~-..<" •••. "".{;GUV>. TO;;y /> '"' CQ~ Republic of the Philippines jJiJ ~!1, "".•' (;.'1), ENERGY REGULATORY COMMISSION'" "lPpro,;;i,l for 0 San Miguel Avenue, Pasig City l. POsting Z . In\w,erc,go.l,pn , ~ IN.,THE MATTER OF THE JOINT APPLICATION FOR APPROVAL OF THE ELECTRIC POWER PURCHASE AGREEMENT (EPPA) ENTERED INTO BY AND BETWEEN LANAO DEL NORTE ELECTRIC COOPERATIVE, INCORPORATED (LANECO) AND FDC MISAMIS POWER CORPORATION (FDC MISAMIS), WITH PRAYER FOR THE ISSUANCE OF PROVISIONAL AUTHORITY ERC CASE NO. 2015-035 RC LANAO DEL NORTE ELECTRIC COOPERATIVE, INCORPORATED (LANECO) AND FDC MISAMIS POWER CORPORATION (FDC MISAMIS), Applicants. J(- - - - - - - - - - - - - - - - - - - - - - - - -J( ORDER On March 3, 2015, Lanao del Norte Electric Cooperative, Incorporated (LANECO) and FDC Misamis Power Corporation (FDC MISAMIS) filed an application for approval of their Electric Power Purchase Agreement (EPPA), with prayer for the issuance of provisional authority. In support of their prayer for the issuance of a provisional authority, LANECO and FDC MISAMIS alleged the following: 1. The turnover of the output of Mt. Apo 1 and 2 Geothermal Power Plants ,is scheduled on December 26, 2014. FDC MISAMIS will start payment of the monthly and generation fees upon issuance of the Certificates of Closing and Effectivity on December 26,. 2014. A ERC Case No. 2015-035 RC ORDER/May 11, 2015 Page 2 of 18 provisional approval of the EPPA with indicative rate from the Commission will allow it to perform its obligation to supply the requirements of LANECO and for the latter to receive power from the power plants. The issuance of the provisional authority will allow LANECO to charge and collect the respective fees enumerated in the EPPA as well as authorize it to pass on the full amount to its member-consumers; 2. Pursuant to the ERe Rules of Practice and Procedure, the Commission may exercise its discretion by granting provisional authority or interim relief prior to a final Decision; and 3. It is understood that the interim relief sought by them that may be granted by the Commission, shall be subject to adjustments and other conditions that the Commission may impose after hearing and final determination. In the same application, LANECO and FDC MISAMIS prayed that the Commission: 1. Approve their duly negotiated EPPA; 2. Issue an Order: i) treating Annex "N" and the information contained therein as confidential; ii) directing their non- disclosure pursuant to Rule 4 of the ERC Rules; and iii) prescribing the guidelines for the protection thereof; 3. Provisionally approve their EPPA thereby authorizing LANECO to pass-on the full amount of the fees and charges contained therein to its member-consumers; and 4. After trial on the merits, issue a permanent approval of their EPPA, as amended, which would authorize LANECO to charge and collect the fees contained therein as well as authorize it to pass-on the full amount to its member-consumers. Relative to the prayer for a provisional authority, the Commission initially reviewed the instant application, as follows: ERC Case No. 2015-035 RC ORDER/May 11, 2015 Page 3 of 18 1. Parties to the EPPA LANECO is a non-stock, non-profit electric cooperative duly organized and existing under the Philippine Laws, with principal office at Tubod, Lanao del Norte. It serves the power requirements of the Municipalities of Bacolod, Baloi, Baroy, Kapatagan, Kauswagan, Kolambugan, Lala, Linamon, Magsaysay, Maigo, Matungao, Munai, Poona Piagapo, Salvador, Sapad, Sultan Naga Oimaporo, Tangkal and Tubod, all in the Province of Lanao del Norte. FOC MISAMIS is a corporation duly organized and existing under the Philippine Laws, with principal office address at 23'd Floor, PBCom Tower, 6795 Ayaia Avenue corner VA Rufino St., Makati City. It was formerly known and registered under the names Green Renewable Power Holdings, Incorporated and Strong Field Energy Corporation. It is a wholly-owned subsidiary of FOC Utilities, Incorporated. 2. Salient Features of the EPPA . Contract Term The Term of the EPPA shall be two (2) years, unless extended by mutual written agreement by the Parties but in no case shall be longer than June 25, 2024 Type of Plant Geothermal Power Plants Rated Capacity 108.48 MW (2 x 54.24 MW) Outage Allowance The Supplier shall have an Outage Allowance of seven hundred twenty (720) hours per Contract Year. Unutilized Outage Allowance hours in any particular Contract Year shall not be carried forward to the succeeding Contract Year. The Customer may not cause the deferment of the Supplier's utilization of the Outage Allowance for any reason ERC Case No. 2015-035 RC ORDER/May 11, 2015 Page 4 of 18 Replacement Power in The Supplier shall exert best efforts to Excess of Outage procure Replacement Power beyond Allowance the Outage Allowance. Notwithstanding any provision in this Agreement to the