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

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J for Republic of the Philippines ENERGY REGULATORY COMMISSION San Miguel Avenue, Pasig City Appro;J for Republic of the Philippines ENERGY REGULATORY COMMISSION San Miguel Avenue, Pasig City IN THE MATTER OF THE APPLICATION FOR APPROVAL OF THE POWER SUPPLY AGREEMENT (PSA) FOR THE SUPPLY OF POWER TO AURORA ELECTRIC COOPERATIVE, INC. (AURELCO), WITH PRAYER FOR PROVISIONAL AUTHORITY ERC CASE NO. 201 3-013 RC AURORA ELECTRIC COOPERATIVE, INC. (AURELCO) AND ECO- DO CKnND •JBM 17 2013 MARKET SOLUTIONS, INC. Date................... (EMS), - App Ii ca nts. x----------------------- x [•flu14 On January 25, 2013, Aurora Electric Cooperative, Inc. (AURELCO) and Eco-Market Solutions, Inc. (EMS) filed an application for the approval of their Power Supply Agreement (PSA), with prayer for provisional authority. Relative to the prayer for provisional authority, the Commission initially reviewed the instant application, as follows: 1. PARTIES TO THE CONTRACT AURELCO is a non-stock, non-profit electric cooperative (EC) duly established and existing under and by virtue of the laws of the Republic of the Philippines, particularly, under the provisions of Presidential Decree No. 269, as amended. It is registered with the National Electrification Administration (NEA) and has its principal office at Barangay Reserva, Balejaler,urora. It is the exclusive holder of a franchise issued by the NEP/operate electric light and power services in the Municipalities f Dipaculao, San Luis, Maria 0 ERC CASE NO. 201 3-013 RC ORDER/April 8, 2013 Paae 2 of 10 Aurora, Dinalungan, Casiguran, Dilasag and Dingalan, all in the Province of Aurora, including the Municipality of Dinapigue, in the Province of Isabela and the Municipality of General Nakar, in the Province of Quezon. • Eco Market Solutions, Inc. (EMS) is a corporation duly organized and existing under and by virtue of the laws of the Republic of the Philippines with principal office address at Unit 501 Cristina Condominium, 143 Legaspi Street, Makati City 1229. 2. SALIENT FEATURES OF THE CONTRACT • Type of Plant Biomass Gasification Power Plant • Installed Capacity 2 MW • Contract Term The PSA shall be enforced for a period of ten (10) years. It shall automatically be extended for a period of five (5) Contract Years from the end of the initial ten (10)-year term and automatically extendable for another five (5) Contract Years, under the same terms and conditions, unless either party gives one (1) Contract Year prior written notice that: (i) it will no longer be extending the term of the PSA, or (ii) the extension of the term shall be under the terms and conditions mutually agreed upon by both parties • Commercial Upon commissioning of the power Operations plant and approval by the Commission of the PSA • Delivery Point High Voltage Side of the power plant transformer located in Brgy. Dibaraybay, Dinalungan, Aurora i 1~1 ERG CASE NO. 201 3-013 RC ORDER/April 8, 2013 Paae 3 of 10 . Contract Quantities a) Contracted Capacity for each Contract Year: Contract Year Phase Quantity(kWh) 1 1 1,182,600 2-10 1 and/or 2 3,000,000 b) Monthly Contract Quantity for the First Contract Year: Monthly Contract Billing Month Quantity (kWh) 1st12th 98,550 Total 1,182,600 • Tariffs and Rates Structure Particulars PhP/kWh Capital Recovery Fees 5.1004 Forex O&M Fees 2.0015 Peso O&M Fees 2.6803 Renewable Fuel & Lube Oil Fees 4.6888 Total 14.471 Note: Rates shall be subject to adjustment based on the adjustment formula provided in the PSA DISCUSSION A. AURELCO's Power Requirements Presently, AURELCO is sourcing its electricity requirements for its DiCaDiDi Area from the Diesel Power Plant of the National Power Corporation—Small Power Utilities Group (NPC-SPUG). NPC-SPUG operates four (4) generating sets in DiCaDiDi Area with combined total ratedcapacity'jof 1,935 kW, as follows: a) 2 X 500 kW MAN Genset; b) 1 X 675 kXV ERKINS Genset; and c) 1 X 260 kW PERKINS Genset. Thes nerati g sets operate for around twenty (20) hours a day. VA ERC CASE NO. 201 3-013 RC ORDER/April 8, 2013 Paae 4 of 10 Prior to the breakdown of some of NPC-SPUG's generating sets, the power supply in D1CaDiDi Area was intermittent even during the scheduled operating hours due to the frequent shortages in diesel fuel. AURELCO expects that the power generated by EMS will address the growing demand of the Municipalities of Dinalungan, Casiguran and Dilasag, in the Province of Aurora, and in the Municipality of Dinapigue in the Province of Isabela (DiCaDiDI Area) as shown by its 20-year demand forecast: Demand Demand Year Forecast (kW) Year Forecast (kW) 2011 1,251.12 2021 18,458.92 2012 1,867.70 2022 20,916.60 2013 2,788.44 2023 22,309.70 2014 4,162.86 2024 23,795.52 2015 6,399.10 2025 25,313.70 2016 9,553.20 2026 26,999.61 2017 10,189.44 2027 28,797.80 2018 10,868.05 2028 30,715.70 2019 11,591.90 2029 32,761.40 2020 12,363.92 2030 34,943.30 B. Procurement Process In March 2012, AURELCO initiated a Competitive Selection Process (CSP) for a New Power Provider (NPP) that will supply the base load requirements of the DiCaDiDi Area. However, on April 21, 2012 and May 5, 2012, AURELCO declared a failed bidding because only EMS participated in the CSP. As a result of the two (2) failed biddings, AURELCO negotiated directly to EMS for the supply of power to the DiCaDiDi Area. On November 5, 2012, the Department of Energy (DOE) issued a Certification on the conduct of the said CSP. C. EMS 2 MW Biomass Gasification Power Plant EMS will install two (2) i$a,rnass gasification power plants that will provide up to 2 MW of effi16iit, scalable, green, base load power ERC CASE NO. 201 3-013 RC ORDER/April 8, 2013 Paae 5 of 10 to the DiCaDiDi Area which includes the Aurora Pacific Economic Zone and Freeport (APECO). The two (2) power plants, which will be utilizing biomass fuel, will be located in the following areas: Plant Location Capacity Biomass Fuel Source Wood branches, coco fronds, Dinalungan 500 kW corn cobs, briquettes 1,500 hectares of woody bio- Dilasag 1,500 kW ____________________ mass plantation (energy farm) The total estimated cost of the power plants is PhP316,208,380.00, forty percent (40%) of which will be sourced from lenders while the remaining sixty percent (60%) will come from investors' equity. On October 5, 2011, the Department of Environment and Natural Resources (DENR) issued a Certificate of Non-Coverage (CNC) with Reference No. CNC-R03-1110-0002 to EMS for its 2 MW Capacity Biomass Gasification Power Plant. On August 30, 2012, another CNC with Reference No. CNC R03-1208-0032 was issued to EMS for its 1.5 MW Biomass Gasification Power Plant. On January 13, 2013, the Commission issued a Certificate of Compliance (COC) to EMS for its 250 kW Biomass Gasification Power Plant. D. Initial Calculation of Rates The Commission used the Feed-In-Tariff (FIT) for Biomass and adopted a 52% load factor for purposes of computing the generation rate of EMS since it will be operating in an off-grid area where the utilization factor is lower compared to the availability factor of its power plant. It is necessary to consider the net capacity factor of an off-grid and on-grid area including their respective billing determinants. ERC CASE NO. 201 3-013 RC ORDER/April 8, 2013 Paae 6 of 10 Shown below is a comparison between the Commission's recalculated rate taking into account the parameters and the Discounted Cash Flow model used for FIT and the proposed rate of EMS: I EMS Commission Difference H Particulars (PhP/kWh) (PhP/kWh) (PhP/kWh) Base Rate 14.4710 7.7397 6.7313 E. Rate Impact At present, AURELCO is paying the Subsidized/Approved Generation Rate (SAGR) of PhP6.7133/kWh for the cost of power provided by NPC-SPUG in the DiCaDiDi Area. The True Cost Generation Rate (TCGR) of NPC-SPUG in the area is about PhP32.99/kWh based on the DOE 2012-2016 Missionary Electrification Development Plan (MEDP, March 14, 2012). In its 2012 Report on Casiguran SPUG, NPC-SPUG's TCGR increased from PhP27.58/kWh in 2010 to PhP29.92/kWh in 2011, to wit: Year 2010 Year 2011 Year 2012 Particulars (PhP) (PhP) (PhP) Variable Cost Fuel Cost 22.7203 26.3096 29.9245 Lube Cost 0.2309 0.2413 0.2522 Total Variable Costs 22.9512 26.5509 30.1767 Fixed Cost Depreciation 0.68961 0.5691 1 0.4844 Operating Expenses Personal Services 1.2845 1.0599 0.9022 Maintenance and Other Operating Expenses 1.6895 1.4423 1.2829 2.9740 2.5022 2.1851 Total Fixed Costs 3.6636 3.0713 2.6695 Interest Expenses 0.9571 0.2966 0.1505 Total Cost Per kwh 27.5719 29.9188 32.9967 ERC CASE NO. 201 3-013 RC ORDER/April 8, 2013 Pafle 7 of 10 The Commission finds that the EMS project will provide additional base load power and will significantly bring down the over- all cost of power in the DiCaDiDi Area, including the Universal Charge- Missionary Electrification (UC-ME), to wit: NPC-SPUG Rate Savings Pa iii Cu Ia rs (PhP/kWh) (PhPlkWh) (PhP/kWh) TCGR 32.9967 7.7397 - SAGR 6.7133 6.7133 - UC-ME 26.2834 0.9205 25.3629 The project will also enhance the local economy by creating a farmer's market for agricultural wastes such as wood waste, rice straw and husk, coconut husk and fronds, corn husks and wastes, and other grasses which will serve as the energy fuel for the power plant.
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