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

IN THE MATTER OF THE APPLICATION FOR APPROVAL OF INDIVIDUAL CAPEX PROJECT IN ACCORDANCE WITH THE RULES FOR THE APPROVAL OF REGULATED ENTITIES’ CAPITAL EXPENDITURE PROJECTS AND AUTHORITY TO SECURE LOAN FROM NEA, WITH PRAYER FOR ISSUANCE OF PROVISIONAL AUTHORITY

ERC CASE NO. 2021- 045___ RC June 16, 2021

FIRST ELECTRIC COOPERATIVE, INC. (FLECO), Applicant. x ------x

APPLICATION

Applicant First Laguna Electric Cooperative, Inc. (FLECO), by and through the undersigned counsel, and unto this Honorable Commission most respectfully states that:

1. FLECO is an electric cooperative duly organized and existing under and by virtue of the laws of the Philippines, with the principal office at Lewin, , Laguna 4014, where it may be served with summons and other legal processes, represented in this instance by its Board President, ALLAN S. GUALBERTO, of legal age, Filipino, and with office address also at FLECO main office;

2. Herein applicant is the exclusive franchise holder issued by the National Electrification Administration (NEA) to operate an electric light and power services in the municipalities of the province of Laguna, namely: , , Lumban, Kalayaan, , , , , , and Sta. Maria;

1 3. Applicant hereby submits its proposed Individual Capital Expenditure (CAPEX) project, in accordance with the specific provisions of Republic Act No. 9136 and the implementing guidelines adopted by the Energy Regulatory Commission (ERC) under Resolution No. 26, Series of 2009, more specifically the Amended Rules for the Approval of Regulated Entities’ Capital Expenditure Projects (CAPEX);

4. Applicant in support of this application for the approval of the capital project has attached the following required documents labeled together and marked collectively as Annex “A”, contained in the said guidelines:

a. Project Title b. Project Type c. Project Category d. Project Description e. Gantt Chart Schedule f. Project Justification g. Project Cost Estimate h. Technical Analysis i. Economic Analysis j. Project Financing Plan k. Rate Impact

5. The proposed capital project is the removal of the existing 10 MVA and installation of a new 20 MVA power transformer at Famy Substation located in Brgy. Batuhan, Famy, Laguna;

6. The 10 MVA Power Transformer at Famy Substation serve as the source of power in the municipalities of Siniloan, Famy, Sta. Maria, and Mabitac, all in the province of Laguna. In 2020, it has an actual peak demand of 8.57 or 76% of its ONAF Capacity;

7. This project is intended to relieve the loading of the 10 MVA Power Transformer and address unexpected significant new load that will be connected to the Distribution System. The foreseen load growth in the area for this year 2021, however, requires the minimum capacity of 13.15MW. The major load growth will come the on-going construction of the Water Co. facility in Pakil, and the newly built iMall in Famy with load requirement of 1MW and 3.2MW, respectively;

8. As such, there is an urgency to remove the existing 10 MVA and install a new 20 MVA power transformer capacity. Hence, this substation project proposal;

2 9. The deficiencies of the existing 10 MVA Famy Substation are as follows, to wit:

a) In 2020, the 10 MVA Famy substation has an actual demand of 8.57MV or 76.2% of its maximum rated capacity. At present, it exceeds the 70% of its maximum rated capacity. Based on the Distribution Criteria and Goals, additional capacity will be triggered on the year the substation will be loaded 70% of the maximum rated capacity;

b) An incoming commercial and industrial load application, iMall Famy and Manila Water Co., respectively, will require an additional 4.2MW supply in 2021. This will cause capacity problem to the power transformer because a total of 13.15MW will be loaded to it. The loading forecast of the power transformer will be critically loaded for the next 10 years if no capacity project will be implemented. Therefore, possible alternatives are formulated to address the deficiencies at Famy Substation:

Alternative A: Removal of the existing 10 MVA and installation of new 15 MVA Power Transformer at Famy Substation.

Alternative B: Removal of the existing 10 MVA and installation of new 20 MVA Power Transformer at Famy Substation.

