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IN THE MATTER OF THE APPLICATION FOR APPROVAL OF CAPITAL EXPENDITURE PROJECTS FOR 2015, NAMELY: 1) CONSTRUCTION OF 69kV SUB-TRANSMISSION LINE FROM CURVADA, KAPATAGAN TO LANECO MAIN OFFICE, AND 2) DOUBLE CIRCUITING OF BACKBONE LINE FROM SUB-STATION TO LARAPAN BRIDGE, , WITH PRAYER FOR . PROVISIONAL AUTHORITY

ERC CASENO. 2015-206 RC

LANAO DEL NORTE ELECTRIC COOPERATIVE, INC. (LANECO), Applicant. )(------)(

ORDER

On 7 December 2015, the Electric Cooperative, Inc. (LANECO) filed an application for the approval of capital expenditure projects for 2015, namely; construction of 69kV sub- transmission line from Curvada, Kapatagan to LANECO Main Office and double circuiting of backbone line from Kauswagan sub-station to Larapan bridge, Linamon, with prayer for the issuance of provisional authority.

In the said application, LANECO alleged, among others,' the fOllOwin 0 ERC CASE NO. 2015-206 RC ORDER/l0 December 2015 Page 2 of 11

1. Applicant LANECO is a non-stock, non-profit electric cooperative duly organized and existing under and by virtue of the laws of the Republic of the , with principal office at Sagadan, , Tubod, Lanao del Norte;

2. LANECOholds an exclusive franchise from the National Electrification Commission, to operate an electric light and power distribution service in all the municipalities of the province of Lanao del Norte, namely: Tagoloan, Linamon, Kauswagan, , , Bacolod, Mango, , , Magsaysay, Tubod, , , Salvador, , Lala, , Kapatagan and .

Legal Basis for the Application

3. The instant application is being submitted to the Honorable Commission for its evaluation and approval of LANECO'sproposed capital expenditure projects for 2015 pursuant to ERC Resolution No.26, Series of 2009 and other pertinent laws, rules and regulations.

The Proposed Projects

4. The proposed capital expenditure projects consist of the following:

Proposed Projects Project Cost (PhP)

1 Construction of 18-kilometer 69kV Subtransmission Line from Curvada, Kapatagan to LANECO'smain office 88,864,173.22

2 Double circuiting of backbone line from the lOMV A Kauswagan Substation to Larapan Bridge, Linamon, for the tapping point of the GNPower Power Plant in Libertad, Kauswagan 6,562,060.31

Total 95,426,233.53 ERC CASE NO. 2015-206 RC ORDER/10 December 2015 Page3 of 11

Statement of Facts

5. On 02 May 2011,the Honorable Commission rendered its decision on LANECO'sapplication for approval of its Capital Projects for Years 2009-2013 under ERCCase No. 2010-015 RC, approving the proposed projects with modification;

6. Among the approved projects is the Construction of 18- kilometer 69kV Subtransmission Line from Curvada, Kapatagan to the cooperative's main office in Tubod, Lanao del Norte, which includes seventy (70) footer concrete poles and overhead electrical lines, intended to address present and future load requirements as well as to energizethe 10MVA Sagadan Substation;

7. As approved, the 18- kilometer 69kV Subtransmission Line Project has a horizontal structural design of construction, with a project cost of PhP36,000,000.00;

8. However, due to internal problems encountered by LANECO,the implementation said project has been set aside;

9. Due to passage of time, or more than six (6) years from the time the approved project was designed, the implementation thereof has been rendered impractical, less feasible and disadvantageous to LANECOas well as its consumers;

10. Recently, due to urgent necessity to implement the construction of the 18-km 69kVsubtransmission line, the cooperative sought permission from the Honorable Commission to revise the conceptual engineering design as well as transfer the location of the said project. The revised project will necessitate an increase in the project cost. Copy of LANECO's letter to the Honorable Commission dated 1 October 2014, is attached to the application as Annex "A";

