Republic of the Philippines ENERGY REGULATORY COMMISSION Pacific Center Building San Miguel Avenue, Pasig City IN THE MATTER OF THE APPLICATION FOR APPROVAL OF UNPLANNED CAPITAL EXPENDITURE PROJECTS FOR YEAR 2019, RE: UPRATING OF 10 MVA -o NARVACAN SUBSTATION NJ WITH NEW 20 MVA POWER LA TRANSFORMER AND LU - RENOVATION OF THE Ui SUBSTATION TENDER HOUSE, WITH PRAYER FOR PROVISIONAL AUTHORITY 20 19-0311 ERC CASE NO. RC ILOCOS SUR ELECTRIC COOPERATIVE, INC. - (ISECO), Applicant. I x-------------------x .t w 0 APPLICATION WITH MOTION FOR PROVISIONAL AUTHORITY Applicant, ILOCOS SUR ELECTRIC COOPERATIVE, lNC. (ISECO), through counsel, unto to this Honorable Commission, respectfully alleges, that: THE APPLICANT 1. ISECO is a non-stock, non-profit electric cooperative, duly organized and existing under and by virtue of the laws of the Republic of the Philippines, with principal office at Brgy. Bigbiga, Santiago, Ilocos Sur; 2. It holds an exclusive franchise from the National Electrification Commission, to operate an electric light and power distribution service in the two cities and 32 municipalities of the Province of Ilocos Sur, namely: Candon City, Vigan City, Alilem, Banayoyo, Bantay, Burgos, Cabugao, Caoayan, Cervantes, Galimuyod, Gregorio Del Pilar, Lidlidda, Magsingal, Nagbukel, Narvacan, Quirino, Salcedo, San Emilio, San Esteban, San Ildefonso, San Juan, San Vicente, Santa, Santiago, Sigay, Sinait, Sta. Lucia, Sta. Catalina, Sta. Cruz, Sta. Maria, Sto. Domingo, Sugpon, Suyo and Tagudin. LEGAL BASIS FOR THE APPLICATION 3. The instant application for approval of the proposed uprating of the Narvacan Substation's existing 10 MVA power transformer to 20 MVA power transformer together with renovation of the substation's old tender house, is being filed pursuant to ERC Resolution 26, Series of 20019, more particularly Article Ill, Paragraph 3.5 thereof which states, to wit: 3.5 Unplanned Capital Expenditure These are expenditure projects that may occur at any given period which may be resulting from unexpected significant new load that will be connected to the Distribution System. A Regulated Entity shall file a formal application prior to the start of implementation of such projects and shall be supported by documents similar to the usual requirements of network asset capital expenditures. CAUSE OF ACTION 4. There is an increasing demand for power supply in the areas being served by the existing 10 MVA Narvacan Substation brought about by the development of commercial and industrial establishments. Among the incoming loads for 2019 with their respective estimated demands are the Ilocos Sur Feedmill (800 KW), Red Ribbon Bakeshop (120 KW) and LPG Refilling Station (180 KW) or a total estimated demand of 1,100 KW. The incoming load will result to 78.67% loading of the 10 MVA Narvacan Substation, which is equivalent to 9.83 MVA at maximum rated capacity of 12.5 MVA (ONAF). 2 5. The load growth and additional consumer connections in the area being served by the Narvacan Substation necessitates the uprating of the existing substation transformer. The uprating will also improve the voltage level of the area while solving capacity problem. 6. On the other hand, the substation's existing tender house is prone to flooding during heavy rains, rendering it unsafe to the substation's personnel and equipment hence, the need to elevate the flooring of the tender house. The renovation of the tender house is also needed to prepare the substation for the implementation of the cooperative's SCADA project which is currently subject of a pending application with the Honorable Commission. PROJECT DESCRIPTION 7. The unplanned CAPEX projects subject of the instant application consist of the replacement of the Narvacan Substation's existing 10MVA power transformer with a brand new 20MVA power transformer and the renovation of the substation's old tender house. JUST IFICATIONS OR BENEFITS TO BE DELIVERED 8. Implementation of the proposed projects will have the following benefits to ISECO's consumers, to wit: 1. There will be sufficient capacity of power supply to address the increasing demand in the area served by the Narvacan Substation; 2. Widen electric service to potential consumers while improving service voltage. 3. Increase in system capacity and reduction of power loss. 4. Improvement of system reliability to ensure that the distribution system will be operated in a safe and efficient manner and with high degree of reliability. 5. Additional sales and revenue. 6. The renovation of the Narvacan Substation tender house will ensure the safety of the substation's personnel and equipment from all risks associated with flooding and also prepare the substation for the implementation of the cooperative's SCADA project. 