Republic of the ENERGY REGULATORYCOMMISSIO San Miguel Avenue, Pasig City

IN THE MATTER OF THE APPLICATION FOR THE APPROVAL OF THE RECOVERY OF THE GENERATION CHARGE AS PURCHASED BY ELECTRIC COOPERATIVE INC. (NOCECO) FROM CENTRAL NEGROS ELECTRIC COOPERATIVE, INC. (CENECO) ERC CASE NO. 2015-066 RC

CENTRAL NEGROS ELECTRIC COOPERATIVE, INC. (CENECO) AND NEGROS OCCIDENTAL ELECTRIC COOPERATIVE DOCKJiT»1l INC. (NOCECO), Dat~: .'{--::.'y.JAN ...•...... 2 8 2016_-_

Applicants. l~: ....-trr.,.--...---....n •••••••••• x------x

ORDER

On 31 March 2015, Central Negros Electric Cooperative Inc. (CENECO) and Negros Occidental Electric Cooperative, Inc. (NOCECO) filed an application for the approval of the recovery of the generation charge as purchased by the latter from the former.

In the said application, CENECO and NOCECO alleged, among others, that:

THE APPLICANTS

1. Joint. Applicant. Central Negros Electric Cooperative, Inc. (CENECO) is a domestic corporation duly organized and existing under the laws of the Philippines, with principal office at Gomaga oom" Mabini Street, Baoolod~ ERC Case No. 2015-066 RC ORDER/21 January 2016 Page 2 of 15

Negros Occidental, Philippines. It has an exclusive franchise to distribute electric service in the cities of , Bago, and Talisay and in the municipalities of Murcia and Don , all in the province of Negros Occidental.

2. Joint Applicant Negros Occidental Electric Cooperative, Inc. (NOCECa) is a corporation duly organized and existing under the laws of the Philippines, with principal office at City, Negros Occidental, Philippines. It has an exclusive franchise to distribute electric service in the cities of , Kabankalan and La Carlota and in the municipalities of , Can doni, Cauayan, , Hinobaan, Hog, Isabela, La Castellana, Moises, Pontevedra, Pulupandan, San Enrique, and Valladolid, all in the province of Negros Occidental.

Compliance with Pre-filing Requirements

3. In compliance with Rule 6 of the ERC Rules of Practice and Procedure, Joint Applicants have furnished the legislative bodies of each of the local government units where they principally operate a copy of the present Application with all its annexes and accompanying documents. Proofs of receipt by the legislative bodies of the City of Bacolod, City of Kabankalan and the Province of Negros Occidental are attached hereto as Annexes "D", "E" and "F", respectively.

4. Furthermore, Applicants have caused the publication of the present Application in its entirety in a newspaper of general circulation within the Province of Negros Occidental. Copies of the newspaper and corresponding affidavit of publication are attached hereto as Annexes "G" and "H" respectively.

STATEMENT OF THE FACTS

5. On 27 October 2013, at around TOO pm, a power blackout cloaked the municipalities of Pulupandan and Volladolid,NegrosOecidental./ ( ERC Case No. 2015-066 RC ORDERf21 January 2016 Page 3 of 15

6. This power failure occurred due to a fault in NOCECO's substation transformer located in Valladolid, Negros Occidental ("Valladolid transformer" for brevity). Its 13.2 kV bus bar was seriously damaged when a gecko crawled into its pin insulator.

7. Upon inspection, NOCECa discovered that the damage unto the transformer was severe, such that it could not be immediately restored for operation. As per assessment, it would take months before the Valladolid transformer is completely repaired.

8. This alarmed the management of NOCECO. Pending the repair of the transformer, the consumers within the municipalities of Pulupandan and Valladolid would deeply suffer the ramifications of a power blackout - the business operation of local entrepreneurs was bound to be disrupted; the operation of government and private offices interrupted; and the daily lives of the residents adversely affected.

9. In order to avert the perpetuation of this scenario, NOCECa sought a temporary source of power which would immediately address their urgent need for electricity.

