Republic of the Philippineâ ENERGY REGULATORY COMMISSION San Miguel Avenue, Pasig City IN THE MATTER OF THE APPLICATION FOR THE APPROVAL OF THE EMERGENCY POWER SUPPLY AGREEMENT (EPSA) BETWEEN ISABELA I ELECTRIC COOPERATIVE, INC. (ISELCO I) AND STRATEGIC POWER DEVT. CORP. (SPDC), WITH PRAYER FOR CONFIDENTIAL TREATMENT OF INFORMATION ERC CASE NO. 2019 - RC C ISABELA I ELECTRIC a COOPERATIVE, INC. (ISELCO I) AND STRATEGIC POWER DEVT. CORP. (SPDC), - Applicants. x---------------------- x JOINT APPLICATION WITH PRAYER FOR CONFIDENTIAL TREATMENT OF INFORMATION • Joint Applicants ISABELA I ELECTRIC COOPERATIVE, INC. ("ISELCO I") and STRATEGIC POWER DEVT. CORP. ("SPDC"), through their respective undersigned counsel, respectfully state that: 1. ISELCO I is a non-stock, non-profit electric cooperative duly organized and existing under the Philippine Laws, with principal office at Victoria, Alicia, Isabela. It holds a franchise to operate light and power services in the Cities of Cauayan and Santiago, and in the Municipality of Alicia, Angandanan, Cabatuan, Cordon, Echague, Jones, Luna, Ramon, Reina Mercedes, San Agustin, San Guillermo, San Isidro, and San Mateo, all in the province of Isabela (Franchise Area). It shall also be herein referred to as the "BUYER"; 4L7 060- Joint Application (ISELCO I and SPDC) Pacie2ofl9 2. SPDC is a corporation duly organized and existing under the laws of the Republic of the Philippines, with office address at 2/F, 808 Bldg., Meralco Ave. cor. Gen. Lim St., San Antonio Village, Pasig City. It shall also be herein referred to as the "SELLER"; 3. SPDC is the Independent Power Producer Administrator ("IPPA") of the 345 MW San Roque Hydroelectric Power Plant in Barangay San Roque, San Miguel, Pangasinan (the "Plant") by virtue of an IPP Administration Agreement it executed with the Power Sector Assets and Liabilities Management Corporation ("PSALM"); 4. The joint Applicants may be served with the orders, notices and other processes of the Honorable Commission through their respective undersigned counsels at the addresses indicated herein; Nature of the Application 5. The Joint Application for approval of the Emergency Power Supply Agreement ("EPSA") dated 21 February 2019 entered into by and between ISELCO I and SPDC, 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" (EPIRA), Rules 5, Section 4(e) and 11, Section 5 of its Implementing Rules and Regulations (IRR), Rule 2 0(B) of its Rules of Practice and Procedure, and other pertinent rules and regulation; 6. Pursuant to ERC Resolution No. 13, Series of 2015, entitled "A Resolution Directing All Distribution Utilities (DUs) to Conduct a Competitive Selection Process (CSP) in the Procurement of their Supply to the Captive Market" adopted on 20 October 2015, all DUs are mandated to undertake a transparent and competitive selection process before contracting for the supply of electricity in their franchise areas; 7. However, under the Department of Energy's (DOE) Department Circular No. DC2018-02-0003 (Adopting and Prescribing the Joint Application (ISELCO I and SPDC) Paqe3ofl9 Policy for the Competitive Selection Process in the Procurement by the Distribution Utilities of Power Supply Agreement for the Captive Market") adopted on 01 February 2018 ("DOE CSP Circular"), all Power Supply Agreements ("PSAs") shall be procured, through CSP, except in some instances which warrant the issuance by the DOE of a Certificate of Exemption on the conduct of CSP; 8. One of the aforesaid instances is the Negotiated Procurement of Emergency Power Supply, where the cooperation period of the PSA shall not exceed one (I) year, the rate shall not be higher than the latest ERC approved generation tariff for same or similar technology in the area. The grant of a Certificate of Exemption authorizes the DU to immediately implement the PSA, without prejudice to the evaluation and final decision of the ERC; Statement of Facts 9. Pursuant to the aforesaid DOE CSP Circular, on 21 February 2019, ISELCO I and SPDC executed an Emergency Power Supply Agreement ("EPSA"), a copy of which is attached as Annex "P" and made an integral part hereof, which is the subject of the Joint Application; 10. The details leading to the execution of the EPSA are as follows: ISELCO I entered into a PSA with Isabela Power Corporation ("IPC") for the supply of 19,000 kW energy starting 26 December 2018; A Joint Application for the approval of the said PSA was filed on 29 April 2016 by ISELCO 'I and IPC with the Honorable Commission, docketed as ERC Case No. 2016- 070 RC; The said PSA was provisionally approved by the Honorable Commission in an Order dated 08 July 2016; In a Letter of the Honorable Commission to ISELCO I and