ECEIIVE Fl Date APPLICATION for APPROVAL —U-A—Gs J of the POWER SUPPLY by ILXC L CONTRACT (PSC) ENTERED INTO by and BETWEEN NUEVA ECIJA II ELECTRIC COOPERATIVE, INC
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Repullic of the Philippines ENERGY REGULATORY COMMISSION San Miauel Avenue, Pasici City &NWGY NE(3tJLAIQRY GOkll'i'S3iON IN THE MATTER OF THE JOINT ECEIIVE fl Date APPLICATION FOR APPROVAL —u-a—gs J OF THE POWER SUPPLY By ILXC L CONTRACT (PSC) ENTERED INTO BY AND BETWEEN NUEVA ECIJA II ELECTRIC COOPERATIVE, INC. - AREA 2 (NEECO Il-AREA 2) AND SAN MIGUEL ENERGY CORPORATION (SMEC), WITH PRAYER FOR PROVISIONAL AUTHORITY AND CONFIDENTIAL TREATMENT OF INFORMATION ERC CASE NO;2016-RC NUEVA ECIJA II ELECTRIC COOPERATIVE, INC. - AREA 2 (NEECO lI-AREA 2) AND SAN MIGUEL ENERGY CORPORATION (SMEC), Applicants. x----------------------x JOINT APPLICATION WITH PRAYER FOR PRQVISIQNAL AUTHORITY AND CONFIDENTIAL TREATMENT OF INFORMATION The Joint Applicants Nueva Ecija II Electric Cooperative, Incorporated - Area 2 (NEECO Il-Area 2) and San Miguel Energy Corporation (SMEC), through their respective undersigned counsel and unto the Honorable Commission, most respectfully state, that: Joint Application (NEECO Il-Area 2 and SMEC) Paae2of23 The Joint, Applicants NEECO Il-Area 2 is a non-stock, non-profit electric cooperative duly organized and existing under the Philippine Laws, with principal office address at Maharlika Highway, Diversion, San Leonardo, Nueva Ecija. It holds a franchise to operate light' and power services in the City of Palayan and in the Municipalities of Bongabon, Gabaldon, General Natividad, General Tinio, Laur, Llanera, Penaranda, Rizal, San Leonardo, and Sta. Rosa, all in the Province of Nueva Ecija, and Dingalan in the Province of Aurora (Franchise Area). It shall also be herein referred to as the "Buyer"; 2. SMEC is a domestic corporation organized and existing under the Philippine laws, with office addresses at the 2 nd Floor, 808 Building, MERALCO Avenue corner Gen. Lirn Street, Barangay San Antonio, Pasig City. It is the Independent Power Producer (IPP) Administrator of the 1,000 Net Contracted Capacity of the Sual Coal-Fired Thermal Power Plant located in Barangay Pangascasan, Sual, Pangasinan. It shall also be herein referred to as the "Seller"; 3. The Joint Applicants may be served with the orders, notices and other processes of the Honorable Commission through their respective undersigned counsel at the addresses indicated herein; Nature of the Application 4. The Joint Application for approval of the Power Supply Contract (PSC) entered into by and between NEECO II- Area 2 and SMEC, is being submitted to the Honorable Commission for its review and approval pursuant to Sections 25 and 45(b) of Republic Act No. 9136, otherwise known as the Electric Power Industry Reform Act of 2001 or the EPIRA, Rules 5, Section 4(e) and 11, Section 5 of its Implementing Rules and Regulations (IRR), Rule 20(B) of its Rules of Practice and Procedure, and other pertinent rules and regulations; Joint Application (NEECO