- G'J'-ATORy c. ..l..~'(;.. O~ ,cP ~ Iff A~prot':jfJf % Republic of the ~ r~\~'~:,~lz ENERGY REGULATORY COMMISSIO~ .. 7&l'~ San Miguel Avenue, City ~

IN THE MATTER OF THE APPLICATION FOR APPROVAL OF ADJUSTMENT IN RATES PURSUANT TO THE TARIFF GLIDE PATH (TGP) RULES, WITH PRAYER FOR PROVISIONAL AUTHORITY

ERC CASE NO. 2013-119 RC

ILOilO II ELECTRIC COOPERATIVE, INC. (llECO II), Applicant. )(------_. ------)(

ORDER

On June 4, 2013, II Electric Cooperative, Incorporated (ILECO II) filed an application for approval of adjustment in rates pursuant to the Tariff Glide Path (TGP) Rules, with prayer for provisional authority.

In the said application, ILECO II alleged, among others, that:

1. It is an electric cooperative duly organized and existing under and by virtue of the laws of the Republic of the Philippines, with principal office at Cauayan, , Iloilo;

2. It is the holder of an exclusive franchise issued by the National Electrification Commission (NEC) to operate electric light and power distribution services in the City of Passi and the Municipalities of Pototan, Mina, Dingle, Duenas, San Enrique, , , , , , , , and , all in the Province of Iloilo;

3. Sometime in 2009, it filed with the Commission an application for approval of its proposed adjustment in its. ERC Case No. 2013-119 RC ORDER/October 7, 2013 Page 2 of 10

rates pursuant to the Rules for Setting the Electric Cooperatives' Wheeling Rates (RSEC-WR);

4. In the said application, the Commission granted it provisional authority to implement the following initial tariffs on its Distribution, Supply and Metering (DSM) Charges, among others, to wit:

Particulars Units

PhP/kW 219.6800 PhP/kWh 0.5782 0.7595

PhP/Customer/Mo. 42.9200 42.9200 PhP/kWh 0.6001

PhPIMeter/Mo. 5.0000 35.9400 35.9400 PhP/kWh 0.4326

5. On May 2, 2011, the Commission promulgated the TGP Rules pursuant to Article VII of the RSEC-WR whereby during the Regulatory Period, the rate of the electric cooperatives (ECs) per group shall be adjusted using the following formula:

Tariff x {1+lndex "I" - Efficiency Factor "X" + Performance Incentive "5'1

The Index, "l" shall be an escalation factor to be used in adjusting the rates to reflect the combined impact of inflation and the load growth. There shall be an efficiency factor "X" to account for the operational efficiency of the electric cooperatives in setting their rates. There shall be a performance incentive liS" which shall reward or penalize the electric cooperatives for the above or below standard performance, respectively.

The TGP is intended as a cap and the EC may move up to the cap, if it is a positive adjustment. If the cap is lower than the current average tariff, a reduction may be implemented. ERC Case No. 2013-119 RC ORDER/October 7, 2013 Page 3 of 10

6. The TGP is a rate adjustment mechanism which provides an opportunity for the ECs to adjust their rates once every three (3) years. The rate adjustments may occur at the start of the Fourth Year of the First Regulatory Period and every three (3) years thereafter;

7. Under the TGP, the Regulatory Period is six (6) years for each Entry Group. For the First Entrant Group, the First Regulatory Period is from January 1, 2011 to December 31,2016. It belongs to the First Entrant Group;

8. Further, under the TGP Rules, the concerned EC shall use the following formula in determining the TGP for the First to Third Years of the Regulatory Period:

TGPA = TGPn + TGPn+1 TGPn+2

Where:

N = the First Year of the Regulatory Period and succeeding Regulatory Periods

Except that for the first two (2) years of the First Regulatory Period, "X" will be equal to zero (0) and thereafter shall not be less than zero (0). The TGP calculated for each of the three (3) years will be summed to determine the possible rate adjustment the starting on the Fourth Year of the current Regulatory Period.

