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

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Republic of the Philippines ENERGY REGULATORY COMMISSION San Miguel Avenue, Pasig City Republic of the Philippines ENERGY REGULATORY COMMISSION San Miguel Avenue, Pasig City IN THE MATTER OF THE APPLICATION FOR APPROVAL OF THE MULTI- YEAR CAPITAL EXPENDITURE PROJECTS (2018-2020) ERC CASE NO. 2020-006 RC NEGROS ORIENTAL I Promulgated: ELECTRIC COOPERATIVE, August 14, 2020 INC. (NORECO I), Applicant. x ------------------------------------ x NOTICE OF VIRTUAL HEARING TO ALL INTERESTED PARTIES: Notice is hereby given that on 28 January 2020, Negros Oriental I Electric Cooperative, Inc. (NORECO I) filed an Application dated 19 December 2019, seeking the Commission’s approval of its multi-year Capital Expenditure (CAPEX) projects for the years 2018 to 2020. The pertinent portions of the said Application are hereunder quoted as follows: 1. NORECO I is an electric cooperative duly organized and existing under the laws of the Republic of the Philippines with office address at Tinaogan, Bindoy, Negros Oriental. 2. NORECO I was granted a franchise to operate an electric light and power distribution service in the municipalities of Mabinay, Manjuyod, Bindoy, Ayungon, Tayasan, Jimalalud, La Libertad, and Vallehermoso, and the cities of Guihulngan, Bais, and Canlaon, all in the province of Negros Oriental. 3. The instant Application is filed pursuant to Section 43 (f) of Republic Act No. 9136, otherwise known as the “Electric Power Industry Reform Act of 2001”, ERC Resolution No. 26, Series of 2009, ERC Rules of Practice and Procedure, and ERC CASE NO. 2020-006 RC NOTICE OF VIRTUAL HEARING/11 August 2020 PAGE 2 OF 7 other relevant laws and rules, for the Honorable Commission's approval, confirmation and authority for NORECO I to implement the proposed Capital Expenditure (CAPEX) projects for the years 2018 to 2020. 4. NORECO I furnished the legislative bodies of the local government units where it principally operates with copies of the Application with all its annexes and accompanying documents. Copies of the proofs of service to the Sangguniang Panlalawigan of Negros Oriental and the Sangguniang Bayan of Bindoy, Negros Oriental are attached as Annexes “A” and “B”, respectively. 5. NORECO I also published the Application sans annexes in its entirety in a newspaper of general circulation within its franchise area. Copies of the Affidavit of Publication and the Newspaper where the Application was published are attached as Annexes “C” and “D”, respectively. 6. NORECO I's Multi-Year Capital Expenditure Projects are divided into network and non-network projects, with the specific projects indicated as follows: CAPITAL EXPENDITURE PROJECTS (2018-2020) PROJECT DESCRIPTION TOTAL 2018 2019 2020 PROPOSED NETWORK PROJECTS Replacement of Defective 21,671,668 6,727,524 7,442,461 7,501,684 Network Assets Replacement of Damaged Batteries and Charger Of SF6 777,000 - 651,000 126,000 Circuit Breaker of 3.75MVA Mabinay Substation Uprating of Bais Substation Power Transformer from 5MVA 25,830,000 - 25,830,000 - to 10MVA including the Substations’s Protection KWhr Meters & Service Drop 35,265,145 4,655,113 15,307,562 15,302,470 Wires for New Consumers Distribution Transformers for 8,617,039 8,032,189 292,425 292,425 Additional Demand Expansion of Distribution System thru Government Subsidy: Primary Single Phase, 200,187,592 60,498,959 14,170,550 125,518,083 Under-Built and Open Secondary Lines Expansion of Under-Built 5,453,873 169,309 2,642,282 2,642,282 Distribution Lines Acquisition of Buffer Stocks 53,917,226 20,973,655 16,471,785 16,471,785 Replacement of Defective/Slow/Stop and Low 55,584,166 3,849,500 18,658,983 33,075,683 Rated kWhr meters Relocation of kwhr Meters to 3,856,581 - 1,928,291 1,928,291 Accessible Areas Sub Total Network Projects 411,160,289 104,906,249 103,395,339 202,858,701 PROPOSED NON- NETWORK PROJECTS Purchase of Personal Protective 1,583,621 1,427,370 93,245 63,005 Equipments (PPE) ERC CASE NO. 2020-006 RC NOTICE OF VIRTUAL HEARING/11 August 2020 PAGE 3 OF 7 Acquisition of Watthour Meter 5,040,000 - - 5,040,000 Standard Test Bench Acquisition and Installation of GIS Engineering Software and 2,867,007 1,424,580 734,118 708,309 Hardware Acquisition of Vehicles 29,956,500 - 4,546,500 25,410,000 Purchase Of Tools, Shop, Garage, Store Equipment, Office 12,823,103 4,518,677 4,973,299 3,331,127 and Furniture Equipment CCTV Installation and Network- 1,239,010 - 1,197,010 42,000 CCTV Room Modification Improvement of Wireless 830,550 - 646,800 183,750 Communication Equipment Server Upgrades and Acquisition 3,265,500 - 1,008,000 2,257,500 of Software Licenses Acquisition of Power Generators 241,500 - - 