKE
Consulting, 2012).
To validate the reasonableness of the reduced US$1,200,000.00

annual O&M cost level, the Commission referred to the BNEF full-
service O&M price index and the following recent data for reported
revenues from O&M contracts by two major manufacturers:25
FIGURE 4.15: FIlll-SERVtCE O&M PRICING 2008-2013 VS. WEIGHTED AVERAGE O&M REVENUES OF nvo MANUFAClUllERS
2014 USDIkWlyear
50
39 _
30
20
- 8NEF OIloM prla!
index
o Weighted average
-~::>~)-
23
25
"'V"',,,,,,
(2 mmulactu""'l
10
o I
, I I I I
2008 2009 2010 2011 2012 HI 2013
Sources: BNEF. 2014 and GlobalData. 2014
It can be gleaned from the above figure that the BNEF reported
2013 level of Full-service O&M contract cost of US$28/kw per year or
US$840,000.00 is still lower than the adjusted US$1,200,000.00
annual O&M cost.
Accordingly the adjusted Total O&M Cost and NREB proposed

Total O&M Cost is shown below:'
24
25
IRENA report entitled "Renewable
Ibid
Power Generation Cost in 2014"
published in January
/'1
2015 ~
Page 25 of 31
NREB ERC
Component
US$/year US$/kWh US$/year US$/kWh
O&M Cost 1,500,000 0.0208 1,200,000 0.0166
. , .,
Spare parts, Tools,
750,000 0.0104 750,000 0.0104
& Equipment
General and
600,000 0.0083 600,000 0.0083
Administrative Cost
Total 0 & M 2,850,000 0.0394 2,550,000 0.0353
To validate the reasonableness of the recommended

US$.0368/kWh total O&M cost, the Commission referred to the
IRENA Report by publicly-traded developers in the United States in
201326 and the normal average value27 of on-shore wind power plant
total O&M costs, as follows:
IRENA
Component ERC US
Min Max
o & M Cost (US$/kWh) 0.0353 0.0240 0.0200 0.0300
To validate further the reasonableness of the recommended

US$.0353/kWh total 0& M cost, reference was made to the reported
total operating costs of Infigen and EDP Renovaveis (EDPR), two
public companies with sizable U.S. wind project assets,28 thus:
EDP Renovaveis
Infigen US$/kWh US$/kWh
(EDPR)
supplies and services
Turbine O&M 0.0118 0.0142
(includes O&M costs)
Balance-of-plant 0.0028 personnel costs 0.0036
Asset management Other operating costs
0.0049 (mainly includes
and administration 0.0035
operating taxes, leases,
Other direct costs 0.0057 and rents)
Total 0 & M Cost 0.025229 0.0213
26
lbid
27 According to IRENA an average value of around USD 0.02 to USD 0.03/kWh would appear to be the norm,
but more systematic data collection is required to confirm these values.
282014 Wind Technologies Market Report dated August 2015, The report authored by Ryan Wiser and Mark
r
Bolinger of the Lawrence Berkeley National Laboratory is being disseminated by the U.S. Department of
Energy (DOE)
29 Infigen's total operating expenses may be higher than indicated here, given that reported costs .~~ no/
include certain capital expenditures related to the replacement of turbines and/or turbine component/"
Page 26 of 31
The foregoing considered, the Commission resolved to adopt the

reduced US$1,200,000.00 annual O&M cost or US$80,000.00/unit
per year.
G. Forward Peso to US$ Exchange Rate - PhP44.00/US$
NREB proposed to adjust the Commission approved PhP43.00

to US$ forward exchange rate to an updated level of PhP44.00. The
Commission finds the proposed level reasonable the same being
within the range of the Government3 forecasted exchange rate of
PhP42.00-PhP45.00 for 2015.
The proposed PhP44.00 forward Peso to US$ Exchange Rate is

likewise lower than the Philippine Peso exchange rate projections by
independent international experts which is PhP45.5 by December
2015 and PhP45.6 by March 2016:
Cur,rency iForecast
Lost: ,prlCO Forecasts

