Initial Order, ERC Case No. 2016-056 RC
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&uLATOf(¥ c : Republic of the Philippines .•~'<) o"'"->\: : o ~> ENERGY REGULATORY COMMISSI w \4pproved for .~ San Miguel Avenue, Pasig City Posting www.erc.gav.ph -I IN THE MATTER OF THE APPLICATION FOR APPROVAL OF THE POWER PURCHASE AND SALE AGREEMENT (PPSA) BETWEEN LA UNION ELECTRIC COOPERATIVE, INC. (LUELCO) AND GNPOWER DINGININ LTD. CO. (GNPD), WITH MOTION FOR CONFIDENTIAL TREATMENT OF INFORMATION AND ISSUANCE OF PROVISIONAL AUTHORITY, ERC CASE NO. 2016-056 RC LA UNION ELECTRIC COOPERATIVE, INC. (LUELCO) AND GNPOWER DOCKETED DINGININ LTD. CO. Dat.: ~.~lLU.,.1D1l (GNPD), Hv: _._.~._._ ..._••__ Applicants. )(- - - - - - - - - - - - - - - - - - - - --)( ORDER On' 27 April 2016, La Union ElectFic Cooperative, Inc. (LUELCO) and GNPower Dinginin Ltd. CO. (GNPD) filed an application dated 11 April 2016, seeking the COlhmission's, approval of the Power Purchase and Supply Agreement (PPSA), between LUELCO and GNPD, with motion for confidential treatment of information and issuance of provisional authority. I In their applica'tion, LUELCOand GNPD alleged the following: I I 1. Applicant LUELCO is a non-stock, hon-profit electric cooperative duly organized and existing under Philippine laws, with principal office at Brgy. 8ta. Rita, East, Aringay, : ,. ERC Case No. 2016-056 RC ORDER/6 June 2017 Page 2 of 20 La Union. It is duly authorized to distribute electricity in the City of San Fernando and in all Municipalities of La Union, namely: AgOG,Aringay, Bacnotan, Bagulin, Balaoan, Bangar, Bauang, Burgos, Caba, Luna, Naguilian, Puga, Rosario, Sto. Tomas, Tubao, San Gabriel, San Juan, Santo1, and Sudipen, and the Municipality of Sison, in the Province of Pangasinan (collectively, the "Franchise Area"). A copy of its Certificate of Franchise is herein attached and forms an integral part hereof as Annex "A". A copy of its Articles of Incorporation and By-laws is also attached as Annexes ~~A-l"and "A-2", respectively and form integral parts hereof; 2, Meanwhile, Applicant GNPD is a duly registered limited partnership organized and existing under Philippine laws, and is engaged in the business of developing, constructing, operating and owning power generation facilities. Its principal office is at the 28th Floor, The Orient Square Building, Don Francisco Ortigas Jr. Road, Ortigas Center, Pasig City, A copy of its Certificate of Registration issued by the Securities and Exchange Commission (SEC) and Articles of Partnership is herewith attached and made integral parts hereof as Annexes "B" and "B-1", respectively; 3. Applicants may be served with orders, notices and other legal processes of this Honorable Commission through the respective addresses ofthe undersigned counsels; 4. By and pursuant to Sections 25, 43 (u) and 45 (b) of Republic Act No. 9136, otherwise known as the Electric Power Industry Reform Act of 2001 (EPIRA), and its Implementing Rules and Regulations, this Application is submitted to this Honorable Commission for its due consideration and approval of the Power Purchase and Sale Agreement (PPSA) executed by and between Applicants LUELCO and GNPD; I. STATEMENTOF FACTS 5, Based on its supply-demand forecast, LUELCO's peak demand in 2016 is 37.95 MW, with an annual average growth rate of 8%. Therefore, its peak demand is expected to increase to 51.80 MW in 2020; 6. In view of the increasing demand in its Franchise Area, LUELCO solicited proposals from potential suppliers for its future power requirements; I 7. LUELCO received GNPD's proposal, along with the proposals of other generators, to supply its future power requirements. LUELCO, being aware of I the competitive procurement process that GNPD undenYent through its Power Purchase and Sale Agreements with the eleven (n) Region 8 electric cooperatives, has emplbyed its internal comparison and validation of the generatioh offers of all the coal-fired power plants (both existing and future) through the ERC-approved power supply agreements;I .•.