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

IN THE MATTER OF THE APPLICATION FOR THE APPROVAL OF THE EMERGENCY CAPITAL EXPENDITURE PROJECT: REPLACEMENT AND UPRATING OF POWER TRANSFORMER AT IRASAN SUBSTATION

2021-044 RC ERC CASE NO. 2020 - ___ RC June 09, 2021

ZAMBOANGA DEL NORTE ELECTRIC COOPERATIVE, INC. (ZANECO), Applicant. x------/

APPLICATION

APPLICANT, del Norte Electric Cooperative, Inc. (ZANECO for brevity), by counsel and unto this Honorable Commission, most respectfully states:

THE APPLICANT

1. Applicant ZANECO is an Electric Cooperative created and existing pursuant to the provisions of Presidential Decree No. 269 as amended, with principal office located at City, , Philippines, represented herein by its General Manager, Adelmo P. Laput, duly authorized by virtue of Resolution No. 152, Series of 2019 dated 01 October 2019, of the Board of Directors, copy of which is attached hereto as Annex “A” and made an integral part hereof;

The filing of the instant Application is likewise authorized under the afore-mentioned Resolution;

2. Applicant has been granted by the National Electrification Administration (NEA) an authority to operate and distribute

1 electric light and power within the coverage area comprising the Cities of and Dipolog, and the Municipalities of Rizal, , La Libertad, , Mutia, Polanco, S. Osmeña, Katipunan, Roxas, Manukan, , , Siayan, Leon Postigo, , , , , , , and , all in the Province of Zamboanga del Norte;

THE APPLICATION AND ITS PURPOSE

3. This Application is filed in compliance with ERC Resolution No. 26, Series of 2009, particularly under Article III, Section 3.4 thereof.

FACTUAL ANTECEDENTS

4. On 26 August 2019 at around 9:00AM, ZANECO’s 10 MVA Irasan Substation Transformer serving the municipality of Roxas, Manukan and Jose Dalman suddenly failed to deliver power resulting to total blackout in the affected areas. Copy of the Significant Incident Report (SIR) is attached hereto as Annex “B” as well as the letter informing the Honorable Commission of the incident as Annex “C”.

5. Several tests were conducted to determine the status of the 10MVA power transformer and found out that it is extremely damaged due to insulation failure on the primary side resulting to oil leaks, thus, needs to be replaced. The 10MVA power transformer was first energized in the year 1997 and prior to the incident the load factor was at 67.97%.

6. As a short-term measure, ZANECO temporarily distributed the load of the Irasan Substation to the adjacent 5MVA Sindangan substation and the 5MVA Piao Substation.

7. Considering the increasing load of the Sindangan Substation and the Piao Substation and the increasing economic activity of the areas served by the Irasan Substation, causes ZANECO to implement the Emergency CAPEX in order to replace the damaged transformer and uprate the same to accommodate the increasing demand in its franchise area.

2 PROPOSED EMERGENCY CAPEX PROJECT

Replacement and Uprating of the Power Transformer at Project Title Irasan Substation This Emergency Capital Expenditure project is for the Project replacement and uprating of the busted power transformer Description from 10 MVA to 20 MVA SCADA Ready Power Transformer located at Irasan, Roxas, Zamboanga del Norte. The Substation capacity for ZANECO’s 10MVA Irasan Substation was operating at a load factor of 67.97% before it failed to operate on 26 August 2019. While ZANECO implemented load transfers as a short term measure, this Justifications temporary solution can no longer sustain the increasing and Benefits demand in its franchise area, thus, necessitated ZANECO to to be replace and upgrade its capacity. Delivered The result of the system analysis demonstrates substantial improvement on the power distribution system including increase of capacity, improvement of system reliability and reduction of power loss. Project Cost PhP28,210,404.20 Project Year 2019 Schedule “D” : Executive Summary of the Emergency CAPEX Project “D-1”: Incident Report and Photos of the Damaged Power Transformer “D-2”: Test Report “D-3”: Procurement Details Annexes “D-4”: Project Schedule “D-5”: Economic Analysis “D-6”: Bill of Materials “D-7”: MFSR as of December 2019 “D-8”: RFSC Utilization Report as of December 2019 “D-9”: Summary of Forecasting Models “D-10”: Single Line Diagram

PROJECT FINANCING PLAN

8. The financing of the Emergency CAPEX will be sourced from the Reinvestment Fund for Sustainable CAPEX (“RFSC”);

3 9. Shown further is the simulation of the Applicant as to the indicative rate impact on the existing RFSC rate ZANECO with the implementation of the Emergency CAPEX project including the approved and pending Capital Expenditure Project Applications, to wit:

Indicative Rate Impact

PARTICULARS Unit 2020 2021 2022 TOTAL Cash balance, beginning, PhP 23,188,774 (62,456,801) (147,418,699) 23,188,774 excess/(shortfall) kilowatt-hour Sales kWh 276,550,082 287,414,419 298,278,755 862,243,256 CASH INFLOWS RFSC collected funds @ 0.3961 PhP 109,541,488 113,844,851 118,148,215 341,534,554 PhP/kWh Gov't. Subsidy (ERC Case No. 2019- PhP 570,973,238 570,973,238 039RC) Loan Proceeds from Bank/REFC PhP - - - - Loan Proceeds from NEA PhP - - - - Loan Proceeds from NEA (ERC Case PhP 668,254,754 474,596,025 461,000,644 1,603,851,423 No. 2019-039RC) Loan Proceeds from NEA (ERC Case No. 2010-050 RC; ERC Case No. 2016- PhP 76,788,628 76,788,628 015RC) Loan Proceeds from Bank/REFC (ERC PhP 28,127,896 28,127,896 Case No. 2016-015RC) Total Cash Inflows PhP 1,453,686,004 588,440,876 579,148,859 2,621,275,739 Available Cash for Disbursement PhP 1,476,874,778 525,984,075 431,730,161 2,644,464,513

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CASH OUTFLOWS Capex Requirements PhP 28,210,404 - - 28,210,404 Capex Requirements (ERC Case No. PhP 668,254,754 474,596,025 461,000,644 1,603,851,423 2019-039RC) Capex Requirements (ERC Case No. 2010-050 RC; ERC Case No. 2016- PhP 120,330,140 120,330,140 015RC) Rural Electrification Projects (ERC PhP 570,973,238 570,973,238 Case No. 2019-039RC) Amortizations of existing loans PhP 49,279,202 37,459,659 37,459,659 124,198,521 Amortizations of new loans (NEA/Bank) PhP 80,630,554 141,357,821 204,412,976 426,401,352 (ERC Case No. 2019-039RC)

Amortizations of new loans (Others) PhP - - - - Amortizations of new loans (ERC Case No. 2010-050 RC; ERC Case No. 2016- PhP 16,429,798 16,429,798 16,429,798 49,289,393 015RC) ERC Permit Fee PhP 5,223,489 3,559,470 3,457,505 12,240,464 Total Cash Outflows PhP 1,539,331,579 673,402,773 722,760,583 2,935,494,935

Cash balance, ending, PhP (62,456,801) (147,418,699) (291,030,422) excess/(shortfall) (291,030,422) Excess/(shortfall) on RFSC PhP/kWh (0.2258) (0.5129) (0.9757) (0.3375)

5 COMPLIANCE WITH PRE-FILING REQUIREMENTS

10. In compliance with Section 2, Rule 6 of the ERC Rules of Practice and Procedure, copies of this Application together with all its annexes and accompanying documents had been furnished by Applicant the Legislative Body of the City of Dipolog where Applicant principally operates and the Legislative Body of the Province of Zamboanga del Norte. Likewise, the Application was published in a newspaper of general circulation within the franchise area of the Applicant;

11. As proof of compliance of the service of the copies of the Application together with all its annexes are the Certifications issued by the Authorized Representatives of the Local Government Units and/or the Affidavit of Service executed by an employee of the Applicant and the first page of the Application bearing the receiving stamp of the aforementioned Offices as Annexes “E” and “F” respectively. Likewise attached hereto as Annexes “G” and “H” are the Affidavit of Publication and the newspaper issue containing the published Application;

12. Moreover, prior to the filing of this Application, a pre-filing conference with the concerned staff of the Commission was conducted pursuant to Section 4 of Rule 6, and for purposes of determining completeness of the supporting documents attached to the Application.

PRAYER

WHEREFORE, foregoing considered, Applicant respectfully prays that the Commission:

1. That after due notice and hearing the proposed capital projects/expenditures subject of this application be approved, declared just, reasonable, and equitable pursuant to the provisions of ERC Resolution No. 26, Series of 2009, and other related laws, rules and regulations;

2. That Applicant be authorized to recover from the member- consumers the costs incurred in the implementation of the approved Capital Expenditure Projects.

Other reliefs just and equitable are likewise prayed for.

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Cebu City, (for Pasig City), Philippines. 20 August 2020.

A.C. GAVIOLA LAW OFFICE Counsel for ZANECO Rm. 203, 2/F Crown Port View Hotel 3rd Ave., North Reclamation Area, City (032) 233-2026; [email protected]

BY:

ALAN C. GAVIOLA PTR No. 410763; Province of Cebu; Jan. 10, 2020 IBP A.R. No. 34214643; Cebu City; Jan. 10, 2020 Roll No. 30385 MCLE Compliance III, 0019612; Dec. 14, 2010

ALAN BYRNE S. GAVIOLA PTR No. 406440; Cebu City; Dec. 09, 2019 IBP A.R. No. 31137542; Cebu City; Dec. 09, 2019 Roll No. 62695 MCLE Compliance VI, 0027706; Apr. 14, 2022

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