11. However, due to the substantial revision in the conceptual engineering design and significant increase in cost of the project, the Honorable Commission instead required LANECOto file a new application for approval of the revised project. Copyof the Commission's reply dated 20 October 2~, is attached to the application as Annex "R"; '1 ERC CASE NO. 2015-206 RC ORDER/10 December 2015 Page 4 ofn

12. Hence, the necessity to file the instant application in order to revise the structural design of the project and relocate the installation of the poles to the opposite side of the road. As of finalization of the instant application, the updated proposed cost of the projects is PhP88,864,173.22, based on the National Electrification Administration (NEA)latest price index;

13. On the other hand, the GNPower Ltd. Co., a power generation company, will locate its 4-150MW Coal-Fired Power Plant in Libertad, Kauswagan, Lanao Del Norte, or within LANECO'sfranchise area;

14. Construction of the plant has commenced in January 2015 and during its construction stage, it will require 4MW capacity from LANECO, to be sourced from its 10MVA Kauswagan Substation;

15. The Kauswagan Substation has a present loading of 4.56MW, and Linamon Feeder that will be serving GNPower has a present loading of 0.9MW;

16. The 3-kilometer old distribution line could not withstand the incoming load and needs rehabilitation by being converted into double-circuits construction wherein revisions on pole height, spanning/ distances and construction assemblies must be done. Hence, the instant application for the double circuiting of backbone line from Kauswagan Substation to Larapan Bridge, Linamon.

Financial and Economic Evaluation

17. Project Financing. The total project cost of Ninety Five Million Four Hundred Twenty Six Thousand Two Hundred Thirty Three Pesos 53/100 (PhP95,426,233.53) will be funded through an approved loan availment from the National Electrification Administration (NEA) and the Land Bank of the Philippines (LBP) at an average interest rate of 6.125% for a term of fifteen (15)years.

18. Cash Flow. LANECO's CAPEX plan cash flow cost, shown below, has determined the viability to pursue and implement the proposed projects without necessarily ERC CASE NO. 2015-206 RC ORDER/10 December 2015 Page 5 of 11

201<;(PhP) INFLOWS: PROJECTED SALES (kWh) 73,819,320 FUNDING SOURCES: Annual Revenue from RFSC (73,819,320 X PhPo,4004) 29,557,256 Financing: NEALoan 123,842,998 Landbank Loan 13,600,000 TOTAL (29,557,256 +123,842,998 +13,600,000) 167,000,254

OUTFLOWS: CASH FOR DEBT SERVICE

Existing Loans - NEA 2,477,940 New Loans -NEA 12,975,248 - Bank/Others 5,217,137 SUB-TOTAL 20,670,325

BALANCE AFfER DEBT SERVICE ( 167,000,254- 20,670,325) 146,329,929

TOTAL CAPEX PROJECTS and ERC CAPEX PERMIT FEES 16<).423.512

BALANCE. END ( 146.32<),<)2<) - 16<).423.512 ) (23,°93,584 )

19. Rate Impact. The instant projects were envisioned to have the least rate impact focusing on a capital expenditure plan that will bring the most value to LANECO's customers at the most reasonable and justifiable electricity rates or at the least cost of service. Shown below is the rate impact of the CAPEXProjects on its Reinvestment Fund for Sustainable CapEx (RFSC), to wit:

Rate Impact Computation Total (PhP) Projected kWh Sales 73,819,320 Annual Revenue from RFSC (RSEC-WR rate - PhPo,4004) 29,557,256 CAPEX Plan Cost Cash Flow Balance, End ( 23,093,584) Indicative Additional Rate (PhP 23,093,584 /73,819,320 ) 0.3128 Existing RSFC Rate 0,4004 CAPEX Plan Cost Cash Flow Rate per kWh 0.7132 ERC CASE NO. 2015-206 RC ORDER/l0 December 2015 Page 60fn

Allegations in Support ofthe Prayer for Provisional Authority

20. LANECO re-pleads the foregoing allegations in support of its application for the issuance of provisional authority;

21. The proposed construction of 69kV Line is intended to address present and future load requirements, as well as to energize the new 10 MVA Sagadan Substation which was among the approved projects under ERC Case No. 2010-015 RC;