10. NOCECa was convinced that purchasing power from CENECO via 13.2 kV distribution lines on a temporary basis was the only option in order to continue the power service delivery to its consumers in the mentioned municipalities, a practical and economical solution to NOCECa's pressing power distribution problem. Thus, NOCECa proposed and CENECO agreed to purchase power for the supply electricity, until the Valladolid transformer is completely repaired.

a) NOCECO's nearest operating transformer is in San Enrique, Negros Occidental with an approximate distance of eleven (11) kilometenl. A OOPY of the NOCEV' ERCCase No. 2015-066 RC ORDER/21 January 2016 Page40f15

Distribution System Single Line Diagram is attached hereto as Annex "I".

b) CENECO, on the other hand, owns a substation transformer in Hilangban, Bago City, Negros Occidental located two (2) kilometers from the damaged Valladolid transformer. A copy of the Single Line Diagram CENECO-NOCECO Diagram is attached hereto as Annex "J".

11. On 29 October 2013, NOCECO General Manager Cornelio L. Somodio, Jr. wrote to Atty. Floresinda G. Baldo-Digal, Director III of Regulatory Operations Service, Energy Regulatory Commission (ERC), to inform the Honorable Commission of the incident in Valladolid and the proposed Sale for Resale Agreement between CENECO and NOCECO. In the same letter, NOCECO requested the Honorable Commission that the "cost of power purchased from CENECO to supply the affected towns will be included in the monthly computation of AGRA." In reply, ERC Executive Director Atty. Francis Saturnino C. Juan wrote a letter dated 5 December 2013 to NOCECO acknowledging the situation and advised CENECO and NOCECO to "jointly file with ERC, in accordance with ERC Rules and Procedure, an application for approval of your sale for resale agreements". Copies of the letters are attached hereto as Annexes "K" and "K- 1", respectively.

12. NOCECO and CENECO, thus, executed the instant Sale for Resale Agreement wherein CENECO committed to sell and deliver energy to NOCECO, who in turn committed to purchase and receive from CENECO electric power and energy.

13. In order to optimize resources, NOCECO resolved to utilize the purchased electricity to supply the municipality of Pulupandan and to deliver power to the municipality of Pulupandan from the NOCECO's San Enrique transforme~ ERC Case No. 2015-066 RC ORDER/21 January 2016 Page 5 of 15

14. In April 2014, NOCECOcompleted the repair of the Valladolid transformer and thereafter ceased to purchase and receive energy from CENECO.

THE SALE FOR RESALE AGREEMENT MATERIAL PROVISIONS AND RELATED INFORMATION

15. Term. The Sale for Resale Agreement commenced from the time CENECO started to supply electric power to NOCECO and remains in full force and effect until the damaged transformer is repaired and becomes operational.

16. Obligations of the Parties. CENECO shall sell and deliver, and NOCECO shall purchase and receive, the electric power and energy at the existing interconnection point between CENECO's 10 MVA Hilangban Substation and NOCECO's 5 MVASan Enrique Substation.

The electric power and energy delivered by CENECO shall be a 3-phase, 4-wire, 60 hertz, alternating current at 7.6KV/13.2 KVnominal.

17. Electrical Facilities to be Furnished. NOCECO agreed to provide all the metering expense at its own expense and shall coordinate with CENECO for the installation, operation and maintenance of sale metering facilities.

The delivery point shall be located at the tapping, or the point of inter-connection between CENECO and NOCECO's distribution facilities, along the South National Highway between Bago City and the Municipality of Pulupandan.

18. Ownership of Equipment and Facilities. Unless otherwise agreed upon, all equipment or facilities made by and/or installed at the expense of either party shall remain a property of the party concerned. -4 ERC Case No. 2015-066 RC ORDER/21 January 2016 Page 6 of 15

19. Selling Rate. The Selling Rate which shall be charged to NOCECO for the supply of power shall be the summation of the generation, transmission, allowable system loss rates, wheeling rates and other pass through charges.

Pursuant to ERC Resolution No 2, Series of 2009, Universal Charges and Lifeline Rates are not included in the Selling Rates to be collected from NOCECO.

20. Wheeling Rate. The Wheeling Rate shall be composed of the distribution, supply and metering costs for the Residential Customers of the CENECO.

