Republic ofthe Philippines .} ENERGY REGULATORY 'P[},jLi!'!~ San Miguel Avenue, Paslg Clt 't.gO'i~'
On October 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 support of their prayer for the issuance of a provisional authority, LEYECO IV and FDCUI alleged the following:
The Certificate of Closing and Effectivity for the turnover of the output of the Unified Lf;:yte Geothermal Power Plant is scheduled to be issued on December FDCUI commences obligation on oo:ooH of December the effectivity date of the IPPA Administration Agreement dated October A provisio~ (1) The Commission has undertaken the initial review of the Application for the purpose of determining whether a provisional authority should be issued thereon. Relative thereto, the Commission has made the following findings:
LEYECO IV is a non-stock, non-profit electric cooperative created pursuant to the provisions of the National Electrification Administration Act (R.A. No. 6038), as amended by Presidential Decree No. 269 (PD No. 269). Pursuant to this Decree, LEYECOIV was incorporated and registered with the National Electrification Administration (NEA) on 07 November 1977.Its principal office is at Lamak, Hilongos, Leyte. LEYECOIV serves the power requirements of the Municipalities of Inopacan, Baybay, Matalom, Hilongos, Hindang, and Bato, all in the province of Leyte.
FDCUI is a corporation duly organized and existing under Philippine laws, with principal office address at the 23rd Floor, PBCom Tower, 6795 Ayala Avenue corner V.A. Rufino St., Makati City. It was formerly known and registered under the names Green Renewable Power Holdings, Incorporated and Strong Field Energy Corporation. It is a wholly-owned subsidiary of Filinvest Development Corporation.
Geothermal Power Plants
40MWStrips
The unutilized Contracted Capacity of the Buyer may be made available for utilization of other Region 8 ECs or sold to WESM in accordance with the WESM Rules and WESM, Scheduling and Dispatch Protocol of this PSA.
In order to maXImIze capacity utilization, the Buyer may, from time to time, reallocate other load nodes, their Contracted capacit%
+ * ~( CAPSched * Hn)
Where:
Fixed Monthly Fixed Monthly payment for Charge contracted capacity in PhP. E-VAT of shall be applied to this Fixed Monthly Charge
FMFcy Fixed monthly fee at a given Contract Year (CY) in PhP/kWh
CAPSched Contracted Capacity except during interruption or curtailment
Specific hour during the billing period
Contract Year Ener Fee (EFcy) PhPS.3433 kWh PhPS-4983 kWh
EFcy * ~(CAPSched * Hn)
Where:
Energy Charge Monthly Payment for actual Energy delivered by the Seller to Buyer in PhP. Zero E-VAT shall be applied to this Energy Charge
EFcy Energy fee at a given Contract Year (CY)in PhP/kWh, to wit
CAPSched Contracted Capacity except during interruption or curtailment
Specific hour during the billing periOd In 2014, FDCUI conducted a series of road shows to market the capacities of ULGPP, located in Tongonan, Leyte, for bilateral agreements in Visayas. During which, FDCUI declared that it can make available to interested distribution utilities the 40MW strips of energy of the power plant.
On 24 September 2014, Region 8 Electric Cooperatives (R8 ECs) have undertaken a Competitive Selection Process (CSP), inviting power suppliers to participate in the Joint Competitive Power Supply Procurement (JCPSP) process for the short-term supply of power of the eleven (11)Region 8 member-ECs for the Contract Years 2015 to 2018.
On 14 November 2014, R8 ECs awarded the power supply agreements to FDCUI, which was determined to have had the Lowest Calculated Responsive Bid.
Considering the urgency in addressing the deficiency of supply, which will be further aggravated by a projected increase in the energy requirements of R8 ECs' customers, R8 ECs commenced negotiations with FDCUI for the execution ofthe PSA.
Thus, on 20 December 2014, R8 ECs signed and executed the PSA with FDCUI for the purchase and supply under the terms and conditions provided therein. With the Visayas power deficit not being expected to significantly improve in the near future and considering the limited supply options available, R8 ECs entered into the PSAto ensure security and reliability of its supply and to avoid power interruptions which will needlessly result in unrecoverable losses to customers in the franchise area.
To supply under the Electric Power Purchase Agreement (EPPA), FDCUI shall manage and control the awarded "Strips of Energy" or the actual quantity of energy generated and associated with the 40MW capacity ofthe Unified Leyte Geothermal Power Plant (ULGPP) located in Tongonan, Ormoc City, Leyt/j The Department of Environmental and Natural Resources (DENR) granted the Environmental Compliance Certificate (ECC) to the PNOC Energy Development Corporation's (PNOC-EDC) power plant on 20 May 1993.