•....... I ERC Case No. 2016-056 RC ORDER /6 June 2017 Page 3 Of20 8. After careful evaluatiou of GNPD's offer, LUELCO found GNPD's rate to be competitive and consistent with its mandate to procure its power supply requirement on a least cost manner and on the terms most advantageous to LUELCO.Thereafter, the contract for a portion of the supply of LUELCO's power requirements was awarded to GNPD, as approved by LUELCO'sboard of directors; 9. Consequently, on 11 April 2016, LUELCO executed with GNPD the subject PPSA, a copy of which is herewith attached and forms an integral part hereof as Annex "C" ; 10. The PPSA provides for GNPD's supply of LUELCO's future power requirements equivalent to 5 MW commencing in 2020, with the option to start delivery earlier than the target commercial operations on an interim basis; 11. GNPD will deliver environmentally clean electric power from two (2) by 660 MW-net clean pulverized coal-fired electric power generation facility (hereinafter, the "Generation Facility"), which it will build, own and operate in Barangay Alasasin, Municipality of Mariveles, Province of Bataan (the "Project"). II. ABSTRACT OF THE PPSA AND OTHER RELATED INFORMATION 12. The following are the salient features of the PPSA:' a. TERM. The PPSA shall be in force for a period of two hundred forty (240) billing periods from the date to be specified in the Commencement Date Notice defined as the written notice that indicates the commencement of the first delivery of the Product after GNPD begins commercial operations in the market, which shall not be later than the first day of the Billing Period immediately after the lapse of thirty six (36) months from the ERC's final approval of the PPSA; b. SOURCE OF SUPPLY'. GNPD shall make available, sell, and deliver or cause to be delivered to LUELCO the Product at the Delivery Point, whether sourced from GNPD's Generation Facility or from other electricity generators, including the Wholesale, Electricity Spot Market (WESM). c. CONTRACTED CAPACITY.3 LUELCO is contractually entitled to receive from GNPD, at any hour, subject to GNPD's Available Capacity for such hour, the Contracted Capacity, as follows: 1 Capitalized terms used but not defined herein have the meaning as defined in the PPSA. :l Section 3.1, Article 3 Obligation and Deliveries, page 11 3 See Annex "C-l". ERC Case No. 2016-056 RC " ORDER /6 June 2017 Page40f20 5,000 ' .. 5,00" i 5,000 I 5,OOOJ ~~~~-~-~ 5,000 I' 5,000 5,000 ' ~~'- __~__ ~._5,OOOJ 5,000 • The Minimum Quantity is a function of the Contracted Capacity and the Minimum Capacity Factor, taking into account GNPD's availahility for a year multiplied by 8,760 hours (which is the number ofho,!rs in a year). C.1. Option to Increase Contracted Capacity. Section 3.7 of the PPSA provides that upon written notice to GNPD, LUELCO may, upon approval by GNPD, increase its Contracted Capacity which increase shall be subjected to the same terms and conditions contained in the PPSA. In considering whether or not to approve the request for increase in Contracted Capacity, GNPD may take into consideration the capacity available for such increase from its facility in its sole opinion. and/or the willingness of any other buyer to assign its Contracted Capacity. Such increase in Contracted Capacity shall be effective on the date GNPD gives its written approval. d. CONTRACT PRICE. The Contracted Capacity shall be paid the Contract Price, which is comprised of the Capacity Fee and Energy Fee, denominated in US Dollars, but may be paid in Philippine Peso (PhP). The calculation of the Contract Price for a particular Billing Period will be: ERC Case No. 2016-056 RC ORDER /6 June 2017 Page50f2o Contract Price = Capacity Fee + Energy Fee d.l The Capacity Fee is the component of the Contract Price allocated to pay for the cost, as well as, the operations and maintenance of the power plant and is designated as the Capacity Fee in Schedule 1 to the PPSA" as such may be adjusted from time to time based on GNPD's Capacity Factor. The corresponding Capacity Fee for a given Capacity Utilization Factor is set forth in the table below: Capacity Utilization Capacity Fee Factor (%) ($jkWh) 100% 0.0466 99% 0.0470 98% 0.0474 97% 0.0477 96% 0.0481 95% 0.0485 • 94% 0.0489 I 93% , 0.0493 • 92% 0.0497 91% 0,0501 90% 0.0506 89% 0.0510 88% 0.0515 87% 0.0519 • 86% • 0.0524 0.0529 85% • 84% 0.0534 83% 0.0539 82% 0.0544 81% 0.0550 80% 0.0555 79% 0.0561 78% 0.0566 77% 0.0572 76% 0.0578 75% 0.0585 74% 0.0592 73% 0.0599 72% 0.0606 71% I 0.0613 70% I 0.0621 I 69% I 0.0629 • 68% • 0.0637 67% . 0.0645 , .i I ERC Case No. 2016-056 RC ORDER /6 June 2017 Page 60f20 Capacity Utilization Capacity Fee Factor (%) I ($/kWh) 100% , 0,0466 99% 0,0470 98% 0,0474 97% 0,0477 96% 0,0481 95% 0,0485 94% 0,0489 93% 0,0493 92% 0,0497 91% 0,0501 90% 0,0506 89% 0,0510 88% 0,0515 87% 0,0519 86~ 0,0524 85% 0,0529 84% 0,0534 83% 0,0539 82% 0,0544 81% 0,0550 80% 0.0555 79% 0.0561 78% 0,0566 77% , 0,0572 76% I 0,0578 75% 1 0.0585 74% I 0.0592 73% I 0,0599 72% I 0,0606 71% I 0.0613 70% 1 0.0621 66% I 0.0653 65% 1 0,0662 In case the Capacity Utilization Factor is not a whole number, the Capacity Fee shall bel computed using the formula below, Capacity Fee = - 0.10773 X(CUF)3 + 0.33975 X(CUF)'- 0.3932 X (CUF) + 0.2078 .