Il-Area 2 and SMEC) Paae3of23 Statement of Facts 5. Competitive Selection Process (CSP). On i June 2015, Engr. Frank T. Wy, NEECO li-Area 2's Corporate and Planning (CORPLAN) Manager sent a letter to Mr. Ramon M. De Vera, General Manager, requesting for the conduct of a CSP for a three (3)-year power supply contract from 26 December 2016 to 25 December 2019, the terms of which were provided in his subsequent letter dated 16 June 2016; 5.1 On 21 June 2015, NEECO Il-Area 2's Procurement, Bid and Award Committee (PBAC) published an "Invitation to Bid" in The Philippine Daily InQuirer. However, only First Gen Corporation (First Gen) signified its interest to participate during 'the qualification and bidding process for said power supply contract. For this reason, NEECO lI-Area 2 declared a failed bidding; 5.2 On 23 August 2015, NEECO Il-Area 2's PBAC published another 'invitation to Bid" in the same newspaper. On 1 September 2015, SMC Global Power Corp. (SMC Global), the parent company of SMEC, signified its intention to participate in the CSP; 5.3 During the Pre-bid Conference on 24 September 2015, only First Gen made a presentation of its proposal: 5.4 Thus, the PBAC recommended to NEECO Il-Area .2's Board of Directors to conduct direct negotiations and invited First Gen and SMEC on 15 October 2015; 5.5 During said 15 October 2015 negotiations, it was disclosed that SMEC's rate proposal is lower than First Gen's proposal. As a result of NEECO llArea 2's Technical Working Group (TWG) and PBAC evaluation, it was determined that the average resulting rate of SMEC's proposal is PhP4.949331/kWh which is lower than First Gen's proposal by approximately PhPO.140466/kWh; Joint Application (NEECO lI-Area 2 and SMEC) Page 4 of 23 5.6 On 12 April 2016, the PBAC recommended to the Board of Directors to award the power supply contract with SMEC which will provide NEECO II- Area 2's electricity requirements for the period 26 December 2016 to 25 December 2019; 5.7 On 21 April 2016, the Board of Directors issued a Notice of Award in favor of SMEC. On even date, said Board issued Resolution No. 2016-04-02 iuthorizing the General Manager and the President, among others, to sign the PSC with SMEC as well as other documents necessary for the execution of said PSC; and 5.8 On 9 June 2016, the Board of Directors issued Resolution No. 2016-06-0 1 authorizing the filing of a joint application for approval of the PSC with SMEC and appointing its authorized representatives and legal counsel during the proceedings before the Honorable Commission; 6. Salient Features of the PSC. 6.1 Contract Capacity. The Contract Capacity for the duration of the PSC shall be 27,000 kW. The Buyer shall maintain a minimum hourly nomination of at least thirty-five percent (35%) of the Contract Capacity for the duration of said PSC. The Contract Capacity shall be subject to a separate Nomination Protocol; 6.2 Contract Term. The PSC shall take effect between the Parties on the date of signing (Execution Date) and shall remain effective until 25 December 2019. The Seller shall