Republic of the Philippines ENERGY REGULATORY COMMISSION San Miguel Avenue, Pasig City IN THE MATTER OF THE APPLICATION FOR APPROVAL OF THE UNBUNDLED RATES PURSUANT TO THE PROVISIONS OF REPUBLIC ACT NO. 9136 ERC CASE NO. 2001-986 SIASI ELECTRIC COOPERATIVE, INC. (SIASELCO), Applicant. x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x D E C I S I O N Before this Commission for resolution is the application filed on December 20, 2001 by applicant Siasi Electric Cooperative, Inc. (SIASELCO) for approval of its unbundled rates pursuant to the provision of Republic Act No. 9136. Relative thereto, on various dates, SIASELCO was directed to submit several documents. On October 29, 2002, SIASELCO filed its “Manifestation with Revised Compliance”. DECISION, ERC Case No. 2001-986 Page 2 of 35 Having found said application sufficient in form and substance with the required fees having been paid, an Order and a Notice of Public Hearing, both dated March 3, 2004 were issued setting the case for initial hearing on April 29, 2004. SIASELCO was directed to cause the publication of the Notice of Public Hearing, at its own expense, twice (2x) for two (2) successive weeks in two (2) newspapers of general circulation in the country, the last date of publication to be made not later than two (2) weeks before the scheduled date of initial hearing. The Office of the Solicitor General (OSG), the Commission on Audit (COA) and the Committees of Energy of both Houses of Congress were furnished with copies of the Order and the Notice of Public Hearing and were requested to have their respective duly authorized representatives present at the aforesaid initial hearing. Likewise, the Offices of the Municipal Mayors of Siasi and Pandami, Sulu were furnished with copies of the Order and the Notice of Public Hearing for the appropriate posting thereof on its bulletin board. At the initial hearing on April 29, 2004, only SIASELCO was present. No oppositor appeared nor was there any opposition registered. DECISION, ERC Case No. 2001-986 Page 3 of 35 During said hearing, SIASELCO submitted proofs of its compliance with the Commission’s publication and posting of notice requirements which were duly marked as Exhibits “U” to “X”, inclusive. Thereafter, SIASELCO presented its two (2) witnesses. The first witness, Ms. Jaina Ibba, SIASELCO’s Finance Manager, testified on certain relevant schedules and on the documents submitted in support of the application. At the termination of the direct examination, the Commission propounded clarificatory questions on the same witness. The second witness, Mr. Ricky Mauro, SIASELCO’s Technical Manager, testified on the various technical aspects of the application including its proposed program for the development and improvement of its services. At the termination of the direct examination, the Commission again propounded clarificatory questions on the same witness. Thereafter, SIASELCO was directed in open court to submit various documents. On August 11, 2004, SIASELCO submitted its Supplemental Compliance as directed during the hearing. On September 16, 2004, SIASELCO filed its “Formal Offer of Evidence” which was admitted on September 18, 2004 by the Commission for the purpose for which they were offered. DECISION, ERC Case No. 2001-986 Page 4 of 35 I. SUMMARY OF SIASELCO’s APPLICATION I.A. REVENUE REQUIREMENT SIASELCO’s revenue requirement per unbundled application based on historical test year 2000 was as follows: Account Name HISTORICAL YEAR kWh Sales 1,476,370 Purchased Power PhP 4,111,444 Payroll 334,326 Operation and Maintenance 2,353,721 Debt Service 313,360 Revenue Requirement PhP 7,112,851 Less: Other Revenue Items 5,072 Reinvestment Fund (5%) 1 34,918 TOTAL REVENUE REQUIREMENT PhP 7,142,697 SIASELCO’s proposed revenue requirement was PhP 7,142,697 based on historical costs for the year 2000. The Overall Average Tariff Adjustment (OATA) published was PhP 0.5860/kWh. The same OATA was stated by witness Ibba, the Finance Manager of SIASELCO, in her testimony on April 29, 2004 (TSN, April 29, 2004, p. 13). SIASELCO also submitted a copy of Financial and Management Audit Report by NEA and Trial Balance for the year 2000. 