9. Applying the methodology embodied in the TGP Rules, it calculated the values of the "I", "X" and "S" and came up with the following results:

TGPA Particulars "I" "S" TGPA "X" (Excluding "S") Year 2010 0.00% 0.00% 1.10% 1.10% 0.00% Year 2011 0.00% 0.00% 1.50% 1.50%) 0.00% Year 2012 0.40% 2.47% 1.50% -0.97% -2.47% Net Results 1.63% -2.47%

1O. Applying the above values resulted in adjustments on its DSM Rates, as follows: ERC Case No. 2013-119 RC ORDER/October 7,2013 Page 4 of 10

10.1 With Performance Incentive "S"

Particulars Units

PhP/kW 223.2522 PhP/kWh 0.5876 0.7719

PhP/Customer/Mo. 43.6179 43.6179 PhP/kWh 0.6099

PhP/Meter/Mo. 5.0813 36.5244 36.5244 PhP/kWh 0.4396

10.2 Excluding Performance Incentive "S"

Customer Type Particulars Units R .d f I Low Higher eSI en la Volta e Volta e

PhP/kW 214.2453 PhP/kWh 0.5639 0.7407

PhP/Customer/Mo. 41.8582 41.8582 PhP/kWh 0.5853

PhP/Meter/Mo. 4.8763 35.0509 35.0509 PhP/kWh 0.4219

11. Consequently, it prays that it be allowed to implement either of the above two (2) alternative calculated DSM rates, either provisionally during the pendency of the instant application or permanently by virtue of a final Decision, starting January 2014 and up to the next Regulatory Reset;

12. In support of the foregoing computations, the following documents are attached to the application and made integral parts thereof: ERC Case No. 2013-119 RC ORDER/October 7, 2013 Page 5 of 10

Annex Nature of Document Proposed TGP calculations and supporting documents using the prescribed templates: A to A-2 Index "I" Calculation Efficiency Factor "X" Calculation Performance Incentive "S" Calculation B MFSR Sections Band E Billing Determinants Template C kWh Sales, Number of Customers, kW Demand D Sam Ie Bills er customer t e E Re ional CPI F RFSC/Reinvestment Fund Utilization G Consumer Com laints H Audited Financial Statements

13. Finally, in compliance with the pre-filing requirements for the instant application, the following documents are, likewise, attached to the application and made integral parts thereof:

Annex Nature of Document I Affidavit in su ort of the ra er for rovisional authorit Proof of furnishing copies of the application to the J to J-1 of Pototan and the Sangguniang Panla/awi an of Iloilo Publication of the application in a newspaper of general K to K-2 circulation in its franchise area or where it principally o erates with Affidavit of Publication

Prayer

14. Thus, it prays that pending evaluation of the instant application or after due notice and hearing, as the case may be, it be allowed to implement either of the following two (2) alternative proposed new rates for its DSM Charges, starting January 2014 and up to December 2016: ERC Case No. 2013-119 RC ORDER/October 7, 2013 Page 6 of 10

14.1 With Performance Incentive "S"

Customer Type Particulars Units R "d f I Low Higher eSI en la Volta e Volta e

PhP/kW 223.2522 PhP/kWh 0.5876 0.7719

PhP/Customer/Mo. 43.6179 43.6179 PhP/kWh 0.6099

PhPIMeter/Mo. 5.0813 36.5244 36.5244 PhP/kWh 0.4396

14.2 Excluding Performance Incentive "S"

Particulars Units

PhP/kW 214.2453 PhP/kWh 0.5639 0.7407

PhP/Customer/Mo. 41.8582 41.8582 PhP/kWh 0.5853

PhP/Meter/Mo. 4.8763 35.0509 35.0509 PhP/kWh 0.4219

Finding the said application to be sufficient in form and in substance with the required fees having been paid, the same is hereby set for initial hearing, expository presentation, pre-trial conference and evidentiary hearing on November 19, 2013 (Tuesday) at ten o'clock in the morning (10:00 A.M.) at ILECO II's Main Office, Barangay Cauayan, Pototan, Iloilo.

ILECO II is hereby directed to cause the publication of the attached Notice of Public Hearing, at its own expense, twice (2x) for two (2) successive weeks in two (2) newspapers of general circulation in the Philippines, with the date of the last publication to be made not later than ten (10) days before the date of the scheduled initial hearing. It is also directed to inform the member-consumers within its franchise area, by any other means available and ERC Case No. 2013-119 RC ORDER/October 7, 2013 Page 7 of 10 appropriate, of the filing of the instant application, its reasons therefor, and of the scheduled hearings thereon.

Let copies of the application, this Order and the attached Notice of Public Hearing be furnished the Office of the Solicitor General (OSG), the Commission on Audit (COA), and the Committees on Energy of both Houses of Congress. They are hereby requested, if they so desire, to send their duly authorized representatives at the scheduled hearings.