On 10 June 2013, the Commission issued a Certificate of Compliance with Reference Number 13-06-GXT 6-0006 to the said power plant.
On 29 January 2014, PSALM issued its Notice of Award to FDCUI as Independent Power Producer Administrator (IPPA) for 40MWworth of strips OfEnergy ofthe ULGPP.
.The IPPA Agreement shall commence upon issuance of PSALM'sCertificate of Effectivity and take effect until 25 July 2021.
FDCUI IPPA
ULGPP is owned by NPC/PSALM and was built and operated by the IPP Energy Development Corporation (EDC) under a Power Purchase Agreement (PPA).
Pursuant to Republic Act No. 9136 or the Electric Power Industry Reform Act of 2001 (EPIRA), PSALM is mandated to take possession and title over the NPC IPP Contracts and to appoint, after public bidding in a transparent and open manner, qualified independent entities that shall act as IPPAs.
These IPPAs refer to qualified independent entities appointed by PSALM to administer, conserve, and manage the contracted energy output of the NPC IPP Contracts, including the sale of the contracted energy output of the said contracts and the offer of Ancillary Service, where applicable.
Sometime in 2013, PSALMbid out strips ofthe energy output of ULGPP. It issued invitations to bid for the selection and appointment of IPP-Administrators (IPPAs) which shall manage and control the auctioned strips, with each strip co~resp~~ing to the equivalent and ."ociated en"'gy of of On 7 November 2013, PSALM conducted the opening of bids for the Selection and Appointment of an IPPA for the output of the ULGPP.
On 29 January 2014, the strips of energy were awarded to six (6) IPPAs, including FDCUI, which was awarded strips of energy associated with 40MW of the capacity ofULGPP. Accordingly, FDCUI executed an IPPA agreement with PSALM containing, among others, the bid price of PhP4.6629/kWh and the rights and obligation of the IPPA as follows:
a. Rights to the Strips of Energy and its related revenues;
b. When applicable, the rights and obligation under TSCs, as identified in the agreement, to be allocated by PSALM at its sole discretion;
c. The rights to enter into bilateral contracts; and
d. Such other rights which are reasonably necessary for or incidental to the Administrator's performance of its obligations within PSALM's authority to grant.
a. The IPPA shall pay to PSALM all sums due under the IPP A agreement;
b. Comply with the terms of the Trading and Settlement Protocol;
c. When applicable, assume PSALM's obligations, including compliance with ERC resolution on mandatory rate reduction, under allocated TSCs and comply with the terms of such allocation;
Maintain the Performance Bond in full force and effect with a Qualified Bank;
Pay to WESM through the Administrator for the Bulk applicable market fees, line rentals, congestion cost, wheeling rates, charges, and other fees; and
f. In view of the right to enter into bilateral contracts and its payment obligation to PSALM, FDCUI entered into a PSA with LEYECO IV.
Under the said PSA, FDCUI shall deliver the energy (produced from the 40 MW strips it acquired from PSALM) to LEYECO IV and the latter shall pay the Total Energy Fee, broken down as follows:
The proposed charges for calendar year 2015 are discounted rates from FDCUI. FDCUI alleged that they offered a lower rate as a result of the competition in the market and FDCUI had to be competitive against other suppliers in order to win customers. Based on the above table, the prices per kWh for CY2016 were escalated by 2.9% compared to those in CY 2015.
The proposed Energy Fee of PhP5.3433 is composed of the Generation Payment, adjustment based on index, and Margin, broken down as follows:
(PhP Kwh) Generation Pa ent Rate (PhP kWh) 4.9 54 %
Given the unique characteristic of the IPP A structure, the Commission believes that the methodology it typically uses is not applicable since the IPPAs are not required to pay for the plant acquisition cost upfront, but are required to pay the bid price through monthly payments out of cash flow.
The generation payment is a pass-through cost on the part of FDCUI. As indicated in the IPPA Agreement issued by PSALM dated 29 January 2014, the Generation Payment of FDCUI to PSALM is at ERC Case No. RC
Salaries and Benefits 32,912,606.99 Travel Expense Per diem - 12,219,575.67 Local Office supplies 498,831.38 Office and Vehicle Rental 15,908,908.13 Training and Education 2,604,993.51 Other Outside Services 2,594,74.:1.22 S onsorshi and Advertisin Utilities Ex ense Taxes, License Fees Miscellaneous Ex ense Business Tax Performance Bond Market Fees Trading Ex ense Representation/Entertainment
The reasonableness of the total Fixed Charge (O&M Fee) may be best established and validated by referring to the historical cost of operations as Administrator. However, the same is inapplicable in the instant case since the IPPA Agreement has not yet commenced. In the absence of such historical information, the Commission benchmarked the computed Fixed Charge (O&MFee) on the recently approved charges for geothermal power plants.
