Republic of the ENERGY REGULATORY COMMISSION San Miguel Avenue, Pasig City

IN THE MATTER OF THE APPLICATION FOR CONFIRMATION AND APPROVAL OF EMERGENCY CAPITAL EXPENDITURE PROJECT, NAMELY: PURCHASE AND INSTALLATION OF NEW 10MVA POWER TRANSFORMER FOR SUBSTATION

ERC CASE NO. 2020-010 RC

DAVAO ORIENTAL Promulgated: ELECTRIC COOPERATIVE, August 24, 2020 INC. (DORECO), Applicant. x ------x

O R D E R

On 10 March 2020, Oriental Electric Cooperative, Inc. (DORECO) filed an Application dated 27 January 2020 seeking the Commission’s approval of its emergency Capital Expenditure (CAPEX) project for the purchase and installation of a new 10MVA transformer for Baganga Substation.

The pertinent provisions of the said Application are hereunder quoted as follows:

1. DORECO is a non-stock, non-profit electric cooperative, duly organized and existing under and by virtue of the laws of the Republic of the Philippines, with principal office at Madang National Highway, Central, City of Mati, ;

2. It holds an exclusive franchise issued by the National Electrification Commission, to operate an electric light and power distribution service in Mati City and certain municipalities of the province of Davao Oriental, namely:

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San Isidro, , , Banay-Banay, Tarragona, Manay, Caraga, Baganga, and Boston.

LEGAL BASES FOR THE APPLICATION

3. Pursuant to Republic Act No. 9136, ERC Resolution 26, Series of 2009 and other laws and rules, and in line with its mandate to provide safe, quality, efficient and reliable electric service to its consumers, DORECO submits the instant application for the Honorable Commission’s confirmation and approval of its Emergency Capital Expenditure (CAPEX) Project, namely: Purchase of New 10 MVA Power Transformer for Baganga Substation.

STATEMENT OF FACTS

4. Sometime on October 9, 2019 at around 8:03 P.M., the head of the Substation Evaluation and Substation Tending Section of DORECO received a report regarding power interruption of SF6 Circuit Breaker which has detected a fault current, thereby causing an abrupt breakdown of the 5MVA Power Transformer of Baganga Substation, resulting in total power outage in the municipalities of Baganga and Caraga, and some areas in the municipality of Manay.

5. Immediately thereafter, DORECO’s technical personnel performed a series of tests on the 5MVA power transformer to determine the cause of the detected faults. After the final testing with the assistance of the technical personnel from Asiaphil Energy Solutions, Inc.,it was confirmed that the power transformer was damaged.

6. The personnel who performed the tests recommended the replacement of the damaged power transformer which has likewise already reached its economic life.

7. Hence, the emergency capital expenditure project subject of the instant application.

PROJECT DESCRIPTION

8. The project subject of the instant application involves the Purchase and Installation of a New 10 MVA Power Transformer for Baganga Substation.

PROJECT JUSTIFICATION

9. There is an urgent need to replace the damaged 5MVA power transformer at Baganga Substation and at the same time upgrade its power transformer to 10MVA, to ensure efficiency and stability of the delivery of power supply to the three municipalities served by the substation, namely: Baganga, Caraga and Manay, ensure the safety of the substation, and further meet the growing demand in the covered municipalities in the years to come.

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10. This project will also serve power to two more municipalities, Cateel and Boston, in case of maintenance or unexpected interruption of the Cateel Substation.

PROJECT SCHEDULE

11. The project was commenced on December 1, 2019 and completed by December 20, 2020.

PROJECT COST

12. The cost of the purchase and installation of a brand new 10MVA Power Transformer for Baganga Substation is Twelve Million Two Hundred Thousand Pesos (PhP 12,200,000.00).