1 In the UFR, this item is reflected as “Plus Percentage for Cooperative Investment”. DECISION, ERC Case No. 2001-986 Page 5 of 35 I.B. RATE STRUCTURE/DESIGN The unbundled rates proposed by SIASELCO were as follows: Residential Retail Customer Charge PhP 5.3600/customer/month Metering Charge 4.6400/customer/month Energy Charge 4.0381/kWh Distribution Charge 1.2532/kWh Commercial Retail Customer Charge 10.7200/customer/month Metering Charge 9.2800/customer/month Energy Charge 3.2777/kWh Distribution Charge 0.4203/kWh Industrial Retail Customer Charge 26.7900/customer/month Metering Charge 23.2100/customer/month Energy Charge 2.8296/kWh Distribution Demand Charge 8.0500/kW NCP Public Buildings Retail Customer Charge 5.3600/customer/month Metering Charge 4.6400/customer/month Energy Charge 3.6107/kWh Distribution Charge 0.6220/kWh Street Lights Dist. Facilities Charge 10.0000/pole/month Energy Charge 16.3900/kWh DECISION, ERC Case No. 2001-986 Page 6 of 35 I.B.1. FUNCTIONALIZATION, CLASSIFICATION and ALLOCATION All the functionalization and the allocation factors used by SIASELCO were default factors provided in the Uniform Rate Filing Requirements (UFR) prescribed by the Commission. These were adopted by SIASELCO as applicable to its operations. However, for certain distribution costs, SIASELCO developed its own classification factors for its demand and customer-related costs using the Minimum-Plant Method. I.B.2. SYSTEM LOSS Witness Mauro, in his testimony, stated that system loss in 2000 was 10.52% (April 29, 2004, TSN p. 51). Witness Mauro testified that SIASELCO’s historical system loss were 10.38% (1997), 11.04% (1998), 10.83% (1999), 10.52% (2000), 10.56% (2001), 9.76% (2002) and 10.50% (2003), respectively (April 29, 2004, TSN p. 52). He mentioned that out of the 51 barangays, only 21 barangays were energized because these are far flung areas and the cooperative do not have enough facilities and equipment to extend their lines to said areas. He further added that the development program for reduction of system loss includes replacement of defective kilowatt hour meters, maintenance of lines and clearing of right of ways. (April 29, 2004, TSN pages. 59-67). DECISION, ERC Case No. 2001-986 Page 7 of 35 I.B.3. INTER-CLASS CROSS SUBSIDY SIASELCO provided the amounts of cross subsidies for each customer type, as follows: INTER-CLASS ADJUSTED CUSTOMER TYPES PROPOSED CROSS EXISTING (PhP) SUBSIDIES (PhP) (PhP) Residential 3,677,893 4,122,869 (444,976) Commercial 1,138,006 916,558 221,448 Industrial 1,938,919 1,168,364 770,555 Public Buildings 161,890 145,856 16,034 Street Lights 225,989 789,050 (563,061) TOTAL 7,142,697 7,142,697 0 Note: Based on Schedule H-1 I.B.4. LIFELINE RATE and LEVEL SIASELCO proposed the following level and rate for marginalized end-users: Option 1 Option 2 (At Existing Rates) (At Proposed Customer Charges) Level 10 kWh 10 kWh Rate PhP 4.2976/kWh PhP 10.00/customer/month DECISION, ERC Case No. 2001-986 Page 8 of 35 I.C. OTHER CHARGES SIASELCO, in its subsequent submission, provided this Commission with information on its existing Other Charges as shown below. PARTICULARS PhP/UNIT New Connection Fees Minimum of two (2) lighting outlets and one (1) convenience outlet 400.00 (excess of 2 L.O. = PhP 50.00/outlet) (excess of 1 C.O. = PhP 50.00/outlet) Meter Deposit 1,500.00 Membership Fee 50.00 Transfer of Load Minimum of two (2) lighting outlets and one (1) convenience outlet 400.00 (excess of 2 L.O. = PhP 50.00/outlet) (excess of 1 C.O. = PhP 50.00/outlet) Transformer Rental (Monthly) 10 KVA 100.00 15 KVA 95.00 25 KVA 85.00 50 KVA 75.00 75 KVA 65.00 Pole Rental (Monthly) Cable/Pole 9.00 Reconnection Fee 50.00 Surcharges on Consumers Power Bill Arrearages Minimum of 10% of Basic Rate and billed together at Official Electric Bill Receipt Penalty on Illegal Connections First Offense - Penalty of PhP 1,500.00 and one (1) month 1,500.00 Back Bill which is billed separately to consumer DECISION, ERC Case No. 2001-986 Page 9 of 35 II. COMMISSION DISCUSSIONS AND CONCLUSIONS II.A. DETERMINATION OF TOTAL REVENUE REQUIREMENT II.A.1. TEST YEAR The Commission finds SIASELCO’s proposal to use the test year 2000 in its unbundled rate application acceptable, since it is consistent with Rule 15 Section 6 (c) of the Implementing Rules and Regulations (IRR) of R.A. 9136. Therefore, the discussions and conclusions that follow are based on Schedule A of SIASELCO’s unbundling application which was based on the Trial Balance for historical test year 2000. II.A.2. GENERATION COST At present, SIASELCO is buying power only from the National Power Corporation-Small Power Utilities Group (NPC-SPUG). The Generation charge shall reflect the NPC-SPUG’s generation charge as approved in ERC Order dated December 20, 2002, Case No. 2002-01 [(In the Matter of the Application for the Approval of Unbundled Power Rates and Basic Rate Increase in the Small Island Grids, National Power Corporation (NPC) – Applicant)]. A separate charge to account for the allowable system loss shall likewise be provided in the bill to end-user (please refer to Section II.B.2.b. for details). Hence, a distribution utility with a system loss that is DECISION, ERC Case No. 2001-986 Page 10 of 35 within the allowable cap can recover from its end-users the total cost of generation.