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Ÿþd Ecision , ERCCASEN O . 2 0 "j' ~~GIj\..ATORyC;. , o...\.. ~t""i,,~ . Republic of the Philippin~s _[:1Approved for\ ENERGY R~GULATORY C<?M~ISSION PCf~ting San Miguel Avenue, Paslg City tWNI.(;rc.gO~.plJ c:,- IN THE MATTER OF THE APPLICATION FOR APPROVAL OF BUSINESS SEPARATION AND UNBUNDLING PLAN (BSUP) PURSUANT TO SECTION 36 OF REPUBLIC ACT 9136 AND RULE 10 OF ITS IMPLEMENTING RULES AND REGULATIONS ERC CASE NO. 2014-006 MC SOUTH GOTABATO II ELECTRIC 1: COOPERATIVE, INC. (SOCOTECO II ), Applicant. ,x- - - - - - - - - - - - - - - - - - - - - - - - -x DECISION jl. Before the Commissio.n for resolution is 'the application filed by South Cotabato II Electric Cooperative, Inc. (SOCOTECO II) on February 6, 2014 for approval of its Business Separation and Unbundling Plan (BSUP) pursuant to Section 36 of Republic Act 9136 and Rule 10 of its Implementing Rules and Regulations. In the said .application, SOCOTECO 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 offices at J. Catolico Ave., Lagao, General Santos City; . 2. It is the holder of an. exclusive franchise issued by the National Electrification Commission (NEC), to operate an electric . light and power distribution service in the Municipalities of Alabel, Malapatan, Glan, Malungon, ERC CASE NO. 2014-006 MC DECISION/December 1, 2014 J:,ag,~",~9.t"t~,_"""""""_"",,,,,,,_,,,,,,,,,,,,,,,,,,,,,,,,,,,_ """"""""""""''''''''''''''''''''''''_'''''''''''__'''''''''_''''''_"""""_",,""'''''''''''''''''''''''''''''''_,,'''''''''''''''''',,__ ,,__''''''_'''''''_,,'''',''''"""""""""""_"" Maasim, Kiamba, Maitum, Polomolok, Tupi for the Provinces of Sarangani and South Cotabato and the chartered City of General Santos; 3. Section 36 of Republic Act No. 9136 otherwise known as the Electric Power Industry Reform Act of 2001 or "EPIRA", provides in part that II Any electric power industry participant shall functionally and structurally unbundle its business activities and rates in accordance with the sectors as identified in Section 5 hereof. The ERG shall ensure full compliance with this provision"; 4. Pursuant to the said mandate of the EPIRA as well as Rule 10 of its Implementing Rules and Regulations (IRR), the Commission promulgated Resolution No. 49, Series of 2006 otherwise known as "Business Separation Guidelines, as Amended' as well as Resolution No. 07, Series of 2012 ,Adopting the Accounting and Cost Allocation Manual (ACAM) for Electric Cooperatives; 5. Pursuant to and in compliance with the requirements of the foregoing law, rules and resolutions, SOCOTECO II is submitting herewith for the Commission's evaluation and approval, its proposed BUSINESS SEPARATION AND UNBUNDLING PLAN (BSUP) for the business separation and structural and functional unbundling of its business activities, with the end in view of separating its distribution activities into appropriate business segments and to have a clear separation of operations and accounts between its regulated and non-regulated activities; 6. It is likewise submitting herewith as annex to the BSUP an Accounting Separation Statements prepared in accordance with the Accounting and Cost Allocation Manual (ACAM) for Electric Cooperatives, based on its Audited Financial Statements for the Year 2011; 7. In addition to the BSUP, it is likewise submitting herewith for the Commission's consideration and approval, a set of Confidentiality Policies and Guidance to be observed by concerned personnel, together with a Board Resolution adopting certain sets of obligations imposed upon Distribution Utilities (DUs), among others, as provided under Article V of the Business Separation Guidelines (BSG), as amended, and made integral parts hereof as annexes; and ERC CASE NO. 2014-006 MC DECISION/December 1, 2014 ..P~.g5?.1Q.fJ..~ _ _ __ _ " _ _ _ ..,.__.._.__ __.____ .._ ___.___ 8. Finally, it prays that after due notice and hearing, its proposed BSUP be approved by the Commission. Having found said application to be sufficient in form and in substance, with the required fees having been paid, an Order and a Notice of Public Hearing, both dated March 17, 2014, were issued setting the case for initial hearing on April 7, 2014. In the same Order, SOCOTECO II was directed to cause the publication of the Notice of Public Hearing, at its own expense, once (1x) in a newspaper of general circulation in the Philippines, with the date of the publication to be made not later than ten (10) days before the date of the scheduled initial hearing. The Office of the Solicitor General (OSG), the Commission on Audit (COA), and the Committees on Energy of both Houses of Congress were furnished with copies of the Order and Notice of Public Hearing and were requested to have their respective duly authorized representatives