22. Due to the influx of potential investors, it is imperative that the above proposed project be implemented as soon as possible to help lessen the critical load level of LANECO's 2-5MVA Kapatagan Substation. The 5MVA Power Transformer- Takaoka Brand has a current percentage loading of 89.55 % while the 5MVA Power Transformer - Brush Brand as a current percentage loading of 92-40 %;

23. The Kapatagan Substation will be relieved by transferring loads/ distribution lines to the lOMVA Sagadan Substation which is currently undergoing civil works construction at the main office headquarters of LANECO;

24. Further, new big load customers are rising soon in the municipalities of Kapatagan, Lala and Tubod, consisting of the Lanao del Norte Provincial Hospital and Jollibee - Maranding Branch, with a total 1MW load requirement;

25. On the other hand, the coal-fired power plant of the GNPower Ltd. Co., which will be located in Brgy. Libertad, Kauswagan, will require 4 MW capacity from LANECO during its construction stage, which has commenced in January 2015;

26. Considering the foregoing, LANECO prayed that upon filing and initial review hereof, it be granted provisional authority to implement the projects in order that the cooperative could deliver a reliable and efficient electric senncetOitscons,""~ ERCCASENO. 2015-206 RC ORDER/10 December 2015 Page 7of11

Submission of Documentary and Pre-filing Requirements

27. Finally, in compliance with the documentary requirements under ERC Resolution 26, Series of 2009 as well as pre-filing requirements under the ERC Rules of Practice and Procedure, LANECO submitted the following documents which are being made integral parts of its application, to wit:

Nature of Document

Annex Executive Summary of the proposed projects presenting C the justifications, technical analysis, economic analysis, financing and other supporting data

Annex Affidavit of Undertaking that the corresponding application D for approval of concerned agencies shall be filed, when reauired Annexes Eto Affidavit of Posting/Proof of Public Information E-1 Dissemination and Notice to Consumers

Annex Judicial Affidavit in Support of the Prayer for Provisional F Authority

Annexes Proof of furnishing of copies of the Application to the Gto of Tubod and Sangguniang G-1 Panlalawigan of Lanao del Norte

Annexes Publication of the Application in a newspaper of general Hto circulation within LANECO'sfranchise area, with Affidavit H-2 of Publication

Finding the said application to be sufficient in form and in substance with the required fees having been paid, the same is hereby set for initial hearing, expository presentation, pre-trial conference and evidentiary hearing on 10 February 2016 (Wednesday) at ten o'clock in the morning (10:00 A.M.) at the LANECO Main Office, Sagadan, Poblacion, Tubod, LanaOdeiNort~ ERC CASE NO. 2015-206 RC ORDER/10 December 2015 Page 8 of 11

LANECO is hereby directed to cause the publication of the attached Notice of Public Hearing, at its own expense, twice (2X) for two (2) successive weeks in two (2) newspapers of general circulation in the Philippines, with the date of the last publication to be made not later than ten (10) days before the date of the scheduled initial hearing. It is also directed to inform the consumers within its franchise area, by any other means available and appropriate, of the filing of the instant application, its reasons therefor, and of the scheduled hearing thereon.

Let copies of the application, this Order and the attached Notice of Public Hearing be furnished 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 at the scheduled hearing.

Likewise, let copies of this Order and the attached Notice of Public Hearing be furnished the Offices of the Governor of the Province of Agusan del Sur and the Mayors of the Cities/Municipalities within ASELCO's franchise area for the appropriate posting thereof on their respective bulletin boards.

LANECOis hereby directed to furnish all those making requests therefor with copies of the application and its attachments, subject to reimbursement of reasonable photocopying costs.