FINANCING PLAN

13. The project is financed through a loan from the Rural Electrification Financing Corp. (REFC). Amortization of the loan is computed based on a 7.25% interest rate per annum payable in five (5) years. . RATE IMPACT

14. The table below shows that DORECO’s projected collections of Reinvestment Fund for Sustainable Capital Expenditure (RFSC) is insufficient to cover the annual capital project cost and loan amortizations of the cooperative in 2021 and 2022 after implementation of the project. RFSC collections will be able to cope with the annual loan amortizations only by year 2023, as shown below:

2019 2020 2021 2022 2023 TOTAL Forecasted Energy Sales, kWh 135,826,677 143,467,238 151,330,442 159,342,780 167,450,167 757,417,304 Cash Balance beginning, Php excess/(shortfall) 29,224,710.23 55,992,617.50 3,328,247.75 (137,416.51) (913,098.54) 87,495,060.42 CASH INFLOWS Current Year Collection @ Php 0.3534/ kWh @ 95% 45,601,090.27 48,166,255.81 50,806,169.29 53,496,151.53 56,218,044.57 254,287,711.47 Loan Proceeds (CAPEX- Regular), Php 151,000,000.00 151,000,000.00 Loan Proceeds (CAPEX- Emergency), Php 12,200,000.00 12,200,000.00 Government Subsidy (if any), Php Total Cash Inflows, Php 57,801,090.27 199,166,255.81 50,806,169.29 53,496,151.53 56,218,044.57 417,487,711.47 Available Cash for disbursement 87,025,800.50 255,158,873.31 54,134,417.05 53,358,735.02 55,304,946.02 504,982,771.89 CASH OUTFLOWS CAPEX Requirement 185,267,292.00 185,267,292.00

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–Regular CAPEX Requirement - Emergency (BGA SS) 12,200,000.00 12,200,000.00 Old debt (Old CAPEX amortization) 31,033,183.00 31,043,183.00 54,271,833.56 54,271,833.56 54,271,833.56 224,891,866.68 New Amortization (CAPEX- Regular), Php 20,312,456.04 - - 20,312,456.04 New Amortization (CAPEX- Emergency), Php 2,916,194.52 2,916,194.52 ERC Permit Fee, Php 91,500.00 91,500.00 Total Cash Outflows, Php 31,033,183.00 217,589,001.42 54,271,833.56 54,271,833.56 54,271,833.56 445,679,309.24 Cash Balance Ending, Php, excess/(shortfall) 55,992,617.50 3,328,247.75 (137,416.51) (913,098.54) 1,033,112.46 59,303,462.65 Excess/(Shortfall) on RFSC, Php/kWh 0.4122 0.0232 (0.0009) (0.0057) 0.0062 0.0783

SUBMISSION OF DOCUMENTARY AND PRE-FILING REQUIREMENTS

15. Finally, in compliance with the documentary as well as pre- filing requirements under ERC Resolution 26, Series of 2009 and the ERC Rules of Practice and Procedure, respectively, the following documents are being submitted herewith to form integral parts hereof, as follows, to wit:

Markings Nature of Document Annex “A” Executive Summary of the Emergency Capital Expenditure Project Annexes Proof of furnishing of copies of the Application to the “B” and Sangguniang Panlungsod of Mati City and Sangguniang series Panlalawigan of Davao Oriental Annexes Proof of publication of the Application in a newspaper of general “C” and circulation in DORECO’s franchise area or where it principally series operates.

PRAYER

WHEREFORE, premises considered, it is respectfully prayed of this Honorable Commission that after due notice and hearing, DORECO’s Emergency Capital Expenditure Project: Purchase and Installation of New 10 MVA Power Transformer for Baganga Substation, be confirmed and approved accordingly.

Other reliefs, just and equitable in the premises are likewise prayed for.

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Finding the said Application to be sufficient in form and substance with the required fees having been paid, the same is hereby set for the determination of compliance with the jurisdictional requirements, expository presentation, Pre-trial Conference and presentation of evidence on 01 October 2020 (Thursday) at two o’clock in the afternoon (2:00 P.M.), through a virtual hearing using the Zoom Application as the online platform for the conduct thereof.

Due to the continuous threat to public health and safety brought about by the coronavirus disease 2019 (COVID-19), the Commission deemed it necessary to conduct and convene the virtual hearing through video conferencing, subject to certain limitations as set forth herein.

ACCORDINGLY, DORECO is hereby directed to host the virtual hearing at DORECO’s Main Office in Madang National Highway, Barangay Central, Mati City, Davao Oriental, as the designated venue for the conduct thereof, and ensure that the same is open to the public and that the community quarantine guidelines are observed at all times. Moreover, DORECO shall guarantee that, during the conduct of the expository presentation, the participation of the public shall not be impaired.