present at the initial hearing. Likewise, the Offices of the Governors of the Province of South Cotabato and the Province of Sarangani and the Mayors of the City/Municipalities within SOCOTECO II's franchise area were furnished with copies of the Order and Notice of Public Hearing for the appropriate posting thereof on their respective bulletin boards. On April 4, 2014, SOCOTECO II filed its "Pre-Trial Brief'. During the April 7, 2014 initial hearing, SOCOTECO II appeared. No intervenor/oppositor appeared nor was there any intervention/opposition registered. At the said hearing, SOCOTECO II presented proofs of its compliance with the Commission's posting and publication of notice requirements which were duly marked as Exhibits "B" to "E", inclusive. Thereafter, it conducted an expository presentation of its application. ERC CASE NO. 2014-006 MC DECISION/December 1, 2014 ..E..9...g.~4.9.f.j ..~ _ ,._.. _. __ ___ _ . SOCOTECO II presented Mr. Nicanor J. Gumayagay, Manager of its Finance Services Department, who testified in support of the instant application. In the course thereof, additional documents were presented and marked as exhibits. The direct examination having been terminated, the Commission propounded c1arificatory questions on the said witness. SOCOTECO II, then, was directed to submit additional requirements together with its formal offer of evidence within fifteen (15) days from the said date of hearing. On April 23, 2014, SOCOTECO II filed its "Formal Offer of Evidence". On May 7, 2014, SOCOTECO II filed its "Compliance with Directives" . On December 1, 2014, the Commission issued an Order admitting the "Formal Offer of Evidence" filed by SOCOTECO II for being relevant and material in the evaluation of this case. DISCUSSION SOCOTECO II's BSUP consists of six (6) sections as prescribed in the BSUP Filing Package, as follows: 1) Details of Current Structure SOCOTECO II submitted its profile, the diagrammatic representation of its existing corporate structure, the description of the activities and functions undertaken by each of the different department or juridical entities, as well as the description of the current process enumerated as follows: 1.1 Application for New Service - Residential; 1.2 Application for New Service - Non-Residential; 1.3 Meter Reading and Billing Process; 1.4 Collection Process; 1.5 Disconnection Process; 1.6 Reconnection Process; , ' , ' ERC CASE NO. 2014-006 MC DECISION/December 1, 2014 e?g~~_c.>..L1...s __ _ .._ _ " _ _ _..".._"_ _ _ _ _ _ ..__ _ _ . 1.7 Customer Assistance - Inquiries, Complaints, Concerns; 1.8 Procurement Process (Both for CAPEX and Non- CAPEX) - Below 1 Million Pesos; and 1.9 Procurement Process (Both for CAPEX and Non- CAPEX) - Above 1 Million Pesos. 2) Details of Business Segments In compliance with the BSUP Filing Package, SOCOTECO II had adequately complied with this requirement and provided the details of its business segments including the allocation of costs for each segment, as follows: 2.1 Business Segments Its business segments are classified and defined according to the BSG, as amended. These are grouped into seven (7) business segments, namely: a) Distribution Services (OS), b) Distribution Connection Services (DCS), c) Regulated Retail Services (RRS), d) Last Resort Supply Services (LRSS), e) Wholesale Aggregation Services (WA), f) Non-Regulated Retail Services (NRRS), and g) Related Business Services (RB). a. Distribution Services (OS) - which consist in the conveyance of electricity through the distribution system and the control and monitoring of electricity. The provision for Ancillary Services; Planning, maintenance, augmentation and operation of the Distribution System; Provision, installation, commission, testing, repair, maintenance and reading of Wholesale Electricity Spot Market (WESM) related meters; the Billing, collection and the provision of customer services directly related to the delivery of electricity. " ERC CASE NO. 2014-006 MC DECISION/December 1, 2014 ..E.~.g~.~_9.t.1.~_ _. .._~ _ __ ____ _____ _.._. _ b. Distribution Connection Services (DCS) - provide for the capability at each Connection Point to a Distribution System for conveyance of electricity from the facilities of persons which are directly connected to the Distribution System; Planning, installation, maintenance, augmentation, testing and operation of Distribution Connection Assets; and the provision of other services in support of any of the above services. c. Regulated Retail Services (RRS) - refer to the sale of electricity to end-users who are included in the Captive Market; the billing and collection and the provision of customer services to end-users; Energy trading, including the purchase of electricity
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