This was agreed pursuant to Article 6.5 of the Rules for Setting the Electric Cooperatives' Wheeling Rates (RSEC-WR), adopted by the Commission pursuant to Resolution 20 Series of 2009, that provides that: "[t]he rates applicable for the Sale for Resale customers shall be equivalent to the rates for the Residential Customers, unless the selling EC and the buying EC propose otherwise. xxx"

PARTICULARS Php/kWh Php/Cust/Mon Distribution Charge Demand Charge -- Distribution System Charge 0.2748 Supply Charge Demand Charge -- Supply System Charge 0.4140 Metering Costs Retail Customer Charge Metering System Charge 0.3460 5.0000

21. Take and Pay Contract. NOCECO shall accept all deliveries allocated or made by CENECO and NOCECO shall pay for the kWh delivered by CENECO as measured by the meter based on the Selling Rate. ~ ERC Case No. 2015-066 RC ORDER/21 January 2016 Page 70f15

22. Currency of Payment. All payments shall be made in Philippine Pesos.

23. Due Date. CENECO shall issue a bill for each calendar month within five (5) business days after the 26th of every month. Unless otherwise agreed by the parties, all invoices under this Agreement shall be due and payable without notice of demand fifteen (15) calendar days from the date said bills have been issued/served to NOCECO but not earlier than the 25th day of said succeeding month or, if such day is not a Business Day, then on the next succeeding Business Day.

24. Manner of Payment. NOCECO will make payments by electronic funds transfer, or by other mutually agreed alternative method, to the account designated by CENECO.

RECOVERY OF THE GENERATION CHARGE AS PURCHASED BY NOCECO FROM CENECO

25. Customer Profile. The instant Sale for Resale Agreement was entered into for the benefit of NOCECO's customers in Pulupandan. These customers are classified into the following:

RESIDENTIAL LOW VOLTAGE HIGH VOLTAGE Small Large Residential Commercial Commercial Public Building Public Building BAPA Low Voltage High Voltage Streetlights Sale for Resale Metered Industrial Streetlights Large Unmetered Industrial

A copy of the KWH Sales & Number of Customers and KW Demand in the Municipality of Pulupandan are attached. hereto as Annexes JJL" and JJL_l", respectively. ERC Case No. 2015-066 RC ORDER/21 January 2016 Page 8 of 15

Copies of the NOCECO Sample Bills for the months of November 2013 to April 2014 are attached hereto as Annexes JJM", JJM_1", JJM_2", JJM_3", JJM-4" and JJM_5", respectively.

26. Total Power Purchased. From 29 October 2013 to 05 April 2014, NOCECO purchased a total of 2,622,742-41KWHR from CENECO and was billed the total amount of PHP 22,705,139.08.

BILLING TOTAL AMOUNT POWERBILL MONTH KWHR BILLEDIN PHP ADJUSTMENT (388,491.60) November 2013 4,257,031.55 Incorporated in the March 2014 476,209.36 Statement (148,695.75) 4,640,592.50 Incorporated in the December 2013 571,247.59 March 2014 Statement 509,564.87 3,955,446.31 Incorporated in the January 2014 February 2014 503,025.54 Statement 8,548.78 3,394,504.58 Incorporated in the February 2014 February 2014 442,942.03 Statement 196,924.00 Incorporated in the March 2014 April 2014 444,824.93 4,475,103.89 Statement

62,580.01 April 2014 Unincorporated. 184,492.96 1,919,780.24 Billed Separately

April 2014 Power Bill Adjustment 62,580.01

TOTAL 2,622,742.41 22,705,139.08

A summary of the actual power (in kWh) purchased by NOCECO from CENECO is attached hereto ~ Annexes JJN". / f / ERC Case No. 2015-066 RC ORDER/21 January 2016 Page 9 of 15

Copies of CENECO's Statement of Account for NOCECO for the billing months of November 2013 to April 2014 are attached hereto Annexes "0", "0_1", "0_2", "0_3", "0_4" and "0_5", respectively.

Copies of CENECO's Power Bill Adjustment for the billing months of November 2013 to April 2014 are attached hereto Annexes "P", "P-l", "P-2", "P-3", "P- 4" and "P-5", respectively.