241,500 Purchase of Power Operated 5,368,348 1,107,749 2,458,304 1,802,296 Equipment Information and Communication System 2,002,875 - 1,212,750 790,125 Improvement and Upgrades Acquisition of Cashier’s Vault with Burglar System and 420,000 - - 420,000 Installation of Alarm System Multi-purpose Sound System and Paging System 537,600 - 275,100 262,500 Rehabilitation Buildings/offices Renovations 5,317,234 - 4,579,457 737,777 and Improvement Acquisition of Land 2,100,000 - - 2,100,000 Development of Queuing and Integrated Customer Complaint 777,000 - 777,000 - System Computer and Communication Network Infrastructures 1,323,000 - - 1,323,000 Upgrades Sub Total Non-Network 75,692,847 8,478,376 22,501,582 44,712,889 Projects TOTAL SUBSIDY 200,187,592 60,498,959 14,170,550 125,518,083 TOTAL CAPITALIZED 286,665,545 52,885,667 111,726,371 122,053,507 PROJECT OVERALL TOTAL FOR 486,853,137 113,384,626 125,896,921 247,571,590 2018-2020 7. The above-enumerated CAPEX projects were proposed after a performance assessment of the distribution system of NORECO I, in response to the identified problems. 8. NORECO I's Profile, Forecasting Model, Forecasted Energy Sales and Peak kW Demand, Consumer Count, Performance Assessment of the Distribution System, Identified Problems, Proposed Capital Projects with Description and Justification and Project Financing Plan are discussed in detail in the CAPEX Plan of NORECO I, attached as Annex “E” hereof. 9. Applicant’s estimated capital expenditure for 2018-2020 exclusive of permit fee, legal and consultancy fees and capitalized interests is Two Hundred Eighty Six Million Six Hundred Sixty Five Thousand and Five Hundred Forty Five Pesos (P286,665,545). ERC CASE NO. 2020-006 RC NOTICE OF VIRTUAL HEARING/11 August 2020 PAGE 4 OF 7 a. Applicant intends to secure loans from the Rural Electrification Financing Corporation for the following projects: i. Replacement of defective network assets; ii. Uprating of Bais Substation Power Transformer from 5 MVA to 10 MVA including the Substation’s protection; iii. KWhr meters and service drop wires for new consumers; iv. Replacement of defective/slow/stop kWhr meters; and v. Acquisition of vehicles. b. Applicant is scheduled to loan P71,785,506 in the last quarter of 2019 and P81,289,836 in the last quarter of 2020 to finance the aforementioned capital projects. The loans have an annual interest rate of 7.25% based on diminishing balance, payable for ten (10) years with one hundred twenty (120) monthly amortizations. c. The balance of the capital expenditure costs will be financed from the Reinvestment Fund for Sustainable Capital Expenditures (RFSC). The implementation of all the proposed projects is projected to have an average indicative additional revenue requirement on the RFSC rate of Php 0.5100 per kWh in order to cover the shortfall on the existing RFSC. 2018 2019 2020 TOTAL Forecasted energy sales, kWh 69,512,382 73,551,971 77,459,790 220,524,143 ACTUAL Cash balance beginning, PhP, 29,992,958 4,558,710 (5,947,177) (41,236,615) excess/(shortfall) CASH INFLOWS Current year collection, Php 36,545,210 37,421,974 26,638,422 100,605,606 Subsidy: SEP/NEA, Php 60,489,959 14,170,550 125,518,083 200,187,592 50% of income on leased 1,800,000 1,800,000 3,600,000 properties, Php Loan proceeds from financial 71,785,506 81,289,836 153,075,341 institutions, Php Total Cash Inflows, Php 97,044,169 125,178,029 235,246,340 457,468,539 Available cash for disbursement 127,037,128 129,736,740 229,299,163 416,231,924 CASH OUTFLOWS CAPEX requirement, Php 58,881,742 111,726,371 122,053,507 292,661,620 SEP Projects, Php 60,498,959 14,170,550 125,518,083 200,187,592 New amortization (new 5,056,614 15,839,334 20,895,948 CAPEX), Php Old debt, Php 3,097,716 3,474,136 3,507,320 10,079,171 Documentary Stamp Tax for 1,256,246 1,422,572 2,678,818 Loan Applications, Php ERC Permit Fee, PhP 2,194,962 2,194,962 Total Cash Outflows, PhP 122,478,417 135,683,917 270,535,778 528,698,112 ERC CASE NO. 2020-006 RC NOTICE OF VIRTUAL HEARING/11 August 2020 PAGE 5 OF 7 Cash balance ending, PhP, 4,558,710 (5,947,177) (41,236,615) (112,466,188) excess/(shortfall) Excess/(shortfall) on RFSC, 0.0656 (0.0809) (0.5324) (0.5100) PhP/kWh PRAYER WHEREFORE, premises considered, it is most respectfully prayed to this Honorable Commission that a DECISION be rendered APPROVING the instant Application. Other just and equitable reliefs are likewise prayed for. In the Order dated 18 February 2020, the Commission has set the instant Application for the determination of compliance with the jurisdictional requirements, expository presentation, pre-trial conference, and presentation of evidence on 07 May 2020 at the main office of NORECO I.
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