RELATIVE THERETO, DORECO is hereby directed to:

1) Cause the publication of the attached Notice of Virtual Hearing in two (2) newspapers of nationwide circulation in the Philippines at its own expense, twice (2X) within two (2) successive weeks, the dates of publication not being less than seven (7) days apart, and the date of the last publication to be made not later than ten (10) days before the date of the scheduled initial hearing;

2) Furnish with copies of this Order and the attached Notice of Virtual Hearing the Offices of the Provincial Governor, the City and Municipal Mayors, and the Local Government Unit (LGU) legislative bodies within DORECO’s franchise area for the appropriate posting thereof on their respective bulletin boards;

3) Inform the consumers within DORECO’s franchise area, by any other means available and appropriate, of the filing of the Application, its reasons therefor, and of the scheduled virtual hearing thereon;

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4) Furnish with copies of this Order and the attached Notice of Virtual Hearing, 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 and attend the scheduled hearing; and

5) Furnish with copies of the Application and its attachments all those making requests therefor, subject to reimbursement of reasonable photocopying costs.

Within five (5) calendar days prior to the date of the virtual hearing, DORECO must submit to the Commission via electronic mail (e-mail) at [email protected] and [email protected], copy furnish the Legal Service through [email protected], the scanned copies of its written compliance with the aforementioned jurisdictional requirements attaching therewith, methodically arranged and duly marked, the following:

1) The evidence of publication of the attached Notice of Virtual Hearing consisting of affidavits of the Editors or Business Managers of the newspapers where the said Notice of Virtual Hearing were published, and the complete issues of the said newspapers;

2) The evidence of actual posting of this Order and the attached Notice of Virtual Hearing consisting of certifications issued to that effect, signed by the aforementioned Governor, Mayors, and LGU legislative bodies or their duly authorized representatives, bearing the seals of their offices;

3) The evidence of other means employed by DORECO to inform the consumers affected of the filing of the Application, its reasons therefor, and of the scheduled hearing thereon;

4) The evidence of receipt of copies of this Order and the attached Notice of Virtual Hearing by the OSG, COA, and the Committees on Energy of both Houses of Congress;

5) The evidence of receipt of copies of the Application and its attachments by all those making requests therefor, if any; and

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6) Such other proofs of compliance with the requirements of the Commission.

Moreover, DORECO is hereby required to post on its bulletin boards, the scanned copies of the foregoing jurisdictional requirements, together with the newspaper publications and certifications issued by the concerned Offices of the Provincial Governor, Mayors, and Local Legislative Bodies, and to submit proof of its posting thereof.

DORECO and all interested parties are also required to submit to the Commission via e-mail at [email protected] and [email protected], copy furnish the Legal Service through [email protected], at least five (5) calendar days before the date of the scheduled virtual hearing and Pre-trial Conference, their respective Pre-Trial Briefs containing, among others:

1) A summary of admitted facts and proposed stipulation of facts;

2) The issues to be tried or resolved;

3) The documents or exhibits to be presented, stating the purposes and proposed markings therefor, which should also be attached to the Pre-trial Brief; and

4) The number and names of the witnesses, with their written testimonies in a Judicial Affidavit form attached to the Pre- trial Brief.

DORECO must ensure that all the documents or exhibits proposed to be presented have already been duly submitted to the Commission at least five (5) calendar days before the date of the scheduled initial virtual hearing and Pre-trial Conference pursuant to the preceding paragraph.

Failure of DORECO to comply with the above requirements within the prescribed period shall be a ground for cancellation of the scheduled hearing, and the resetting of which shall be six (6) months from the said date of cancellation.

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DORECO must also be prepared to make an expository presentation of the instant 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 consumers and other concerned parties, the nature of the Application with relevant information and pertinent details substantiating the reasons and justifications being cited in support thereof.

DORECO is hereby directed to file a copy of its Expository Presentation via e-mail at [email protected] and [email protected], copy furnish the Legal Service through [email protected], at least five (5) calendar days prior to the scheduled virtual hearing. DORECO shall also be required, upon the request of any stakeholder, to provide an advance copy of its expository presentation, at least five (5) calendar days prior to the scheduled virtual hearing.

