Republic of the Philippines ENERGY REGULATORY COMMISSIO San Miguel Avenue, Pasig City IN THE MATTER OF THE APPLICATION FOR CONFIRMATION AND APPROVAL OF CALCULATIONS OF OVER OR UNDER-RECOVERIES IN THE IMPLEMENTATION OF AUTOMATIC COST ADJUSTMENT AND TRUE- UP MECHANISMS AND CORRESPONDING CONFIRMATION PROCESS PURSUANT TO ERC RESOLUTION NO. 16, SERIES OF 2009, AS AMENDED BY RESOLUTION NO. 21, SERIES OF 2010 ERC CASE NO. 2015-027 CF NEGROS ORIENTAL I ELECTRIC COOPERATIVE, DOCKETED INC. (NORECO I), ]j)ll.te:~;.l:..L.?.l!!.!. " Applicant. 11~'~,.... ._.~ ....- il J(------------------------------------J( DECISION Before this Commission is the application filed by the Negros Oriental I Electric Cooperative, Inc. (NORECO I) on 31 March 2015 for confirmation and approval of calculations of over or under- recoveries in the implementation of automatic cost adjustment and true-up mechanisms and corresponding confirmation process pursuant to ERC Resolution NOr' 6, . ries of 2009, as amended by Resolution No. 21, Series of2010 . ERC Case No. 2015-027 CF Decision/26 July 2016 Page 2 Of20 FACTS In the said application, NORECO I alleged, among others, the following: 1. NORECO I is an electric cooperative duly organized and existing under and by virtue of the laws of the Republic of the Philippines, with principal office at Tinaogan, Bindoy, Negros Oriental; 2. NORECO I holds an exclusive franchise to operate an electric light and power distribution service in the municipalities of Negros Oriental, namely: Mabinay, Manjuyod, Bindoy, Ayungon, Tayasan, Jimalalud, La Libertad, Vallehermoso and the cities of Guihulngan, Bais and Canla-on, all in the province ofNegros Oriental; 3. The Commission's Resolution No. 16, Series of 2009, as amended by Resolution No. 21, Series of 2010, established the procedure for the automatic recovery or refund of pass through costs and the confirmation process that would govern the automatic cost adjustment and true-up mechanisms approved by the Commission, with the objective of ensuring appropriate recovery of the pass through costs in an efficient manner and to put in place a fair and transparent process for the confirmation of the automatic cost adjustments implemented by Distribution Utilities and the true-up of other pass through charges involving Generation Rate, Transmission Rate, System Loss Rate, Lifeline Rate Recovery and Senior Citizen Discount; 4. NORECO I applied the formulae provided under Resolution No. 16, Series of 2009, as amended by Resolution No. 21, Series of 2010, in determining the over recoveries and under recoveries incurred in its implementation of the foregoing automatic cost adjustments and true-up mechanisms; 5. The results of NORECO I's calculations per cost item which sums up to a net over recovery:~/5,959,788.59) are presented hereunder, as fOllOWS? ERCCase No. 2015-027 CF Decision/26 July 2016 Page 3 Of20 ITEMS Amount in Pesos Generation (2,226,722.16) Transmission 764,070.52 System Loss (4,885,206.18) Lifeline Rate 407,419.85 Senior Citizen (19,35°.62) Net Over-Under Recoveries (5,959,788.59) Summaries of the results of individual yearly computations on the foregoing pass through charges are attached to the application and made integral parts hereof as Annexes "A" to "C", respectively; 6. In support of the computations made, NORECO I submitted the following data and documents, labeled together and made an integral part of the application as Annex "D": a. Power Supplier Data Sheet; b. Statistical Data Sheet; c. Implemented Rates Data Sheet; d. Power Bills of Power Suppliers; e. Official Receipts (O.K) issued by Power Suppliers; f. Breakdown of Payments with O.K; g. Debit/Credit Memo of Power Suppliers; h. O.R. issued by the National Transmission Corporation (TRANSCO)/N ational Grid Corporation of the Philippines (NGCP); 1. Breakdown of Payments with O.K; j. Debit/Credit Memo issued by TRANSCO/NGCP; k. DU-M01 and DU-M02, MFSR; 1. Consumer Bills of Lifeliners (per level) and Non-Lifeliners per customer class; and 7. NORECO I prayed that the calculations of over or under recoveries presented in the application be confirmed and approved and that the amount of Five Million Nine Hundred Fifty Nine Thousand Seven Hundred Eighty Eight Pesos and Fifty-Nine Centavos (PhP5,959,788.59) o~o/ recoveries be allowed to be refundedto;t, cu"ome~ ERC Case No. 2015-027 CF Decision/26 July 2016 Page40f2o Subsequently, having found NORECO 1's Application to be sufficient in form and substance, with the required fees having been paid, the Commission issued an Order and Notice of Public Hearing both dated 09 December 2015 setting the case for initial hearing on 27 January 2016. In the same Order, NORECO I was directed to cause publication of the Notice of Public Hearing, at its own expense, once (IX) in a newspaper of general circulation in the Philippines, with the date of the publication to be made not later than ten (10) days before the date of the scheduled initial hearing. It was also directed to inform the consumers within its franchise area, by any other means available and appropriate, of the filing of the instant application, its reasons therefor, and of the scheduled hearing thereon. NORECO I was, likewise, directed to furnish the Office of the Solicitor General (OSG), the Commission on Audit (COA), the Committees on Energy of both Houses of Congress, the Office of the Provincial Governor of Negros oriental and the Mayors of the Cities/Municipalities within its franchise area, with copies of the Application, Order and Notice of Public Hearing. On 21 January 2016, NORECO I filed its "Pre-trial Brief" During the 27 January 2016 hearing, NORECO I appeared. There was no intervenor or oppositor who appeared nor was there any intervention or opposition registered. In the said hearing, NORECO I was directed to present its proofs of compliance with the Commission's posting and publication of notice requirements pursuant to the Order dated 09 December 2015. NORECO I presented proofs of the said compliance, which were duly marked as Exhibits "G" to "J-4", inclusive. Thereafter, the Commission certified that NORECO I had fully complied with the jurisdictional requirements pursuant to the said Order. Thereafter, the Expository Presentation commenced. NORECO I presented Engr. John Paul D. Taub, Technical Audit Staff of NORECO I, who delivered under oath the said presentation. Thereafter, the Commission terminated the Expository Presentation and proceeded with the Pre-trial and Evidentiary presentati~ ;/ ERC Case No. 2015-027 CF Decision/26 July 2016 Pages Of20 During the evidentiary presentation, NORECO I presented Engr. John Paul D. Taub, as its lone witness, who testified in support of the instant Application. In the course thereof, various documents were identified and marked as exhibits. After the direct examination, the Commission propounded c1arificatory questions on the said witness. Thereafter, NORECO I moved that an Order of General default be issued against those who failed to appear in the said hearing. Finding the said Motion meritorious, the Commission granted the same. Thereafter, the Commission directed NORECO I to submit its formal offer of evidence and the required additional documents. On 27 January 2016, NORECO I filed its "Compliance (To the Order dated 09 December 2015)". On 10 February 2016, NORECO I filed a "Motion for Additional Time (To Submit Compliance and Formal Offer of Exhibits), praying that an extension of fifteen (15) days from 11February 2016 or until 26 February 2016 within which to file its Compliance and Formal Offer of Evidence. On 26 February 2016, NORECO I filed its "Compliance with Motion" and "Formal Offer of Evidence". On 15 July 2016, the Commission issued an Order admitting NORECO I's marked exhibits contained in the "Formal Offer of Evidence" and submitting the case for resolution. ISSUE The issue to be resolved is whether the Commission should grant the instant Application and confirm and approve NORECO I's calculations of its (over)/under recovery for the period 2012 to 2014, pursuant to the Commission's Resolution~~. 1~eries of 2009, as amended by Resolution No. 21, Series of 20~ ERCCase No. 2015-027 CF Decision/26 July 2016 Page 6 of 20 DISCUSSION In its Application, NORECO I sought the approval of the Commission of the following (over)/under recoveries: ITEMS Amount in Pesos Generation (2,226,722.16) Transmission 764,070.52 System Loss (4,885,206.18) Lifeline Rate 407,419.85 Senior Citizen (19,350.62) Net Over-Under Recoveries (5,959,788.59) Pursuant to Resolution No. 16, Series of 2009, entitled "A Resolution Adopting the Rules Governing the Automatic Cost Adjustment and True-Up Mechanisms and Corresponding Confirmation Process for Distribution Utilities", as amended by Resolution No. 21, Series of 2010, entitled "A Resolution Amending Section 4 of Article 4 and Section 1 of Article 5 of the Rules Governing the Automatic Cost Adjustment and True-Up Mechanisms and Corresponding Confirmation Process for Distribution Utilities", and Resolution No. 23, Series of 2010, entitled '~ Resolution Adopting the Rules Implementing the Discounts to Qualified Senior Citizen End-Users and Subsidy from the Subsidizing End-Users on Electricity Consumption under Sections 4 and 5 of Republic Act No. 9994", the formulae below were adopted in the computation of the following: 1) Generation Rate; 2) Transmission Rate; 3) System Loss; 4) Lifeline Subsidy; and 5) Senior Citizen Discount and Subsidy: Generation Rate: GOUR = [(AGe - GRR )+ rGOu~.] /' SM~,~ 17 ERCCase No. 2015-027