CU-rrency 06-<Nta r ..
1S M..-1S ;Jul"t-'1S 5ep-15 __ Dec-1S iN'IIar-i'G
,
[G1G-USOon_
'Eui'"O EuRuSO 1.08
=:J .1.1:1 1_07 1.,02 0.99 0.98
)
,Japanese yen USDJPY .120.8 1i9 123 128 illO i3i

Brtt:lsh ,Pound GBPUSO 1.50 1.52 1.45 1.36 1.32 1.3:1.
SWIss Fnanc USOCHF 0.99 0.99 1.04 1.08 1 ..12 1.12
Aust: I"af I.Dol. Dr A:UDUSO 0.77 0.75 O.?ll 0.7'1 0.70 0"'0
NeVlll'ZOatand NZOUSO 0.74 0.74 ,0.71 0.G8 0.67 0.66
Canadian 'Dollar USDCAD 1.26 1.25 1.27 1.29 1_30 1.30

[IEMAsi. [
Chinese Renft'tlnbt USOCNV 6.26- 6.25 6.27 G.29 6 .
28 6.24
HOn8'K~8 USDHKD '.76 7.77 7,.78 7.79 7.79 7.78
ifndoneSian Rup'I:oh USC_DR 1'29'6 :12..

961 13 .
054 13,_148 13,.182 13 ..
1.42
!indian Rupee USOINR G2 63.~1 63.~8 64.G 65_0 64.9

'iKCH"e
an 'W'on USDKRVV 1098.81 1~12:1 1~13.2 1~144 1,~149 1,..14?
l\I'IIat.eys$an ,RJnBtt USOMYR 3.65 3.65 1l.G? 3.69 3 ..69 B.G?

Ph. II pptne 'Pe so USOPHP 44.09 45,.0 4$.2 45 .
4 45 .
5 45 ..6
SIngapore Do'l~ USOSGO 1.3S 1.37 1. liS 1.119 1.....

40 1.39
Thai 'BaIrt USOYHB 112.SS 33.0 33.2 33_4 1l1l.S 3'3.4

T"~OOII3r USDTYJ'D 31.44 32.0 32.2 32.4 112-S 32.4
fOll_IEu-
Russian Ruble
- -.- ~- _._-~---
USDRUB 60.43-
L~
65.:2
__~_~~_~ -'- --
6".2 69.2
_u_~==:J
70.1 69.5
fEN!
Ik'aZIllan
L.-t...-
Sc:Krth A'frI-c.1In
IReal
iAand USDZAR
USOBRL
12.04
3.06
c=__
._11.81
3.10
11.92
3.08
12.0-4
1l.OG
12.:1.2
3.05
12.16
3.,04
I ,
fIW'IIe:lidc:
Peso USONlXN 15.50 15.0 14.'9 14.8 14.7 ]:.4.5
SC:oun:le.: Cti IR~ .-nd er be g.:ps.,O'!O~20'I$
H. Base Peso to US$ Exchange Rate - PhP44.40/US$
Consistent with the Commission's approval on the new Solar

FIT,31 NREB likewise proposed to update the PhP47.81 base Peso
Exchange to US$ Exchange Rate to PhP44.40/US. The Commission
finds the use of the PhP44.40/US$ proposed base Peso Exchange
Rate, which is equal to the average exchange rate during 2014, to be
3ODeveiopment Budget Coordination Committee (DBCC), 2015 Budget Briefer, Congressional pOlic:::vand
Budget Research Department ~ /
31 ERC Case No. 2014-004 RM, Decision dated March 27, 2015 ZJ
Page 27 of 31
in order given that the WIND FIT2 would likely apply to the second
batch of FIT-eligible wind power projects that have commenced
commercial operations late 2014 and mid-2015, to wit:
Commercial
RE Developer RE Plant Location Operations Date
Trans-Asia Renewable San
San LorenzoWind December 27,
Energy Corporation Lorenzo,
Power Project 2014
(TAREC) Guimaras
AlternergyWind One PilillaWind Power
Pililla, Rizal June 9, 2015
Corporation(AWOC) Project
PetroWind Energy, Inc. NabasWind Nabas and
June 10, 2015
(PWEI) Energy Project Malay, Aklan
I. Local Inflation Rate - 3.28%
The Commission modified the assumed local inflation from the

