Republic of the Philippines ENERGY REGULATORY COMMISSI San Miguel Avenue, Pasig City IN THE MATTER OF THE APPLICATION FOR .FOR FRANCHISE AND CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY, • ERC CASE NO. 2016-018 MC CAMIGUIN ELECTRIC COOPERATIVE, INC. (CAMELCO) & MISAMIS ORIENTAL II RURAL ELECTRIC SERVICE DO Co!TEo~.Illoi Date: ....•.:./ - COOPERATIVE, INC. 87': 1!••• _.-IfC.. ..':'- ....•~- (MORESCO II), Applicant. x- - - - - - - - - - - - - - ...- - - - - ...-x NOTICE OF PUBLIC HEARING TO ALL INTERESTED PARTIES: Notice is hereby given that on 23 June 2016, the Camiguin Electric Cooperative, Inc. (CAMELCO) & Misamis Oriental II Rural Electric Service Cooperative, Inc. (MORESCO II), filed an application for franchise and certificate of public convenience and necessity. In the said application, CAMELCO and MORESCO II alleged the following: I. Applicant CAMELCO is an Electric Cooperative created and existing pursuant to the provisions of Presidential Decree No. 269 as amended, with principal office located at Pandan, Mambajao, Camiguin. It is engage in the distribution of electric energy in Mambajao, Mahinog, Guinsiliban, Sagay, Catarman all in the Province of Camiguin and represented herein by its General Manager, ADRIANO A. EBCAS, duly authorized by virtue of Resolution No. 098 Series 0[2015 dated 8 December 2015 of the ERC CASENO. 2016-018 MC Notice of Public Hearlng/29 September 2016 ~~g~_~Qfz_.............-------------... ------- --------- Board of Directors, copy of which is attached hereto as Annex "A" and made an integral part hereof. The filing of this Joint Application is likewise authorized under the aforementioned Resolution; 2. Applicant MORESCO II is an Electric Cooperative created and existing pursuant to the provisions of Presidential Decree No. 269 as amended, with principal office located at Medina, Misamis Oriental. It is engaged in the distribution of electric energy in city of Gingoog and the municipalities of Balingasag, Balingoan, Binuangan, Claveria, Kinoguitan, Lagonglong, Magsaysay, Medina, Salay, Sugbangcogon and Talisayan all in the Province of Misamis Oriental and represented herein by its OIC-General Manager, RONEL B. CANADA, duly authorized by virtue of Resolution No. 59 Series of 2016 dated 17 June 2016 of the Board of Directors, copy of which is attached hereto as Annex "B" and made an integral part hereof. The filing of this Joint Application is likewise authorized under the aforementioned Resolution; 3. Chapter II, Section 8 of Republic Act No. 9136 otherwise known as the Electric Power Industry Reform Act of2001 (EPlRA) which provides that: "The sub-transmission functions and assets shall be segregated from the transmission functions, assets and liabilities for transparency and disposal: Provided, That the sub-transmission assets shall be operated and maintained by TRANSCO until their disposal to qualified distribution utilities which are in a position to take over the responsibility for operating, maintaining, upgrading, and expanding said assets. x x x. TRANSCO shall negotiate with and thereafter transfer such functions, assets, and associated liabilities to the qualified distribution utility or utilities connected to such sub-transmission facilities not later than two (2) years from the effectivity of this Act or the start of open access, whichever comes earlier: x x x Where there are two or more connected distribution utilities, the consortium or juridical entity shall be formed bv and composed of all of them which has been granted a franchise to operate the sub-transmission asset by the ERe. The subscription rights of each distribution utility involved shall be proportionate to their load requirements unless otherwise agreed by the parties." (Emphasis supplied.) ERC CASENO. 2016-018 MC Notice of Public Hearing/29 September 2016 .!,.~g~3..Qfz........... 4. Among the sub-transmission assetsllines that have been identified by the National Transmission Corporation (TransCo) for disposal to qualified distribution utilities is the TWENTY ONE (21) KILOMETER APLAY A-JASAAN-BALINGASAG 69kV SUB- TRANSMISSION LINE. Because CAMELCO and MORESCO II are distribution utilities that are both connected to the 69KV Sub- transmission line, the consortium was, therefore, organized to acquire, operate, maintain, upgrade, and, if possible, expand said line, copy of the Consortium Agreement is attached hereto as Annex "C". 5. Thus, under the purposes for which the Consortium was formed, the Consortium will acquire, maintain, operate and/or expand the Aplaya-Jasaan-Balingasag 69kV sub-transmission line facilities. An Application shall be filed with the Honorable Commission for the Approval of the Sale of the said Sub- Transmission Lines/Assets, which Application will be filed by the National Transmission Corporation (Trans Co) and the Consortium of CAMELCO and MORESCO II as the Applicants. 