27. Total Amount Paid. NOCECO timely paid its account with CENECO. It issued checks with the total amount of PHP 22,705,139.08 and deposited the same with the savings account of CENECO in the Rizal Commercial Banking Corporation (RCBC), under account no. 1419-300809.

CHECKNo. AMOUNTPAID DATEDEPOSITED 1200001261 4,257,031.55 December 23, 2013 1200001270 4,640,592.50 January 24, 2014 1200001504 3,955,446.31 February 25, 2014 1200001870 3,394,504.58 March 25, 2014 1200002265 4,475,103.89 April 25, 2014 1200002695 1,919,780.24 May 23, 2014 1200003111 62,580.01 June 25, 2014 Total Amount 22,705,139.08

Copies of NOCECO's Check Vouchers for the billing months of November 2013 to April 2014 are attached hereto as Annexes "Q", "Q-l", "Q-2", "Q-3", "Q- 4","Q-5" and "Q-6", respectively.

28. Rate Impact. The purchase of power from CENECO resulted in an average difference in the blended rate of 0.1006 PhP /kWh if NOCECO had purchased from NPC/PSALM and an average difference of 0.0725 Php/kWh if NOCECO had purchased from WESM. A copy of the computation ofthe Rate Impacti,attachedhereto asAnnex~ ERC Case No. 2015-066 RC ORDERf21 January 2016 Page 10 Of1S

29. Additional Documentary Requirements. In further support of the instant application, Joint. Applicants ate providing the Honorable Commission with the following documents, III addition to the Annexes specified above:

Annex Document "S" 2013 Audited Financial Statement of NOCECO "T" 2013 Audited Financial Statement of CENECO "U"; "U-l"; .NOCECO's Monthly Financial and Statistical "U-2'", "U-3'", Report (MFSR) for November and December "U-4"; "U-5" 2013, January, February, March and April 2014, respectively. "V"; "V-l"; CENECO's Monthly Financial and Statistical "V-2"; "V-3'", Report for November and December 2013, "V-4"; "V-5" January, February, March and April 2014, respectively. "W",, "W-l",, NOCECO's AGRA Computation for "W-2"; "W-3"; November and December 2013, January, "W-4"; "W-5" February, March, April and May 2014, "W-6" respectively. "X",. "X-l",, CENECO's AGRA Computation for "X-2'", "X-3"; November and December 2013, January, "X-4"; "X-5"; February, March, April and May 2014, "X-6" respectively.

PRAYER

WHEREFORE, premises considered, Joint Applicants CENECO and NOCECO respectfully pray that the Honorable Commission after hearing on the merits, render a Decision APPROVING the instant application for recovery of the Generation Charge in the amount of TWENTY TWO MILLION SEVEN HUNDRED FIVE THOUSAND ONE HUNDRED THIRTY-NINE PESOS AND EIGHT CENTAVOS (PHP 22,705,139.08) as purchased by NOCECO from CENECO.

Finding the said application to be sufficient in form and substance with the required fees having been paid, the same is hereby set for jurisdictional hearing, expository presentation, pre-trial conference and evidentiary hearing on March 8, 2016 (Tue~ ERCCase No. 2015-066 RC ORDER/21 January 2016 Page 11of 15 at ten o'clock in the morning (10:00 A.M.) at NOCECO's Principal Office, Kabankalan City, Negros Occidental.

CENECO and NOCECO are hereby directed to cause the publication of the attached Notice of Public Hearing, at their 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. They are also directed to inform the customers within CENECO and NOCECO's franchise area, by any other means available and appropriate, of the filing of the instant application, their 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 Mayors of the Cities and Municipalities within CENECO and NOCECO's franchise area and the Provincial Governor of Negros Occidental for the appropriate posting thereof on their respective bulletin boards.

