Energy Regulatory Commission Decision
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'. Republic of the Philippines ENERGY REGULATORY COMMISSION San Miguel Avenue, Pasig City IN THE MATTER OF THE PETITION FOR .APPROVAL/REVIEW OF THE BUSINESS SEPARATION AND UNBUNDLING PLAN (BSUP) PURSUANT TO THE PROVISION OF SECTION 36 OF R. A. 9136 AND RULE 10 OF ITS IMPLEMENTING RULES AND REGULATIONS ERC CASE NO. 2013-049 MC NUEVA ECIJA II-AREA 1 ELECTRIC COOPERATIVE, INC. (NEECO II-AREA 1), Petitioner. x- - - - - - - - - - - - - - - - - - - - - - -x DECISION Before this Commission for resolution is the petition filed on April 15, 2013 by Nueva Ecija II-Area 1 Electric Cooperative, Inc. (NEECO II-AREA 1) for approval of its Business Separation and Unbundling Plan (BSUP) pursuant to the provision of Section 36 of Republic Act No. 9136 (RA 9136) and Rule 10 of its Implementing Rules and Regulations (lRR). In the said petition, NEECO II-AREA 1 alleged, among others, that: 1. It is an electric cooperative duly established and existing pursuant to the provision of Presidential Decree No. 269 (P.O. 269), as amended by P.O. 1645. It holds a franchise issued by the National Electrification Commission (NEC), to operate an electric light and power distribution service in the Municipalities of Talavera, Sto. Domingo, Aliaga, Licab, , ERC Case No. 2013-049 MC DECISION/August 27,2013 Page 2 of 15 Quezon, Lupao, Talugtug, Carranglan, Guimba and Munoz Science City, all in the Province of Nueva Ecija. Its principal office is located at Brgy. Calipahan, Talavera, Nueva Ecija; 2. Pursuant to Section 36 of R.A. 9136, Rule 10, Section 3 (b) of its IRR and the Commission's Resolution No. 49, Series of 2006 as well as Resolution No. 07, Series of 2012, all electric power industry participants shall prepare and submit for approval of the Commission their Business Separation and Unbundling Plans (BSUP); 3. In accordance with the aforesaid requirements, it is submitting its proposed BSUP for the Commission's evaluation and approval; and 4. It prays that after due notice and hearing, its proposed BSUP be approved by the Commission. Having found said petition to be sufficient in form and substance, with the required fees having been paid, an Order and a Notice of Public Hearing, both dated May 20, 2013, were issued setting the case for initial hearing on June 17, 2013. In the same Order, NEECO II-AREA 1 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 Provincial Governor of Nueva Ecija and the Mayors of the City and Municipalities within NEECO II-AREA 1'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 June 13, 2013, NEECO II-AREA 1 filed its "Pre-Trial Brief'. ERC Case No. 2013-049 MC DECISION/August 27,2013 Page 3 of 15 During the June 17, 2013 initial hearing, only NEECO 11- AREA 1 appeared. No intervenor/oppositor appeared nor was there any intervention/opposition registered. At the said hearing, NEECO II-AREA 1 presented its proofs of compliance with the Commission's posting and publication of notice requirements which were duly marked as Exhibits "A" to "H-3", inclusive. Thereafter, it conducted an expository presentation of its application. NEECO II-AREA 1 presented its witness, Ms. Edna G. Libunao, its OIC-lnstitutional Service Manager, 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. NEECO II-AREA 1 was, then, directed to submit additional requirements together with its formal offer of evidence (FOE). On July 22, 2013, NEECO II-AREA 1 filed its "Formal Offer of Evidence with Compliance on the Required Revised Documents". On August 8, 2013, the Commission issued an Order admitting the "Formal Offer of Evidence" filed by NEECO II-AREA 1 and declaring the instant petition submitted for resolution. DISCUSSION NEECO II-AREA 1's BSUP consists of six (6) sections as prescribed in the BSUP Filing Package, as follows: 1) Details of Current Structure NEECO II-AREA 1 submitted its profile, the diagrammatic representation of its existing corporate structure, the description of the activities and functions undertaken by each of the different departments or juridical entities, as well as the description of the current process enumerated as follows: ERC Case No. 2013-049 MC DECISION/August 27,2013 Page 4 of 15 1.1 Meter Reading and Billing Process 1.2 Collection, Remittance