approved 4% down to 3.28%. The adopted 3.28% inflation rate is the
average increase in inflation for the past three (3) years covering
2012 to 2014. The 3.28% inflation level is consistent with the recent
policy targee2 of the Bangko Sentral ng Pilipinas (BSP),33 i.e. that the
country is expecting to maintain a three percent (3%) :t 1.0
percentage point inflation target for 2015-2018. 34
The 3.28% likewise falls within the range of the ~overnment's

forecasted inflation for 2015 and 2016 which is 2%- 4%.3
J. Base Local CPI - PhP138.91
Considering that the WIND FIT2 will likely apply to the 2nd batch
of FIT eligible wind power projects whose FIT entitlement generally
commenced in 2015,36 the Commission updated the base local CPI
from the PhP160.00 2009 original level to PhP138.91. The
PhP138.91 is the average CPI during 2014 and consistent with the
Commission's approval under ERC Case No. 2014-004 RM.
32The policy target is set by the Development Budget Coordination Committee (DBCC) in consultation with
the BSP. The DBCC. created under Executive Order (E.O.) No. 232 dated 14 May 1970, is an inter-
agency committee tasked primarily to formulate the National Government's fiscal program. It is composed
of the Office of the President (OP), Department of Budget and Management (DBM), National Economic
and Development Authority (NEDA), and the Department of Finance (DOF). The BSP attends the
Committee meetings as a resource agency
33BSP Inflation Report 2nd Quarter 2015
~he inflation target range for 2015-2018 was announced thru DBCC Resolution No.2015-1 dated 27
January 2015
35NEDA, Philippine Medium Term Development Plan 2011-2016
36AlthoughTAREC's San Lorenzo Wind Power Project was commissioned on December 27,2014, the same~/
falls within the January 2015 billing month
?;!
rfl
Page 28 of 31
Commission-computed PhP7.4000/kWh WIND FIT2
The Commission determined the WIND FIT2 based on the following

modified key input parameters/assumptions:
NREB ERC WIND

ERC WIND Proposed
Parameters .~".
FIT1 FIT2
WIND FIT2
Total Project Cost US$2,492/kW US$2,462/kW US$2,330/kW
EPC Cost US$1,836/kW US$1,836/kW US$1,730/kW
Net Capacity Factor 27.5% 27.5% 27.5%
Switchyard and transformers $1,814 $1,814 $1,742

(US$OOO)
Transmission $69,767/km $69,767/km $74,203/km
Interconnection Cost
Operations & Maintenance 100,000 100,000 80,000
(US$/Unit/year)
Local Inflation Rate 4.0% 3.28% 3.28%
Base Local CPI 160.00 138.90 138.91
Interest Rate - Local Debt 10.0% 8.0% 8.0%
Interest Rate - Foreign Debt 8.0% 6.5% 6.5%
Equity IRR 16.44% 14.71% 14.71%
Pre-Tax WACC 11.2% 9.6% 9.6%
Base Peso to US$ Exchange Php47.81 :US$1 Php44.00:US$1 Php44.00:US$1

Rate
Forward Peso to US$ Php43.00:US$1 Php44.00:US$1 Php44.00:US$1
Exchange Rate
FIT (PhP/kWh) 8.5300 7.9300 7.4000
Applying all the modified assumptions, the Commission has

derived an updated WIND FIT2 of PhP7.4000/kWh:
NREB Difference
ERC WIND
Particulars PROPOSED Increase/
FIT2
WIND FIT2 (decrease)
Feed-In Tariff (PhP/kWh) 7.9300 7.4000 (0.5300)