IPC dated 22 December 2016, the Honorable Commission Joint Application (ISELCO I and SPDC) Page 4 of 19 confirmed that with the grant of the provisional authority, the PSA may already be implemented and ISELCO I may already include in the computation of its generation charge the costs incurred for the supply coming from IPC, subject to the applicable Selling Rate of PhP5.90/kWh, a copy of the said Letter is hereto attached as Annex "0"; Meanwhile, the commercial operation of IPC Run-of-River 1-lydro Electric Power Plant has been moved from the expected date of 26 December 2018 to June 2020, thus, IPC would not be able to supply ISELCO I's 19,000 kW energy requirement by 26 December 2018; ISELCO I would be compelled to source the 19,000 kW energy from other generating company to avoid exposure to the WESM where price of energy is volatile; In light of the foregoing, ISELCO I wrote the DOE on 05 September 2018 requesting for the issuance of a Certificate of Exemption from the conduct of CSP to cover the aforesaid demand and energy requirement from IPC, a copy of the said letter is hereto attached as Annex "0-1" and made an integral part hereof; In a Reply-letter dated 20 December 2018, the DOE approved ISELCO I's request for exemption and thus, issued a Certification that ISELCO I is exempted from the conduct of CSP and authorizing it to proceed with the negotiated procurement of emergency power supply for a cooperation period of one (1) year, copies of the DOE Reply-letter and Certification are hereto attached as Annexes "0-2" and "0-3", respectively; Subsequently, ISELCO I negotiated with SPDC for the emergency supply of 19,000 kW starting 26 February 2019 until 25 February 2020; The Board of Directors of ISELCO I issued Board Resolution r No. 006, Series of 2019 on 30 January 2019 approving the EPSA bet*een ISELCO I and SPDC and authorizing the Board President and General Manager to enter into and be Joint Application (ISELCO I and SPDC) Paae 5 of 19 the official signatories in, behalf of ISELCO I in the EPSA; and In a Letter dated 28February 2019, ISELCO I informed the Honorable Commission regarding the EPSA it executed with SPDC and submitted documents pertinent thereto, a copy of which is hereto attached as Annex "04"; 11. The immediate supply from SPDC was intended to prevent power shortage/rotating brownouts in ISELCO I's Franchise Area and possible exposure of its member-consum?rs to the volatile prices of the WESM or to the higher , prices of its current supplier/s or other generators. This emergency power supply from SPDC redounds to the benefit of ISELCO I's member-consumers in terms of ensuring a stable, secure, continuous and reliable supply of electricity at a reasonable price; 12. The salient features of the EPSA are as follows: 12.1. Maximum Allowable Capacity (MAC). The SELLER shall make available to the BUYER the MAC of 19,000 kW energy requirement for the duration of the EPSA. If the BUYER requires energy beyond the MAC, the BUYER shall inform the SELLER. The SELLER, on best efforts basis; will provide the said requirement and declare it to the Wholesale Electricity Spot Market (WESM). Any consumption of the BUYER beyond the MAC not declared by the SELLER in the WESM, shall be deemed a WESM purchase (imbalance) and shall be for the account of the BUYER. The BUYER shall furnish the SELLER with its monthly, weekly and binding day-ahead nominations of capacity in accordance with the Bilateral Contract Quantity (BCQ) Nomination Protocol. The SELLER guarantees supply to the BUYER, with no Replacement Power Charges, throughout the duration of the EPSA even during outages (scheduled and Joint Application (ISELCO I and SPOC) Page6of 19 forced outages) of the SELLER's source power plants, except during Force Majeure Events. 12.2 Contract Term. The supply of power under the EPSA shall commence on 26 February 2019 until 25 February 2020, or for a period of twelve (12) Billing Periods. 12.3 Power Source. 345 MW San Roque Multipurpose Hydroelectric Power Plant or from other sources including the WESM. 12.4 Contract Charges. 12.4.1 Fixed Energy Rate (FER). The SELLER shall bill the BUYER's energy consumption at an energy rate of PhP5.90/kWh, not subject to any adjustment. 12.4.2 Taxes. All applicable existing taxes, including Value Added Tax (VAT), Excise Tax and other taxes under the TRAIN Law, as well as all other future taxes (except Corporate Income Tax and Local Business Tax), that may be imposed by the government and which may be legally passed on by the SELLER to the BUYER in connection with the SELLER's performance of its obligation under the EPSA, including any increase or adjustments thereon, shall be for the account of the BUYER.