Any interested stakeholder may submit its comments and/or clarifications at least one (1) calendar day prior to the scheduled virtual hearing, via e-mail at [email protected] and [email protected], copy furnish the Legal Service through [email protected]. The Commission shall give priority to the stakeholders who have duly submitted their respective comments and/or clarifications, to discuss the same and propound questions during the course of the expository presentation.

DORECO is hereby directed to submit, either through personal service, registered or ordinary mail/private courier, one (1) set of the original or certified true hard/printed copy/ies of its Jurisdictional Compliance, Expository Presentation, Pre-trial Brief, and Judicial Affidavit/s of witness/es, within five (5) working days from the date that the same were electronically submitted, as reflected in the acknowledgment receipt e-mail sent by the Commission. Similarly, all interested parties who filed their Petition for Intervention or Opposition are required to submit the hard/printed copy thereof within the same period through any of the available modes of service.

(This space is intentionally left blank.)

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Finally, DORECO, including its authorized representative/s and witness/es, are hereby directed to provide the Commission, thru [email protected], with their respective e- mail addresses upon receipt of this Order. The Commission will send the access link/s to the aforementioned hearing platform within five (5) working days prior to the scheduled hearing.

SO ORDERED.

Pasig City, 12 August 2020.

FOR AND BY AUTHORITY OF THE COMMISSION:

AGNES VST DEVANADERA Chairperson and CEO

LS: ema /arg/mccg.2020-010 RC DORECO.IO.doc

Copy furnished:

1. Dechavez Lerios-Amboy and Evangelista Law Offices Atty. Jeremiah Francisco Counsel for DORECO Unit 2008, Tycoon Centre Pearl Drive, Ortigas Center, Pasig City 1605 E-mail: [email protected]

2. Davao Oriental Electric Cooperative, Inc. (DORECO) Applicant Madang National Highway, Barangay Central, Mati City, Davao Oriental

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

4. Commission on Audit Commonwealth Ave., Quezon City

5. The Senate Committee on Energy GSIS Building, Roxas Boulevard, Pasay City

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6. The House Committee on Energy Batasan Hills, Quezon City

7. Office of the City Mayor Mati City, Davao Oriental

8. Office of the LGU Legislative Body Mati City, Davao Oriental

9. Office of the Municipal Mayor San Isidro, Davao Oriental

10. Office of the LGU Legislative Body San Isidro, Davao Oriental

11. Office of the Municipal Mayor Governor Generoso, Davao Oriental

12. Office of the LGU Legislative Body Governor Generoso, Davao Oriental

13. Office of the Municipal Mayor Lupon, Davao Oriental

14. Office of the LGU Legislative Body Lupon, Davao Oriental

15. Office of the Municipal Mayor Banay-Banay, Davao Oriental

16. Office of the LGU Legislative Body Banay-Banay, Davao Oriental

17. Office of the Municipal Mayor Tarragona, Davao Oriental

18. Office of the LGU Legislative Body Tarragona, Davao Oriental

19. Office of the Municipal Mayor Manay, Davao Oriental

20. Office of the LGU Legislative Body Manay, Davao Oriental

21. Office of the Municipal Mayor Caraga, Davao Oriental

22. Office of the LGU Legislative Body Caraga, Davao Oriental

23. Office of the Municipal Mayor Baganga, Davao Oriental

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24. Office of the LGU Legislative Body Baganga, Davao Oriental

25. Office of the Municipal Mayor Cateel, Davao Oriental

26. Office of the LGU Legislative Body Cateel, Davao Oriental

27. Office of the Municipal Mayor Boston, Davao Oriental

28. Office of the LGU Legislative Body Boston, Davao Oriental

29. Office of the Provincial Governor Province of Davao Oriental

30. Office of the LGU Legislative Body Province of Davao Oriental

31. National Grid Corporation of the Philippines (NGCP) Quezon Avenue corner BIR Road, Diliman, Quezon City

32. Regulatory Operations Service 17/F, Pacific Center Bldg. San Miguel Ave., Pasig City