Page 29 of 31
Treatment of Capacity in Excess of Installation Target
On 07 April 2015, the Department of Energy (DOE) issued a

Certification increasing the installation target f,or wind under the Feed-
In Tariff (FIT) System from 200 MW to 400 MW. In the said
Certification, the DOE likewise clarified the treatment of Capacity in
Excess of Installation Target stating that considering the technical
and commercial indivisibility of RE projects, the last entrant RE
project shall be considered eligible for FIT endorsement for its total
installed capacity if a portion of its capacity fills in the balance of the
corresponding installation target,38
Since the total 393.9 MW wind projects is still 6.1 MW short of

the 400 MW increased installation target, the Commission is
cognizant that because of the DOE's indivisibility rule, a wind project
of similar scale may complete the remaining 6.1 MW of the total
installation target, thereby allowing the entire capacity of such plant to
avail of the PhP7.4000 WIND FIT2.
Thus, mindful of the impact that the changes in the installation

targets of RE generation would have on the Feed-In Tariff Allowance
(FIT-All) that is collected from all on-grid connected consumers, the
Commission hereby limits the entitlement of WIND FIT2 to the
three (3) wind power projects, which have commenced
commercial operations as certified by the DOE, viz:
Commercial
Capacity
RE Developer RE Plant Operations
(MW)
Date
Trans-Asia San Lorenzo
Renewable Energy Wind Power 54 12/27/2014
Corporation Project
Petro Wind Energy, Nabas Wind
36 6/10/2015
Inc. Energy Project
Alternergy Wind One Pillilla Wind

54 6/9/2015
Corporation Power Project
Total 144.00
3800E Certification dated April 7, 2015

Page 30 of 31
As for the FIT that will apply to whoever will take up the remaining 6.1
MW of the total WIND installation target, the Commission shall fix the
same at a later time.
WHEREFORE, the foregoing premises considered, the

Commission hereby sets the WIND FIT2 at PhP7.4000/kWh.
SO ORDERED.
Pasig City, October 6, 2015.
L~'~'~_Af~
GLpRIA VICTORIAlf.'VAP-TARUC
Commissioner
JOSEFIN~ICIA A. MAGPALE-ASIRIT
commissli~t~TR
Copy Furnished:
1. Attys. Mary Ann Castro Diccion, Anna Tricia Paradero

Evangelista and Rozanne Birosel Dela Cruz
DICCION LAW FIRM
Counsel for National Renewable Energy Board (NREB)
Unit 1912 Jollibee Plaza Building
F. Ortigas Jr. Road, Ortigas Center, Pasig City
" ,

Page 31 of 31
2. Department of Energy (DOE)

DOE Building, Meritt Road, Fort Bonifacio, Taguig City
3. Wind Energy Developers Association ofthe Philippines

(WEDAP)
4. Visayan Electric Company (VECO)

Cebu City
5. Manila Electric Company (MERALCO)

yth Floor, Lopez Building, MERALCO Avenue, Ortigas Center,
Pasig City
6. Atty. Shirley G. Velasquez-Viray

Counsel for Petrowind Energy, Inc. (PWEI)
5th & 1ih Floors, VGP Center,
6772 Ayala Avenue, Makati City
7. Atty. Anna Tricia Paradero Evangelista

Counsel for Trans-Asia Renewable Energy Corporation
(TAREC)
Unit 1912 Jollibee Plaza Building, F. Ortigas Jr. Road,
Ortigas Center, Pasig City
8. Atty. Rozanne Birosel Dela Cruz

Counsel for NREB
Ortigas Center, Pasig City
9. Atty. Mailyn Pacifico Caspe
'1
Counsel for Alternergy Wind One Corporation (AWOC)
Ortigas Center, Pasig