6. However, to be able to maintain, operate and/or expand the aforementioned sub-transmission facilities, Applicants will require a Franchise or Certificate of Public Convenience and Necessity (CPCN). Under Chapter IV, Section 43 (P) of the EPlRA, the Honorable Commission has the power to: "(P) Act on applications for or modifications of certificates of public convenience and/or necessity, licenses or permits of franchised electric utilities in accordance with law and revoke, review and modify such certificates, licenses or permits in appropriate cases, such as in cases of violations of the Grid Code, Distribution Code and other rules and regulations issued by the ERC in accordance with law; " 7. Under the afore-cited provision, TransCo required applicants to likewise file the application for the Franchise and Certificate of Public Convenience and Necessity simultaneously with the filing of the application for approval of the sale of the aforementioned sub-transmission assets with the Honorable Commission. 8. Hence, this Application. 9. Pursuant to Section 4, Rule 6 of the Implementing Rules and Regulations of Republic Act No. 9136 and the Guidelines to the Sale and Transfer of the Transco's Sub-transmission Assets and Franchising of Qualified Consortiums technical and financial criteria are contained herein to determine qualification of Applicant to acquire sub-transmission assets. ERC CASENO. 2016-018 MC Notice of Public Hearing/29 September 2016 .~.~g~4.Q.fZ........... ................---....... -. 10. Both members of the Consortium, having been in operation for the last 32 (CAMELCO) and (MORESCO II) 33 years respectively, had been exposed and are continuously technically engaged in the maintenance and operation of electric power lines, thus, possess the following technical capability as follows, to wit: a. Applicants have more than one (1) year of experience in the operation of similar sub-transmission assets operating at the same voltage level. Proof of such technical capability on the part of MORESCO II is the positive findings in the technical evaluation of TransCo; On the other hand, CAMELCO is technically capable to operate the sub-transmission asset when the Honorable Commission in its Decision in ERC Case No. 2010-088 RC approved the application for approval of the sale of various subtransmission line/assets of the National Transmission Corporation (TransCo) on 11 April 2011. A copy of the technical evaluation and ERC Decision are attached hereto as Annexes "D" and "E"; b. Applicants jointly have sufficient inventory of materials for immediate replacement during emergency repair and maintenance of the line. c. Applicants have qualified personnel with experience in the operation and maintenance of sub-transmission lines and substation facilities. d. Applicants CAMELCO and MORESCO II had submitted to the Honorable Commission its Statement of Compliance to the Philippine Grid Code and Philippine Distribution Code pursuant to the Provisions of R.A. 9136 as evidenced by the Decision issued by the Honorable Commission dated 7 July 2007 and 2 May 2007, respectively, and correspondingly marked herein as Annexes "F" and "G", respectively; e. Applicant CAMELCO is fully compliant with DSC- PGC-019 (Maintenance Program) and DSC-PDC-038 (Maintenance Program), as evidenced by the aforementioned Decision approving the sale of various subtransmission line/assets of TransCo. ERC CASENO. 2016-018 MC Notice of Public Hearing/29 September 2016 .~~g.~.5_~!.Z.........._..._......_...._.......... .. 11. Applicants are: a. Current in all its financial obligations related to all contracts with suppliers of inputs necessary for its provisions of electricity service to its End-Users. b. Current in all its financial obligations related to outstanding debt to all listed creditors. c. CAMELCO has a current ratio of 44% and its quick ratio is 71%; While MORESCO 2 has a current ratio of 61%, and its quick ratio is 55%. Thus, both passed the criteria for these ratios. d. In support of the foregoing are the Financial Qualification Evaluation of MORESCO II conducted by TransCo, MORESCO II's Financial Ratio which shows a positive profitability ratio and the Independent Auditor's Report of CAMELCO for the year 2015 hereto attached as Annexes "H", "I" and "J". 12. The foregoing considered, Applicants, as a Consortium, are deemed to have complied with both technical and financial criteria as set in the Guidelines in the acquisition of sub-transmission lines; 13. In support of the instant application, Applicants most respectfully submit to the Honorable Commission the following documents: ANNEX NATURE OF DOCUMENTS "K" Single Line Diagram "L" CAMELCO