CENECO and NOCECO are 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, CENECO and NOCECO must submit to the Commission their written Compliance with the jurisdictional requirements attaching therewith, methodically arranged and duly marked, the evidences of the actual posting and publication of the Notice of Public Hearing consisting of certifications issued to that effect, signed by the afore-mentioned Mayors and Governor or their duly authorized representatives, bearing the seals of their offices, and the affidavits of the Editors or Business Managers of the newspapers where said Notice of Public Hearing were published together with the, complete issues of the said newspapers, and such other proofs 0 compliance with the requirements of the Commission. /I ERC Case No. 2015-066 RC ORDER/21 January 2016 Page 12 Of15

CENECO and NOCECO 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 others:

(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 thereof 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 CENECO and NOCECO to submit the required Pre- Trial Brief and Judicial Affidavits of their 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, CENECO and NOCECO must also be prepared to make an expository presentation of their application, aided by whatever communication medium that they may deem appropriate for the purpose, in order to put in plain words and explain, for the benefit of the member-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, 21 January 2016.

FOR AND BYAUTHORITY OF THE COMMISSION: OfficeEReof the Chairman l~illlll'IIIIII~II~II[IIIIIIIIIII~illll~III~~I~IIIIIII~ . A20!6-027.cOC-00298 --,. . • • _.. JOSE VICENTE B. S~

A i. I tJ Chairman 7 ~i!;glsjapvjCENECO and NOCECOj201S-066 RCjinitial order ERC Case No. 2015-066 RC ORDERj21 January 2016 Page 13 of 15

Copy Furnished: 1. Atty.Cecilia R. Layug LAYUG LAW OFFICE Counselfor Joint Applicants Unit 2904, One San Miguel Building San Miguel Avenue corner Shaw Boulevard Ortigas Center, Pasig City, Metro Manila

2. Negros Occidental Electric Cooperative, Inc. (NOCECO) Kabankalan City, Negros Occidental

3. Central Negros Electric Cooperative, Inc. (CENECO) Mabini St., Bacolod City, Negros Occidental

4. Office of the Governor Province of Negros Occidental

5. The City Mayor Kabankalan City, Negros Occidental

6. The City Mayor Himamaylan, Negros Occidental

7. The City Mayor La Carlota City, Negros Occidental

8. The Municipal Mayor Binalbagan, Negros Occidental

9. The Municipal Mayor Can doni, Negros Occidental

10.The Municipal Mayor Cauayan, Negros Occidental

11.The Municipal Mayor Hinigaran, Negros Occidental

12.The Municipal Mayor Hinoba-an, Negros Occidental

13.The Municipal May~r /I Hog, Negros OCcidental/ ) / ERC Case No. 2015-066 RC ORDERf21 January 2016 Page 14 of 15

14.The Municipal Mayor Isabela, Negros Occidental

15.The Municipal Mayor La Castellana, Negros Occidental

16.The Municipal Mayor Moises, Negros Occidental

17.The Municipal Mayor Pontevedra, Negros Occidental

18.The Municipal Mayor Pulupandan, Negros Occidental

19.The Municipal Mayor San Enrique, Negros Occidental

2o.The Municipal Mayor Sipalay, Negros Occidental

21.The Municipal Mayor Valladolid, Negros Occidental

22.0ffice of the City Mayor Bacolod City, Negros Occidental

23.0ffice ofthe City Mayor Bago City, Negros Occidental

24.0ffice ofthe City Mayor Silay City, Negros Occidental

25.0ffice of the City Mayor Talisay City, Negros Occidental

26.0ffice of the Municipal Mayor Murcia, Negros Occidental

27.0ffice ofthe Municipal Mayor Don Salvador Benedicto, Negros Occidental

28.0ffice of the Solicitor General 134 Amorsolo Street, Legaspi Villa71 Makati City, Metro Manila /)/ ERC Case No. 2015-066 RC ORDERJ21 January 2016 Page 15 Of15

29.Commission on Audit Commonwealth Avenue Quezon City, Metro Manila

30.The Committee On Energy Senate of the Philippines GSIS Building, Roxas Blvd., Pasay City

31.The Committee On Energy House of Representatives Batasan Hills, Quezon City

32.Philippine Chamber of Commerce and Industry (PCCI) 3rd Floor, Chamber and Industry Plaza (CIP), 1030 Campus Avenue corner Park Avenue, McKinley Town Center, Fort Bonifacio, Taguig Ci/:;