&.G\.\I.ATORy~ c,'" ~ 0>:-'.'~'.::\ ~ ~/ / 'Y ".P"~"""''',0.'''-'''''J /"! ,.• <{i Republic of the Philippines iJJ i;;: ',' t:. : ., I.;( 's. ENERGY REGULATORY COMMISSION [ :'".' :l n . ..~, r. •••• ,'0, 'I ,.-: ,. , San MIguel Avenue, Pasig CIty \: "~ .•,~l) """ ~ ~ /, '-~~.~ IN THE MATTER OF THE APPLICATION FOR APPROVAL OF THE POWER SUPPLY AGREEMENT (PSA) BETWEEN LANAO DEL NORTE ELECTRIC COOPERATIVE, INC. AND TOTAL POWER INC., WITH PRAYER FOR PROVISIONAL AUTHORITY ERC CASE NO. 2016-062 RC LANAO DEL NORTE ELECTRIC COOPERATIVE, INC. (LANECO) AND TOTAL POWER INC. (TPI), Applicants. )(- - - - - - - - - - - - - - - - - - - - --){ NOTICE OF PUBLIC HEARING TO ALL INTERESTED PARTIES: On 28 April 2016, Lanao del Norte Electric Cooperative, Inc. (LANECO) and Total Power Inc. (TPI) filed a joint application for approval of the Power Supply Agreement (PSA) between Lanao del Norte Electric Cooperative, Inc. and Total Power Inc., with prayer for the issuance of provisional authority. In their application, LANECO and TPI alleged the following: 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 Philippines, with principal office at Sagadan, Poblacion, Tubod, Lanao del Norte, Philippines. It is authorized to distribute and provide electricity services to its member- consumers in the Municipalities of Bacolod, Baroy, ERC Case No. 2016-062 CF Notice of Public Hearing /30 May 2016 Page 2 Of16 ;Balo-i, $ultan Naga Dimaporq, Kauswagan, Kapatagan, Kolambugan, Lala, Linamon, Magsaysay, Maigq, Matungao, Munai, Poona Piagapo, Salvador, Sapad, Tangkal, and Tubod, all in the Province of Lanao Del Norte (hereinafter, "Franchise Area"). Copies of LANECO's Certificates of Franchise are attached to the application as Annexes "A", "A-l" and "A-2" to form integral parts hereof; 2. Applicant TPI is a domestic corporation, duly organized and existing under and by virtue of the laws of the Republic of the Philippines, with principal office at 201 Alabang Business Tower, 1216 Acacia Ave., Alabang, Muntinlupa City; 3. TPI is engaged in the business of installing, ownmg, operating, maintaining, and managing power generation facilities. Copies of relevant documents showing TPI's due incorporation, registration, and permit to operate as a generation company are hereto appended to form integral parts hereof, as follows: .- .--_ .. --- ._- - ..- . ANNEX DOCUMENT - . - "B" Certificate of Incorporation with the Securities and Exchange Commission (SEC) "C" Articles of Incorporation and By- Laws "D" General Information Sheet for the Year 2015 "E" Certificate of Non-Coverage (CNC) from the Department of Environment and Natural Resources (DENR) 4. LANECO and TPI may be served with orders, notices, and other legal processes of this Honorable Commission through the address of the undersigned Firm; 5. On 12 April 2013, Applicants LANECO and TPI executed a Power Supply Agreement (PSA) for the delivery to and purchase by LANECO of electricity for its peaking load requirements from TPI's 4-4 MW diesel-fired power plant. A copy of the PSA is hereto attached as Annex "F" to form an integral part hereof; 6. By and pursuant to Sections 25, 43 (u) and 45 (b) of Republic Act No. 9136, otherwise known as the Electric Power Industry Reform Act of 2001 (EPIRA), its ERC Case No. 2016-062 CF Notice of Public Hearing /30 May 2016 Page 3 of 16 Implementing Rules and Regulations, and other pertinent rules and regulations, the instant Application is submitted to the Commission for its due consideration and approval of the PSA, executed by and between LANECOand TPI; STATEMENT OF FACTS 7. Distribution utilities in Mindanao, including LANECO, have been experiencing chronic energy crisis due to insufficient supply, particularly with the reduction of supply coming from the National Power Corporation - Power Sector Assets and Liabilities Management (NPC- PSALM); 8. On 26 December 2012, NPC-PSALM renewed its Contract for the Supply of Electric Energy (CSEE) with LANECO, but allotted to the latter only 5 MW against LANECO's basic power demand of 14 MW'. NPC- PSALM informed LANECO in 2013 that due to generation constraint, it can no longer commit to supply the full energy requirements of LANECO.A copy of the Certification from NPC-PSALM is herewith attached to form an integral part hereof as Annex "G"; 9. At that time, the insufficiency of supply threatened the viability of LANECO and posed risk of substantial stoppage of economic activities within its Franchise Area; 10. As an immediate solution to its power woes, LANECO made an invitation to bid on 11March 2013, calling all Independent Power Providers (IPP) who could provide a peaking plant to be embedded directly to LANECO's distribution line. Copies of LANECO's Invitation to Bid and the Affidavit of Publication from the newspaper where said Invitation was published, are hereto attached as Annexes "H" and "H-l", respectively, to form integral parts hereof; 11. Only TPI submitted its bid proposal for the 3MW + IMW Brand New High Speed Containerized Power Plant using diesel as fuel. A copy of TPI's letter-proposal dated 11 March 2013 with attached diesel power plant layout and single line diagram layout is hereto attached to form an integral part hereof as Annex "H-2"; 1 As of the issuance of LANECO Board Resolution No. 59, Series of 2013 dated April 10, 2013 (Annex "Y' hereof) ERC Case No. 2Q16-062 CF Notice of Public Hearing /30 May 2016 Page 4 of 16 ' 12. Owing to the urgent need to address the power crisis in LANECO's franchise area, as well as the persistent demand from the big load consumers group, LANECO negotiated with TPI to lower its peaking rate proposal to be at par with ERC's authorized ceiling load range. A copy of LANECO's Board Resolution No. 57, Series of 2013 authorizing the cooperative to negotiate the peaking load rate of TPI, is herewith attached and made an integral part hereof as Annex "H-3"; 13. As a result of the negotiation, on 12 April 2013, LANECO and TPI executed a ten (lO)-year Power Supply Agreement (PSA), providing the terms and conditions of supply to LANECO of electric energy for its peaking requirements from a 4.4 MW diesel-fired power plant (hereinafter, the "TPI Power Facility") to be financed, developed, constructed, commissioned, operated, and maintained by TPI within the Franchise Area of LANECO; ABSTRACT OF THE PSAAND OTHER RELATED INFORMATION 14. The following are the salient features of the PSA: A. Term. The PSA shall become effective upon its execution on 12 April 2013 (the "Effective Date") and shall have a term commencing on said Effective Date until the last day of the tenth (10th) year of the Commercial Operations Period, which refers to the twenty-sixth (26th) day immediately following the day on which all the conditions under Section 4.1 of the PSA have been complied with, unless renewed or earlier terminated in accordance with the PSA. One of the conditions precedent to Commercial Operations Date under Section 4.1 of the PSA is the Commission's approval of the PSA, provided that the issuance of a provisional approval shall be considered approval for purposes of determining Commercial Operations Date; B. Supply of Electricity. During the term of the PSA, TPI shall allocate and deliver to LANECO, the Contract Energy for the latter's peaking requirement equivalent to 720,000 kWh per month, with an Allowable Maximum Demand of 3,000 kW per month pursuant to "Schedule of Contract Energy" (Schedule 1 of the PSA), except for interruption or reduction due to Force ERC Case No. 2016-062 CF Notice of Public Hearing /30 May 2016 Pagesoft6 Majeure, System Emergency, and/or Allowable Outage; Subject to availability of supply and consent of TPI, LANECO may be allowed to increase its Contract Energy subject to 24-hour prior notice to TPI, provided that LANECO shall pay Additional Energy Fee per month. LANECO may also be allowed to increase the Allowable Maximum Demand, subject to mutual agreement of the Parties on the terms of expansion; C. Delivery Point. The Delivery Point shall be within the TPI Power Facility at Barangay Poblacion, Tubod, Lanao Del Norte. Electricity shall be deemed delivered to and accepted by LANECOat the Delivery Point. For all intents and purposes, title to and all risks associated with electricity from TPI Power Facility shall pass to LANECOat the Delivery Point. All risks and costs including any transmission losses attributed to the delivery of electricity' beyond the Delivery Point shall be for the account of LANECO; D. Allowable Outage. For each contract year, TPI is entitled to an Allowable Outage of forty-five (45) days consisting of: (i) Scheduled Outage equivalent to forty (40) days, and (ii) Unscheduled outage equivalent to five (5) days. TPI is excused from its obligation to deliver energy during the occurrence of Scheduled Outage or Unscheduled Outage, in which case, the Contract Energy for the affected Billing Period may be adjusted pro rata or as agreed by the Parties; In any contract year, the difference between Allowable Outage and the actual days used by TPI for Scheduled and Unscheduled Outage in such contract year will not be credited to the succeeding contract years; E. Contract Energy Charge. For energy delivered, TPI shall charge LANECO, in peso per kilowatt hour (PhP/kWh), as indicated under Schedule 3 of the PSA. LANECOand TPI agreed to Fixed and Variable rates composed of the following components: a. Capacity Fee (CF) = based on the contracted capacity of LANECO or 3,000 ERC Case No. 2016-062 CF Notice of Public Hearing /30 May 2016 Page60f16 kW in the amount of PhP715.00/kW /month; b. Fixed O&M Fee (FOM) = PhP350/kW/month escalated annually by Inflation Factor, as specified below; c.