3 ESTIMATED PROJECT COST 9. The estimated total project cost of the proposed unplanned CAPEX projects is Twenty Two Million Four Hundred Thirty Four Thousand and Nine Hundred Ninety Two Pesos (PhP22,434,992.00). PROJECT FINANCING PLAN 10. Long term borrowing to finance the cost of the proposed projects is a way to minimize the cash flow cost which forms part of the cost service to consumers. The proposed projects shall be financed through a loan from the Development Bank of the Philippines (DBP), at the prevailing lending rate of 6.5% per annum at the time of preparation of the CAPEX plan, over 15 years repayment period in equal quarterly installments. Amortization payments shall be funded from revenues generated from the cooperative's Reinvestment Fund for Sustainable Capital Expenditure (RFSC). INDICATIVE RATE IMPACT 11. Implementation of the proposed projects will have a reasonable rate impact. For the next 15 years, the cooperative will need an additional amount of PhP2,352,663.00 or an equivalent of PhPO.0057 per kWh to fund the projects, as shown below, to wit: Indicative Additional Revenue Requirement Total Cash Flow (Indicative Rate Impact On kWh Sales Year Additional RFSC In PhF/kWh - Forecast Revenue Excess/(Shortfall) Requirement) 2019 (2,352,663) 303,835,872 (0.0083) 2020 (2,352,663) 319,452,339 (0.0074) 2021 (2,352,663) 335,068,805 (0.0070) 2022 (2,352,663) 350,685,272 (0.0067) 2023 (2,352,663) 366,301,739 (0.0064) 2024 (2,352,663) 381,918,205 (0.0062) 2025 (2,352,663) 397,534,672 (0.0059) 2026 (2,352,663) 413,151,138 (0.0057) 2027 (2,352,663) 428,767,605 (0.0055) 2028 (2,352,663) 444,384,071 (0.0053) El 2029 (2,352,663) 460,000,538 (0.0051) 2030 (2,352,663) 475,617,005 (0.0049) 2031 (2,352,663) 491,233,471 (0.0048) 2032 (2,352,663) 506,849,938 (0.0046) 2033 (2,352,663) 522,466,404 (0.0045) TOTAL (35,458,208) 6,197,267,074 (0.0057) PROJECT SCHEDULE. 12. The proposed projects require immediate implementation considering that the additional loads are geared to operate within 2019. ALLEGATIONS IN SUPPORT OF THE MOTION FOR PROVISIONAL AUTHORITY 13. Applicant respectfully repleads herein the foregoing allegations; 14. As shown in Paragraph 12 above, the incoming significant new loads are expected to commence operations within the current year or while the instant application is pending; 15. Further, unforeseen situations or occurrences may arise which might necessitate the immediate implementation of the proposed projects; 16. In view thereof, ISECO respectfully moves that it be permitted to immediately implement the proposed projects, even while the application is pending, to enable the cooperative to deliver a more reliable, efficient and safe electric service to its consumers. SUBMISSION OF DOCUMENTARY AND PRE-FILING REQUIREMENTS 17. Finally, in compliance with the documentary requirements under ERC Resolution 26, Series of 2009 and pre-filing requirements under the ERC Rules of Practice and Procedure, ISECO is submitting herewith the following documents which are being made integral pads hereof, as follows: 5 Annex Marking Description of Document Annex A Write up on the Proposed Projects Judicial Affidavit in Support of the Motion for Provisional Annex B Authority Proof of furnishing of copies of the Application to the Annex C Sangguniang Bayan of Santiago and Sangguniang and series Panlalawigan of Ilocos Sur Proof of publication of the Application in a newspaper of Annex D general circulation within ISECO's franchise area or and series where it principally operates. PRAYER WHEREFORE, premises considered, applicant ISECO respectfully prays of this Honorable Commission that upon initial review of the instant application and while the same is pending, the cooperative be permitted to implement the proposed Unplanned Capital Expenditure Projects for 2019, to wit: Uprating of the 10 MVA Narvacan Substation with a New 20 MVA Power Transformer and Renovation of the Substation Tender House, and after due notice and hearing, the projects be approved permanently. ISECO further prays for other reliefs, just and equitable under the premises. Pasig City, Metro Manila, April 8, 2019. DECHAVEZ LERIOS-AMBOY AND EVANGELISTA LAW OFFICES 1 Counsel for the Applicant Ilocos Sur Electric Cooperative, Inc. (ISECO) Unit 2008, Tycoon Centre Pearl Drive, Ortigas Center,Pasig City 1605 Tel. Nos. 9101587; 6387806 Email: powerIawfirmgmail.com By: RON4tYAN A. SANDIGAN RoIlIpAttorneys No. 65412 PTR No. 5241599, January22, 2019, Pasig City IBP Lifetime Member No. 015204, Masbate Chapter MCLE Compliance No. VI Cert. No. 0018407, Feb. 6, 2019 1 Pursuant to Office of the Court Administrator Circular No. 56-2015, hereunder are the MCLE Compliance Numbers of the undersiened Firm's name nartners. to wit Partners MCLE Compliance No. Date of Issuance Joseph Ferdinand M. Dechavez V-0005240 Jan. 7, 2015 Ditas A. Lerios-Amboy V-0016672 March 6, 2016 Nelson V. Evangelista V-0008307 June 3, 2015 PA VERIFICATION AND CERTIFICATION OF NON FORUM-SHOPPING Engr. Egdon A. Sabio, of legal age, Filipino and with office address at the Main Office, liocos Sur Electric Cooperative, Inc.