Likewise, let copies of this Order and the attached Notice of Public Hearing be furnished the Offices of the of the City and Municipalities within the franchise area of ILECO II and the Provincial Governor of Iloilo for the appropriate posting thereof on their respective bulletin boards.

ILECO II is hereby directed to furnish all those making requests therefor with copies of the application and its attachments, subject to reimbursement of reasonable photocopying costs.

On the date of the initial hearing, ILECO II must submit to the Commission its written Compliance with the jurisdictional requirements attaching therewith, methodically arranged and duly marked, the evidences on the actual posting and publication of the Notice of Public Hearing consisting of certifications issued to that effect, signed by the aforementioned Mayors and Governor or their duly authorized representatives, bearing the seals of their offices, and the affidavits of the Editors or Business Managers of the newspapers where the said Notice of Public Hearing were published together with the complete issues of the said newspapers, and such other proofs of compliance with the requirements of the Commission.

ILECO II and all other interested parties are directed to submit, at least five (5) days before the date of the initial hearing and pre-trial conference, their respective Pre-trial Briefs containing, among others:

a. a summary of admitted facts and proposed stipulation of facts;

b. the issues to be tried or resolved;

c. the documents or exhibits to be presented, stating the purposes thereof and proposed markings therefore; and ERC Case No. 2013-119 RC ORDER/October 7, 2013 Page 8 of 10

d. the number and names of the witnesses, with their written testimonies in an individual affidavit form, to be attached to the Pre-trial Brief.

Failure of ILECO II to submit the required Pre-Trial Brief and Judicial Affidavits of its witnesses within the prescribed period shall be a ground for cancellation of the scheduled hearings, and the resetting of which shall be six (6) months from said date of cancellation.

As part of the pre-trial conference, ILECO II must also be prepared to make an expository presentation of its application, aided by whatever communication medium that it may deem appropriate for the purpose, in order to put in plain words and explain, for the benefit of the member-consumers and other concerned parties, what the application is all about and the reasons and justifications being cited in support of the rate adjustments prayed for.

SO ORDERED.

Pasig City, October 7,2013.

FOR AND BY AUTHORITY OF THE COMMISSION:

d4 c1(~ ENAIDA G. CRUZ-DUCUT ~ Chairperson ~ ERC Case No. 2013-119 RC ORDER/October 7, 2013 Page 9 of 10

Copy Furnished:

1. Lerios-Amboy and Delos Reyes Law Office Attn: Atty. Ditas A. Lerios-Amboy Counsel for ILECO /I Units 1609-1610 Tycoon Centre, Pearl Drive, Ortigas Center, Pasig City

2. Iloilo II Electric Cooperative, Incorporated (ILECO II) Barangay Cauayan, Pototan, Iloilo

3. Office of the Solicitor General 134 Amorsolo Street, Legaspi Village Makati City, Metro Manila

4. Commission on Audit Commonwealth Avenue Quezon City, Metro Manila

5. Senate Committee on Energy GSIS Bldg. Roxas Blvd., Pasay City, Metro Manila

6. House Committee on Energy Batasan Hills, Quezon City, Metro Manila

7. Office of the City Passi City, Iloilo

8. Office of the Municipal Mayor Badingan, Iloilo

9. Office of the Municipal Mayor Barotac Nuevo, Iloilo

10. Office of the Municipal Mayor Bingawan, Iloilo

11. Office of the Municipal Mayor Calinog, Iloilo

12. Office of the Municipal Mayor Dingle, Iloilo

13. Office of the Municipal Mayor Duenas, Iloilo ERC Case No. 2013-119 RC ORDER/October 7, 2013 Page 10 of 10

14. Office of the Municipal Mayor Dumangas, Iloilo

15. Office of the Municipal Mayor Janiuay, Iloilo

16. Office of the Municipal Mayor Lambunao, Iloilo

17. Office of the Municipal Mayor Mina, Iloilo

18. Office of the Municipal Mayor New Lucena, Iloilo

19. Office of the Municipal Mayor Pototan, Iloilo

20. Office of the Municipal Mayor San Enrique, Iloilo

21. Office of the Municipal Mayor Zarraga, Iloilo

22. Office of the Governor Province of Iloilo

23. Philippine Rural Electric Cooperatives Association, Incorporated (PHILRECA) 4th Floor, Casman Bldg., 372 Quezon Ave., Quezon City

24. Philippine Chamber of Commerce and Industry (PCCI) 3rd Floor, ECC Building, Sen. Gil Puyat Ave., Makati City