supply the Buyer beginning 26 December 2016 (Supply Effective Date); 6.3 Capacity and Energy Fees. Under the PSC, NEECO lI-Area 2 shall pay the following Capacity and Energy Fees to SMEC: Joint Application (NEECO Il-Area 2 and SMEC) Paae5of23 Period Covered Capacity Fees (PhP/kW-month) Energy Fees (PhP/kWh) Variable Variable Dollar Local Fixed Fuel Contract Year 2017 O&M O&M Portion Portion O&M Rate (Dollar) (Local) From - To Al A2 B C Dl D2 26-Dec-16 - 25-Jan-17 455.2793 1067.9536 106.3830 2.0342 0.0626 0.0083 26-Jan-17 - 25-Feb-17 456.1276 1,069.5023 106.3830 2.0342 0.0626 0.0083 26-Feb-17 - 25-Mar-17 456.9787 1,053.7243 106.3830 2.0342 0.0626 0.0083 26-Mar-17 - 25-Apr-17 457.8327 1,072.6143 106.3830 2.0342 0.0626 0.0083 26-Apr-17 - 25-May-17 458.6896 1,068.4008 106.3830 2.0342 0.0626 0.0083 26-May-17 - 25-Jun-17 459.5492 1,075.7462 106.3830 2.0342 0.0626 0.0083 26-Jun-17 - 25-Jul-17 460.4117 1,071.5435 106.3830 2.0342 0.0626 0.0083 26-Jul-17 - 25-Aug-17 461.2772 1 1078.8999 106.3830 2.0342 0.0626 0.0083 26-Aug-17 - 25-Sep-17 462.1455 1,080.4834 106.3830 2.0342 0.0626 0.0083 26-Sep-17 - 25-Oct-17 463.0167 1,076.2978 106.3830 2.0342 0.0626 0.0083 26-Oct-17 - 25-Nov-17 463.8909 1,083.6691 106.3830 2.0342 0.0626 0.0083 26-Nov-17 - 25-Dec-17 464.7678 1,079.4927 106.3830 2.0342 0.0626 0.0083 ContracL Year 2018 26-Dec-17 - 25-Jan-18 465.6477 1,086.6966 106.3830 2.0297 0.0626 0.0083 26-Jan-18 - 25-Feb-18 466.5306 1,088.3073 106.3830 2.0297 0.0626 0.0083 26-Feb-18 - 25-Mar-18 467.4146 1,072.6112 106.3830 2.0297 0.0626 0.0083 26-Mar-18 - 25-Apr-18 468.3052 1,091.5478 106.3830 2.0297 0.0626 0.0083 26-Apr-18 - 25-May-18 469.1968 1,087.4035 106.3830 2.0297 0.0626 0.0083 26-May-18 - 25-Jun-18 470.0916 1,094.8071 106.3830 2.0297 0.0626 0.0083 26-Jun-18 - 25-Jul-18 470.9893 1,090.6738 106.3830 2.0297 0.0626 1 0.0083 26-Jul-18 471.8899 1,098.0891 106.3830 2.0297 0.0626 1 0.0083 - _y18 26-Aug-18 - 25-Sep-18 472.7936 1,099.7379 106.3830 2.0297 0.0626 0.0083 26-Sep-18 - 25-Oct-18 473.7003 1,095.6221 106.3830 2.0297 0.0626 0.0083 26-Oct-18 - 25-Nov-18 474.6100 1,103.0531 106.3830 2.0297 0.0626 0.0083 26-Nov-18 - 25-Dec-18 475.5227 1,098.9466 106.3830 2.0297 0.0626 0.0083 ContracL Year 2019 26-Dec-18 - 25-Jan-19 476.4385 1,046.2326 106.3830 2.0500 0.0626 0.0083 26-Jan-19 - 25-Feb-19 477.3574 1,047.8084 106.3830 2.0500 0.0626 0.0083 26-Feb-19 - 25-Mar-19 478.2793 1,032.1915 106.3830 1 2.0500 0.0626 0.0083 26-Mar-19 - 25-Apr-19 479.2042 1,050.9749 106.3830 2.0500 0.0626 0.0083 26-Apr-19 - 25-May-19 480.1323 1,046.8335 106.3830 2.0500 0.0626 0.0083 - 25-Jun-19 481.0634 1,054.1634 106.3830 2.0500 0.0626 0.0083 26-Jun-19 - 25-Jul-19 481.9977 1,050.0308 106.3830 2.0500 0.0626 0.0083 26-Jul-19 - 25-Aug-19 482.9351 1 1057.3704 106.3830 2.0500 0.0626 0.0083 - 25-Sep-19 483.8755 1,058.9851 106.3830 2.0500 0.0626 0.0083 26-Sep-19 - 25-Oct-19 484.8191 1,054.8693 106.3830 2.0500 0.0626 0.0083 26-Oct-19 - 25-Nov-19 485.7659 1,062.2264 106.3830 2.0500 0.0626 0.0083 26-Nov-19 - 25-Dec-19 486.7159 1,058.1212 106.3830 2.0500 0.0626 0.0083 6.4 Adjustment Formula.