Decision+ERC+Case+No +2015-002+RM

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IN THE MATTER OF THE

ERC CASE NO. 2015-002 RM

Before . the Commission for resolution is the .National

In Resolution No. 10, Series of 2012, entitled "A Resolution

Given the foregoing, on April 13, 2015, the Commission motu

In its letter dated April 15, 2015, the Commission directed

NREB, in a reply-letter dated May 5, 2015, submitted its

The following interested parties filed their respective comments

1. Petrowind Energy, Inc.'s (PWEI) "Matrix of Comments"

2. Alternergy Wind One Corporation's (AWOC) "Petition for

3. Trans-Asia Renewable Energy Corporation's (TAREC)

4. Visayan Electric Company's (VECO) "Comments to the

On June 3, 2015, NREB filed a "Notice of Compliance"

During the June 9, 2015 public hearing, NREB manifested that

In compliance therewith, in its letter dated June 10, 2015,

In its Order and Notice of Proposed Rule-Making both dated

In the same Order, the Commission directed all interested

1. VECO's "Comments" filed on July 21,2015; and

2. PWEI's "Matrix of Comments" filed on July 21,2015.

On July 24, 2015, NREB filed a "Notice of Compliance"

On July 23, 2015, NREB filed a "Motion to Withdraw Prior

Relative thereto, on July 27, 2015, the Commission issued an

At the continuation of the hearing on July 30, 2015, the

In the said hearing, NREB conducted an expository

At the termination of the expository presentation, NREB

MERALCO and VECO moved that they be furnished with

The Commission directed MERALCO and VECO to include in

On August 5, 2015, MERALCO filed its "Comment and Motion"

(15) days from receipt of NREB's estimated rate impact as a result of

On August 12, 2015, the Commission issued an Order directing

On August 17, 2015, NREB filed its "Reply [To MERALCO's

On August 19, 2015, TAREC and AWOC filed their respective

On August 27,2015, NREB filed its "Comment [To MERALCO's

On August 28, 2015, the Commission issued an Order denying

On even date, the Commission issued a separate Order

Relative thereto, on September 7, 2015, NREB filed a "Notice

On September 16, 2015, MERALCO filed a "Manifestation and

On even date, MERALCO filed a "Motion for Reconsideration

On September 21, 2015, MERALCO filed its "Comment and

On even date, MERALCO filed its "Comment (To NREB's

On October 5, 2015, the Commission issued an Order resolving

FEED-IN TARIFF (FIT) REVIEW AND RE-ADJUSTMENT

Section 7 of the Feed-In Tariff Rules (FIT Rules) provides that,

1. When the installation target per technology is achieved;

On July 27, 2012, the Commission approved a PhP8.5300/kWh

'ERG c.~ No.201 Hl06 RM.01."" "'0 Ih. M".,

On April 13, 2015, the Commission's examination of updated

Total Wind Power Plants Capacity 393.9

Upon determination that the installation target for the wind

NREB's Proposed Revised WIND FIT2 of PhP7.9300/kWh

On June 10, 2015, NREB submitted its proposed revised WIND

In calculating for the revised WIND FIT2, NREB submitted that

NREB likewise submitted that it has also considered the

a. The total capacity of wind power plants built and commissioned

b. The following projects which have obtained FIT Certificate of

i) EDC Burgos Project (150 MW);

c. The likely projects eligible under FIT2, as follows:

i) TAREC Guimaras Project (54 MW);

d. The assumed Equity IRR target of 14.71% in FIT2, which is a

e. The assumed EPC Cost for FIT2 eligible projects amounting to

NREB further submitted that all other input parameters

between the assumptions used in the determination of the ERC-

Gross Installed Capacity (MW) 30 30 No Change

______ J Ec_on_om_lc_ll_fe_~ Weighted average cost of capital, real