On the date of the initial hearing, LANECO must submit to the Commission its written Compliance with the jurisdictional requirements attaching therewith, methodically arranged and duly marked, the evidences on the actual posting and publication of the Notice of Public Hearing consisting of certifications issued to that effect, signed by the afore-mentioned Governor and Mayors or their duly authorized representatives, bearing the seals of their offices, and the affidavits of the Editors or Business Managers of the newspapers where the said Notice of Public Hearing were published together with the complete issues of the said newspapers, and such other proofs of compliance with the requirements of the Commission.

LANECO and all interested parties are directed to submit, at least five (5) days before the date of initial hearing and pre-trial conference, their respective Pre-trial Briefs containing, among ot~ f ERC CASE NO. 2015-206 RC ORDER/10 December 2015 Page 9 of 11

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

b) The issues to be tried or resolved;

c) The documents or exhibits to be presented, stating the purposes and proposed markings therefore; and

d) The number and names of the witnesses, with their written testimonies in an individual affidavit form, to be attached to the Pre-trial Brief.

Failure of LANECOto submit the required Pre-trial Brief and Judicial Affidavits of its witnesses 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 said date of cancellation.

As part of the pre-trial conference, LANECO must also be prepared to make an expository presentation of its 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, what the application is all about and the reasons and justifications being cited in support thereof.

SO ORDERED.

Pasig City, 10 December 2015.

FOR AND BYAUTHORITY OF THE COMMISSION:

--C...... ".r" , ~ JOSE VICENTE B. SALAZAR ChairmanandCEOr

M ~/~/APV/2015-206 RC LANECO ORD.doc

ERC~ Office a/the Chairman

1~llllllllllllllllIlilll~llllllllllllillf~II~111111111111~~llllilli~ A-2016-004-0C-00008 ERC CASE NO. 2015-206 RC ORDER/10 December 2015 Page 10 ofn

Copy Furnished:

1. Atty. Nelson V. Evangelista Counsel for Applicant LANECO Units 1609-1610, Tycoon Centre Pearl Drive, Ortigas Center, Pasig City

2. Lanao del Norte Electric Cooperative, Inc. (LANECO) Sagadan, Poblacion, Tubod, Lanao del Norte

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

4. Commission on Audit Commonwealth Avenue Quezon City

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

6. House Committee on Energy Batasan Hills, Quezon City

7. Office of the President of PCCI Philippine Chamber of Commerce and Industry (PCCI) 3rd Floor, ECC Building, Sen. Gil Puyat Avenue Makati City

8. Office of the Municipal Mayor Tagoloan, Lanao del Norte

9. Office of the Municipal Mayor Linamon, Lanao del Norte

10. Office of the Municipal Mayor Kauswagan, Lanao del Norte

11. Office of the Municipal Mayor Matungao, Lanao del Norte

12. Office of the Municipal Mayor Poona Piagapo, Lanao del Norte

13. Office of the Municipal Mayor Bacolod, Lanao del Norte

14. Office of the Municipal Mayor Mango, Lanao del Norte

15. Office of the Municipal M7 Munai, Lanao del Norte / ~ ERC CASE NO. 2015-206 RC ORDER/10 December 2015 Page 11of 11

16. Office ofthe Municipal Mayor Kolambugan, Lanao del Norte

17. Office of the Municipal Mayor Magsaysay, Lanao del Norte

18. Office of the Municipal Mayor Tubod, Lanao del Norte

19. Office of the Municipal Mayor Tangcal, Lanao del Norte

20. Office of the Municipal Mayor 8aroy, Lanao del Norte

21. Office of the Municipal Mayor Salvador, Lanao del Norte

22. Office of the Municipal Mayor Nunungan, Lanao del Norte

23. Office of the Municipal Mayor Lala, Lanao del Norte

24. Office of the Municipal Mayor Sapad, Lanao del Norte

25. Office of the Municipal Mayor Kapatagan, Lanao del Norte

26. Office of the Municipal Mayor Sultan Naga Dimaporo, Lanao del Norte

27. Office of the Provincial Governor Province of Lanao del Norte

28. National Grid Corporation of the Philippines (NGCP) Q,e",o A"""e ",me, SIRRood,Dmm,", Q,e",o CV