Alternative C: Removal of the existing 10 MVA and installation of new 30 MVA Power Transformer at Famy Substation;

c) The existing 10 MVA Power Transformer installed at Famy was commissioned and energized in 2010. This 10 year old power transformer will be pulled-out once the implementation of the project started and will be transferred to replace the 5 MVA power transformer installed at Pakil Substation. The existing 5 MVA Power Transformer at Pakil Substation has been in service for 29 years. It has shown signs of deterioration considering its age, frequent transformer trouble and technical obsolescence;

d) The FLECO Management has proposed to replace its existing 5 MVA Power Transformer at Pakil Substation with the 10 MVA Power Transformer from Famy to meet the following reasons:

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i. To meet the present and future load requirement in the area;

ii. To ensure safety in the operation of the facilities;

iii. To enhance the reliability of delivery of power to customers being supplied by the substation;

iv. To have an accessible capacity that could accommodate emergency requirements on transferring of loads from other substation or feeders; and

v. To have a continuously available distribution services and a substation that will provide reserve capacity margins for future interruption contingency to meet the reliability performance standards;

10. FLECO conducted a Technical Analysis wherein the present loading of the 10 MVA Power Transformer of Famy Substation is compared against the future loading if the proposed project will be implemented. The interpretation of the analysis shows that without the project being implemented, this will cause overloading to the 10 MVA Power Transformer and with the project, all of the alternatives will be technically feasible. However, the capacity of Alternative A will be overloaded before it reaches its economic life of 30 years and so it has the need to add additional capacity project in the near future. A copy of more detailed comparative loading analysis of Famy Substation is hereto attached and duly marked as Annex “B”;

11. The substation uprating project at Famy is classified under capacity projects, therefore, it is deemed mandatory for FLECO to have an expansion plan for the system. Based on the simulation, a 20 MVA capacity expansion is ideal. The expansion plan study assumes economic life of the power transformer and other electric equipment of the substation to be 30 years. A copy for more detailed economic evaluation for each alternative is hereto attached and duly marked as Annex “C”;

12. The project shall start by March 1, 2021 and end by December 3, 2021. From the beginning of the bidding and procurement procedure up to the commissioning and energization of the substation, this project shall last for ten (10) months based from the load projection of the significant new loads. iMall is set to be energized at the first quarter while the Manila Water Co. will ramp-up its operation not later than the last quarter of the year. Thus, feeder load transferring with adjacent substation is the

4 remedial action undertaken by FLECO to address its immediate capacity concern;

13. The expected cost of the Proposed Individual CAPEX Project totals to TWENTY TWO MILLION TWENTY FIVE THOUSAND SIX HUNDRED (Php22,025,600.60);

14. The capital projects of FLECO will be financed by acquiring loans from the National Electrification Administration. Based on the Cooperative’s Cash Flow analysis, the Reinvestment Fund for Sustainable CAPEX (RFSC) would result to negative revenues as shown below:

Capex Plan Annual Cash Flow

For the Years 2021 – 2023

Particulars 2021 2022 2023 Total Actual/Forecasted Energy sales, kWh 122,527,953 128,813,637 134,983,810 386,325,399.19 RFSC balance beginning per AFS, PhP 1,651,362.77 7,229,827.84 (4,202,738.97) 1,651,362.77 CASH INFLOWS Actual/Forecasted

1 collection from RFSC 65,172,618.03 68,515,973.34 71,797,888.46 205,486,479.83 Charge, PhP

Loan proceeds from

financial institutions, PhP 22,025,600.00 22,025,600.00

Loan proceeds from

financial institutions, PhP 10,720,598.00 78,284,091.80 14,773,130.20 103,777,820.00 (Other CAPEX projects) From general fund, if any, - PhP Subsidy (if any), PhP - Interest earned from - deposits, PhP

Total Cash Inflows, PhP 97,918,816.03 146,800,065.14 86,571,018.66 331,289,899.83 Available cash for disbursement 99,570,178.80 154,029,892.97 82,368,279.69 332,941,262.60 CASH OUTFLOWS Payment for CAPEX

project 22,025,600.00 22,025,600.00 Payment for other CAPEX

projects 33,752,526.54 100,153,724.39 47,187,423.53 181,093,674.46

5 Payment of

amortization/s for new - 2,945,008.00 2,945,008.00 5,890,016.00 loan, if any (PhP) Payment of amortization/s for new

loan, for other CAPEX 2,497,716.48 20,736,574.61 24,178,461.97 47,412,753.07 Projects Payment of

amortization/s for 33,646,172.00 33,646,172.00 33,646,172.00 100,938,516.00 previous loan (PhP) Replenishment of General Fund account - (PhP)

Permit Fee (PhP) 418,335.95 751,152.93 353,905.68 1,523,394.56

Total Cash Outflows, PhP 92,340,350.96 158,232,631.94 108,310,971.18 358,883,954.08 Cash balance ending, PhP, excess/(shortfall) 7,229,827.84 (4,202,738.97) (25,942,691.48) (25,942,691.48)