and Deposit Process 1.3 Reconnection Process 1.4 Disconnection Process 1.5 New Electric Service Connection Process 1.6 Consumer Complaints Process 1.7 Procurement Procedure for Capital Expenditures and Non-Capital Expenditures 2) Details of Business Segments In compliance with the BSUP Filing Package, NEECO 11- AREA 1 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. NEECO II-Area 1 is currently undertaking the four (4) distribution and related activities business segments namely: (a) Distribution Services (OS); (b) Distribution Connection Services (DCS); (c) Regulated Retail Services (RRS); and (d) Related Business Services (RB). In addition, the following business segments are intended in preparation for future businesses which the cooperative may indulge specially with the implementation of the Open Access and Retail Competition (OARC), namely: (a) Non-Regulated Retail Services (NRRS); (b) Last Resort Supply Services (LRSS); and (c) Wholesale Aggregation (WA). a. Distribution Services (OS) - This segment includes the following: 1) Conveyance of electricity through a Distribution System and the control and monitoring of electricity as it is conveyed through the Distribution System (including any services that support such conveyance, control or monitoring or the safe operation of the Distribution System); 2) Provision for Ancillary Services (if any) that are provided using assets which form part of a Distribution System; 3) Planning, maintenance, augmentation and operation of .',, ERC Case No. 2013-049 MC DECISION/August 27,2013 Page 5 of 15 the Distribution System; 4) Provision, installation, commission, testing, repair, maintenance and reading of the Wholesale Electricity Spot Market (WESM) related meters that are not also used to measure the delivery of electricity to end-users or other customers; and 5) Billing, collection and the provision of customer services that are directly related to the delivery of electricity to end-users or to the connection of such persons to a Distribution System. b. Distribution Connection Services (DCS) - This segment includes the following: 1) Provision of capability at each Connection Point to a Distribution System to deliver electricity or to take electricity from the Connection Point and the conveyance of electricity from the facilities of persons which are directly connected to the Distribution System and from the Connection to the facilities of persons which are directly connected to the Distribution System; 2) Planning, installation, maintenance, augmentation, testing and operation of distribution connection assets; and 3) Provision of other services that supports any of the above services. c. Regulated Retail Services (RRS) ~ This segment comprises the provision of regulated retails services such as: 1) Services pertaining to the sale of electricity to end-users who are included in the Captive Market; 2) Billing, collection and the provision of customer services to such end-users in their capacity as electricity consumers; Energy trading (including the purchase of electricity and hedging activities) undertaken in connection with the sale of electricity to end-users who are included in the Captive Market; and sales of electricity to end-users who are included on the Captive Market; 3) Regulated retail services also comprise the provision, installation, commissioning, testing, repair, maintenance and reading of meters that are used to measure the delivery of electricity to end- users who are included in the Captive Market. d. Last Resort Supply Services (LRSS) - This segment comprises the provision of LRSS services pertaining to the sale of electricity to SOLR customers, including ,. ERC Case No. 2013-049 MC DECISION/August 27, 2013 Page 6 of 15 billing, collection and the provision of basic customer service. e. Wholesale Aggregation (WA) - This segment comprises the distribution utility's service of purchasing electricity in bulk and selling this to other distribution utilities, namely: services pertaining to the sale of electricity to other distribution utilities including billing, collection and the provision of basic customer service. f. Non-Regulated Retail Services (NRSS) - This segment comprises the provision of non-regulated retail services to end-users who are included in the contestable