contrary, the Supplier has the right to source Replacement Power for the Customer from other current or future facilities of the Supplier or of any third party, including the Wholesale Electricity Spot Market (WESM) or its equivalent, at the sole election of the Supplier. The Supplier shall not in any case have the obligation to procure Replacement Power other than from the Grid Service Specification Contracted 5,000 kW Demand Contracted 40,200,000 kWh Ener Plant Gate - Mt. Apo 1 Delivery Point and 2 Geothermal Power Plants Voltage at the 138 kV Plant Gate Customer Failure to If the Customer off-takes power less Off-take Power than the Contracted Energy, the Customer shall still pay the full Generation Charge for the Contracted Energy and all applicable fees, charges and costs Transmission Fees, The Customer shall pay for Ancillary Services Transmission Fees, Ancillary Services Charges, Line Rental Charges, Line Rental Charges, and Charges, and WESM WESM Costs. All other transmission Costs charges and market related fees/charges that are not part of the generation charge shall be for the account of Customer ERC Case No. 2015-035 RC ORDER/May 11, 2015 Page 5 of 18 Security Deposit The Security Deposit shall be in an amount equivalent to one hundred percent (100%) of the projected highest monthly Power Bill for the first Contract Year of the Agreement Assignment In all cases of valid assignment, the assignee shall assume all the rights and obligations of the assignor under this Agreement Adjustments Due to The Supplier shall have ninety-six (96) Force Majeure .hours to restore interrupted supply counted from the time a Force Majeure Event prevented it from supplying electric power to the Customer. The Customer shall not be entitled to interruption adjustment during such period. On the other hand, the Customer shall have ninety-six (96) hours to resume taking electric power counted from the time a Force Majeure Event prevented it from fully taking its Contracted Energy Generation Charge LANECO shall pay the generation charge consisting of administrative charge, fixed charge and energy charge, as follows: Monthly Generation Charge = Administrative Charge + Fixed Charge + Energy Charge Where: Administration Charge = (PhP100.64/kW/month) x (CD) x (LCP1/LCPO) Fixed Charge = (PhP1,628.69/kW/month) x (CD) . , ERC Case No. 2015-035 RC ORDER/May 11, 2015 Page 6 of 18 Energy Charge = L Demandsched x BER/LF x 1- n, such that if In < 1, In = 1 And where: Administration Charge = (PhP100.64/kW/month) x (CD) x (LCP1/LCPO) CD = Contracted Demand Demandsched = Hourly Scheduled Demand, as defined under Schedule 2 BER = Base Energy Rate, PhP3.034/kWh LF = Load Factor, L Demand,om / Monthly Contracted Energy In = Inflation Factor for the Billing Month 3. LANECO's Demand - Supply Scenario The Mindanao Grid is heavily dependent on hydroelectric power. More than fifty percent (50%) of its total dependable capacity consist of hydroelectric generating capacity. As a consequence, available power supply in the said Grid was drastically reduced during summer months. As a result, the Mindanao Island, including LANECO's franchise area, has experienced and is at risk of suffering power outages, adversely affecting local businesses and the daily lives of all electricity consumers. The lack of sufficient and reliable power supply has long been a barrier to much needed capital investment The lack of supply was substantiated by the System Operator's frequent issuances of system red alert The diagram below shows the supply-demand outlook in the Mindanao Grid, as published by the Department of Energy (DOE): ERC Case No. 2015-035 RC ORDER/May 11, 2015 Page 7 of 18 Mindanao Supply - Demand Outlook (2014-2020) 2014 2015 2016 2017 3toO Apr.13.6MW"TUd.1y3 ~r. 150 PSN Therm3 SOU'.h2 Mar. 25 t.m Lake MaInIt HEP J<Jl:9 MN ltnllatangon HEP : 15 p.ffl Mapalad Diesel JIm: 13.2 S<03ng311 HEP Sep: 405 f/m FDC Coal --'-- --- 2800 sep: 26.1 Wi Peak P\:)y,U Jut:30 !.ffl P\ryo HEP Nov: 150 MNThemIaSOtrtIl1 Sep: 200 MW $;ll3ng;1ni Coal Dec: 40 t.ffl Blom3ss ''''' ,,', 24'" _... ,.- ~.._- . ,..-..~....••.. 22'" -',-.•...,- 1000 • 1800 j ... t'.,.," 16'" I,-' .1 ::] llXlO """' •• , .. ,., .•.••.••...•. , ••.•..•••.• ,. _" ...• ,. _'. ,. , •. , •.•...•.••••..•••• , • ,1 • ~ ~ • ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ m = ~ ~ ~ ~ ~ ~ 0 0 COO 0 0 0 NS N NS NS NS NS NS N NS NS NS NS NS NS NS NS NS NS NS NS NS NS NS NS NS NS NS NS NS NS NS NS NS SN NS NS NS N~ NS NS NS NS i' i' i' i' i i' i' ~~!r:;'1~ z ~ ~ ~r:;"1~ z ~ ~ ~r:;"1~ z ~ ~!r:;"1~z ~ ~!'r:;"1~z ~ I ~r:;'1~ z ~ 2!r:;"1~ z _Committed _A'I.1l1JbleClpaclty -'uk Demlnd --- Requltel!ReleJve With the privatization of PSALM's generation plants and coupled with insufficiency of supply in the Mindanao, it has become increasingly difficult for PSALM to sustain the demands of its Mindanao customers.