Total / Average YEAR 2021 2022 2023 Rate

Projected kWH Sales 122,527,953 128,813,637 134,983,810 386,325,399 Additional Rev. Req per 0.0590 0.0326 0.1922 0.0672 kWh (RFSC RATE)

Existing RFSC Rate 0.5319 0.5319 0.5319 0.5319 Capex Plan Cost Cash 0.5909 0.5645 0.7241 0.5991 Flow Rate per kWh

15. Since the proposed Individual CAPEX Project cannot be funded by the existing RFSC, it shall be recovered by FLECO from the Member’s Contribution for Capital Expenditures (MCC) for the period of 10 years (2022-2031) with the proposed recovery rate of Php 0.0190 per kWh, as simulated below:

RECOVERY SCHEME PROPOSAL

YEAR Projected KWH Sales For Recovery(Php)

2022 128,813,637 2,945,008 2023 134,983,810 2,945,008 2024 141,044,583 2,945,008 2025 146,982,560 2,945,008 2026 152,803,069 2,945,008 2027 158,502,624 2,945,008 2028 164,097,766 2,945,008

6 2029 169,578,632 2,945,008 2030 174,971,232 2,945,008 2031 180,255,363 2,945,008

TOTAL 1, 552, 033, 276 29,450,080

Proposed rate for 10 years 0.0190

16. The proposed project shall be financed through a loan from NEA considering that the cooperative’s RFSC is not readily available and further not sufficient to finance the implementation of the proposed Individual CAPEX Project. In view thereof, the cooperative hereby applies for authority from the Honorable Commission to secure said loan from NEA. A copy of Tentative Schedule of Amortization is hereto attached and duly marked as Annex “D”;

17. This capital project is necessary for the operation and maintenance of the distribution system of FLECO in order to extend dependable and quality electric service to consumers;

18. This capital project is in compliance with the Philippine Grid Code, Philippine Distribution Code, and specific provisions of Republic Act No. 9136, and the implementing guidelines on capital projects;

19.This Individual CAPEX Project is consistent with the Distribution Development Plan of FLECO submitted to the Department of Energy;

20. Herein applicant most respectfully request for immediate relief and/or approval of this application considering that there is necessity thereof in view of the fact that this project is intended to relieve the loading of the 10 MVA Power Transformer and address unexpected significant new load that will be connected to the Distribution System. The foreseen load growth in the area for this year 2021, however, requires the minimum capacity of 13.15MW. The major load growth will come the on-going construction of the Manila Water Co. facility in Pakil, and the newly build iMall in Famy with load requirement of 1MW and 3.2MW, respectively;

Attached herewith is an Affidavit in Support for Issuance of Provisional Authority executed by ENGR. RICHARD B. MONDEZ, Officer-in-Charge (OIC) General Manager, duly marked as Annex “E”;

21. That in compliance with the pre-filing requirements, FLECO is submitting the following:

7 i. Certification from the of Lumban, Laguna that a copy of the application, with all its annexes and accompanying documents, attesting to the fact that applicant has furnished the said legislative body of the aforesaid application;

ii. Certification from the Sangguniang Panlalawigan of Laguna that it likewise has furnished the said pertinent documents; and

iii. Affidavit of Publication and Newspaper issue containing the published Application in its entirety in a newspaper of general circulation in the Province of Laguna; and

22. The approval of this Capital Expenditure Project is necessary to maintain efficient, reliable, and safety delivery of power to FLECO’s existing and future consumers, and will redound to the benefits of the consuming public.

PRAYER

WHEREFORE, premises considered, applicant First Laguna Electric Cooperative, Inc. (FLECO) respectfully prays of this Honorable Commission that pending hearing, the herein submitted capital project be provisionally approved ex-parte, that the applicant be authorized to adopt and implement the same effective upon such approval, and that the applicant be authorized to secure loan from the National Electrification Administration (NEA).

And after due notice and hearing and consideration, this application be approved permanently.

Other relief/s, just or equitable under the premises, are likewise prayed for.

8 , for Pasig City, March 2, 2021.

ARNIDO O. INUMERABLE Counsel for Applicant FLECO 405 Elisa Street, U.E. Village, Cainta, Rizal PTR No. 0978681, 2-05-21, Q.C. IBP No. AR50510807, 2-09-21, Q.C. Roll of Attorneys No. 28764 MCLE Compliance VI No. 008302, 4-20-18

EXPLANATION

This Application was filed by registered mail due to lack of personnel, time constraints and pandemic.

ARNIDO O. INUMERABLE

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