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 CASE NO. 2015-206 RC

LANAO .DEL NORTE ELECTRIC COOPERATIVE, ( {JiJ or l!l D D J C.JAN. 0 5 2016 INC. (LANECO), nate:, 20./ ,=..-. Applicant. .. p.o/: _W ~.~._-llI

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NOTICE OF PUBLIC HEARING

TO ALL INTERESTED PARTIES:

On 07 December 2015, the Electric Cooperative, Inc. (LANECO) filed an application for the approval of capital expenditure projects (CAPEX) 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. ERC CASE NO. 2015-206 RC NOTICE OF PUBLIC HEARING/10 December 2015 Page 2 of8

In the said application, LANECO alleged, among others, 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 , 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, , Poona , Bacolod, Mango, , , Magsaysay, Tubod, , , Salvador, , Lala, , Kapatagan and .

Legal Basis for the Application

3. The instant application is being submitted to. the Commission for its evaluation and approval of LANECO's proposed 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 6,562,060.31 Libertad, Kauswagan

Total 95,426,233.53 ERC CASE NO. 2015-206 RC NOTICE OF PUBLIC HEARING/10 December 2015 Page 3 of8

Statement of Facts

5. On 02 May 2011, the Commission rendered its decision on LANECO's application for approval of its Capital Projects for Years 2009-2013 under ERC Case 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 energize the 10 MVA Sagadan Substation;

7. As approved, the 18- kilometer 69kV Subtransmission Line Project has a horizontal structural design of construction, with a project cost ofPhP36,000,000.00;

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

9. Due to the 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 LANECO as well as its consumers;

10. Recently, due to the urgent necessity of implementing the construction of the 18-km 69kV subtransmission line, the cooperative sought permission from the 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;'

11. However, due to the substantial revision in the conceptual engineering design and significant increase in cost of the project, the Commission instead required LANECOto file a new application for approval ofthe revised project;2

'Copy of LANECO's letter to the Commission of 1October 2014 is attached hereto as Annex "A". 2 Copy of the Commission's reply of 20 October 2014 is attached hereto as Annex "B", ERC CASE NO. 2015-206 RC NOTICE OF PUBLIC HEARING/10 December 2015 Page 4 of8

12. Hence, the present application was filed 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 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 (PhP95A26,233.53) 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 of pursuing and implementing the proposed projects without necessarily causing a significant increase in its electricity rates, to wit: ERC CASE NO. 2015-206 RC NOTICE OF PUBLIC HEARING/10 December 2015 Page 5 of8

2015 (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 AFTER DEBT SERVICE ( 167,000,254- 20,670,~2S) 146,:-l2<},<}29

TOTAL CAPEX PROJECTS and ERC CAPEX PERMIT FEES 169-42:-l,512

BALANCE, END ( 146,329,929 - 169,423,512 ) (23,093,584 )

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 Imnact Comnutation Total (PhP) Pro;ected kWh Sales 7~,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 ner kWh 0.7132 ERC CASE NO. 2015-206 RC NOTICE OF PUBLIC HEARING/10 December 2015 Page 6 of8

Allegations in Support of the 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 10MVA 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 service to its consumers. ERC CASE NO. 2015-206 RC NOTICE OF PUBLIC HEARING/10 December 2015 Page 70f8

Submission of Documentary and Pre-filing Reguirements

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 required Annexes Eto Affidavit of Posting/Proof of Public Information E-l 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-l Panlalawigan of Lanao del Norte

Annexes Publication of the Application in a newspaper of general Rto circulation within LANECO's franchise area, with Affidavit R-2 of Publication

The Commission has set the application 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 LANECOMain Office, Sagadan, Poblacion, Tubod, Lanao del Norte.

All persons who have an interest in the subject matter of the proceeding may become a party by filing, at least five (5) days prior to the initial hearing and subject to the requirements in the ERC's Rules ERC CASE NO. 2015-206 RC NOTICE OF PUBLIC HEARING/10 December 2015 Page 8 of8

of Practice and Procedure, a verified petition with the Commission giving the docket number and title of the proceeding and stating: (1) the petitioner's name and address; (2) the nature of petitioner's interest in the subject matter of the proceeding, and the way and manner in which such interest is affected by the issues involved in the proceeding; and (3) a statement of the relief desired.

All other persons who may want their views known to the Commission with respect to the subject matter of the proceeding may file their opposition to the application or comment thereon at any stage of the proceeding before the applicant concludes the presentation of its evidence. No particular form of opposition or comment is required, but the document, letter or writing should contain the name and address of such person and a concise statement of the opposition or comment and the grounds relied upon.

All such persons who wish to have a copy of the application may request from the applicant that they be furnished with the same, prior to the date of the initial hearing. The applicant is hereby directed to furnish all those making such request with copies of the application and its attachments, subject to the reimbursement of reasonable photocopying costs. Any such person may likewise examine the application and other pertinent records filed with the Commission during the standard officehours.

WITNESS, the Honorable Chairman, JOSE VICENTE B. SALAZAR, and the Honorable Commissioners, ALFREDO J. NON, GLORIA VICTORIA C. YAP-TARUC and GERONIMO D. STA. ANA, Energy Regulatory Commission, this 10th day of December 2015 at Pasig City.

ATTY. J. MARASIGAN hief of Staff Officeof the Chairman and CEO

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