Moreover, the Commission deems it necessary for the Fixed Charge (O&M Fee) to be energy based (PhPjkWh) since under the IPPA Agreement, the Contract Energy to be provided has no minimum energy off-take (MEOT) or guaranteed supply. That is, the IPPA Agreement is on a take and pay basis wherein FDCUI shall supply to LEYECOIVI whatever power is generated and delivered by theULGPP.
The Commission believes that some items in the proposed Fixed Charge (O&M Fee) require further justification. Hence, the Commission deems it prudent to adopt the provisionally approved O&MFee in ERC Case No. 2014-156 RC.2
The Commission further benchmarked the proposed rates with its recently approved PSAs involving geothermal power plants and found the same to be comparable or within the level approved by the Commission of the said power plants. In this regard, the Commission deems it prudent to adopt the provisionally approved Administration Cost of AESI amounting to PhPO.2137jkWh as the applicable Fixed Charge (O&M Fee). This will be subject to re-evaluation in the final determination.
In the Matter the Applicationfor Approval the Energy Supply Agreement (ESA) Between Visayan Electric Company, Incorporated (VECO) and Aboitiz Energy Solutions, Incorporated lAESV. WI" ""wl;;,m"' AES' ERC Case No. RC
Page
The Commission has a mandate to protect the interest of the electricity consumers insofar as they are affected by the rates, by ensuring that the tariffs imposed are consistent with the principle of full recovery of prudent and reasonable costs.
The initial evaluation of the instant application disclosed that the PSA entered into by and between LEYECOIV and FDCUI will redound to the benefit of LEYECOIV's member-consumers in terms of reliable, continuous, and efficient supply of power within its franchise area at reasonable costs as mandated by Section (b), Chapter of Republic Act No. otherwise known as the Electric Power Industry Reform Act of (EPIRA), to wit:
Section Declaration of Policy -
(b) to ensure the quality, reliability, security and affordability of the supply of electric power;
WHEREFORE, the foregoing premises considered, the Commission hereby PROVISIONALLY APPROVES the Power Supply Agreement (PSA) between Leyte IV Electric Cooperative, Incorporated (LEYECOIV) and FDC Utilities, Incorporated (FDCUI), subject to the following conditions:
The applicable generation rate shall be as follows:
The Energy Charge shall be subject to adjustments based on the formula provided in the IPPA Agreement;
3. The Fixed Cost shall only be on the actual metered quantity (MQ) delivered to LEYECOIVfrom the strips based on PSALM billing multiplied by the approved rates above;
4. The final generation cost that can be recovered shall be determined by ~he9mmission in its Decision in the instant Application; and/ ERC Case No. RC
5. In the event that the final rate is higher than that provisionally granted, the resulting additional charges shall be collected by FDCUI from LEYECOIV. On the other hand, should the final rate be lower than that provisionally granted, the amount corresponding to the reduction shall be refunded by FDCUI to LEYECOIV.
Pasig City, 8 January
•• •• _ .~ •• _ ~ ~ OjJiceo!theChairman
JOSE
ALF
RC - LEYECO IV-FDCUI ERC Case No. RC
Copy Furnished:
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Counselfor Renagmec Member 240 Jp Rizal, Marikina City
2. Lamak, Hilongos, Leyte
3.
sT Floor Robinsons Equitable Tower 4 ADB Avenue cor Poveda Street Ortigas Center, Pasig City
4. 30THFloor PBCOM Tower, 6795 Ayala Ave. Cor. V.A. Rufino St., Makati City
5. the Amorsolo Street, Legaspi Village, City of Makati
Commonwealth Avenue, Quezon City
GSIS Building, Roxas Boulevard, Pasay City 1300
Batasan Hills, Quezon City
9. the Inopacan, Leyte
of the Baybay, Leyte
of the Matalom, Leyte
of the Hilongos, Leyte
of the Hindang, Leyte
14. of the Bato, Leyte / 15. Province of Leyte
16. 3rd Floor, Chamber and Industry Plaza (CIP), Campus Avenue corner Park Avenue, McKinley Town Center, Fort Bonifacio, Taguig City