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IN THE MATTER OF THEAPPLICATION FORAPPROVAL OF THECONTRACT FOR THE SALEOF ELECTRICITYBETWEEN GUIMARASELECTRIC COOPERATIVE,INC., AND TRANS-ASIA OILAND ENERGYDEVELOPMENTCORPORATION

GUIMARAS ELECTRICCOOPERATIVE, INC andTRANS-ASIA OIL ANDENERGY DEVELOPMENTCORPORATION,

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•

ERC CASE NO. 2016-071 RC

NOTICE OF PUBLIC HEARING

TO ALL INTERESTED PARTIES:

Notice is hereby given that on 29 April 2016, the GuimarasElectric Cooperative, Inc" (GUlMELCO) and Trans-Asia Oil andEnergy Development Corporation (Trans-Asia) filed a jointapplication for approval of the contract for the sale of electricitybetween GUlMELCO and Trans-Asia,

ERCCASENO. 2016-071 RCNotice of Public Hearing/02 August 2016 of 13

In the said application, GUIMELCO and Trans-Asia alleged,among others, the following:

1. GUIMELCO is a non-stock, non-profit electric cooperativeorganized and existing under Presidential Decree No. 269, asamended, with principal office at San Miguel, Jordan,Guimaras. It has a franchise to distribute electricity in theMunicipalities of Jordan, Buenavista, Sibunag and NuevaValencia, all within the Province of Guimaras.

A copy of the Certificate of Franchise of GUIMELCO is attachedto the application asAnnex "A".

2. Trans-Asia is a corporation duly organized and existing underthe laws of the Republic of the Philippines, with principaladdress at Level 11, PHINMA Plaza, 39 Plaza Drive, RockwellCenter, Makati City. Trans-Asia is the owner and operator of anembedded 3-4 MW bunker C-fired diesel generator powerstation located at San Miguel, Jordan, Guimaras (the "PowerPlant"). Copies of pertinent documents evidencing Trans-Asia'sdue incorporation/registration and permit to operate as ageneration company are attached to the application, as follows:

Annex Document"B" SECCertificate of Registration"C" Articles of Incorporation and By-laws ,

"D" Audited Financial Statement"E" General Information Sheet"F" ERCCertificate of Compliance"G" Environmental Compliance Certificate

3. Applicants GUIMELCO and Trans-Asia may be served withorders, notices and other legal processes through theirrespective undersigned counsels;

4. The Joint Application is submitted pursuant to Rule 20(B) ofthe ERC Rules of Practice and Procedure for the review, dueconsideration and approval by the Commission of the CSEentered into between GUIMELCO and Trans-Asia. A copy ofthe Agreement is attached to the application as Annex "H".

ERC CASE NO. 2016-071 RCNotice of Public Hearing/02 August 2016 of 13

STATEMENT OF FACTS

5. On 12 November 2003, GillMELCO and Trans-Asia enteredinto an Electricity Supply Agreement ("ESA") whereby Trans-Asia agreed to construct, operate and maintain a 3AMWbunker C-fired diesel generator power station to supplyelectricity to GillMELCO until 2015. Subsequently, the partiesentered into several amendments which provided for theoptimization of electricity supplied by Trans-Asia during peakhours (Amendment No. 01) and adjustment to the fuel heatrate to accurately reflect the unique load profile of GillMELCO(Amendment No. 02). The ESA and subsequent amendmentsentered into by the Applicants were approved by theCommission in its Decisions dated 13 October 2005 for theESA1, 19 October 2006 for Amendment No. 012 and 16 July2012 for Amendment No. 023;

6. At present, GUIMELCO sources its power supply requirementsfrom Green Core Geothermal, Inc. (GCGI) for base load,Wholesale Electricity Spot Market (WESM) and throughTrans-Asia's embedded power plant which it constructedpursuant to the terms and conditions under the ESA. Thepower supply of GillMELCO is primarily sourced from ageothermal power plant owned and managed by GCGI for baseload supply while the peak load requirements of GillMELCO isprovided by Trans-Asia. In order to address the additionalpower requirements of the island especially during day time(office hours) and to comply with the voltage requirementsunder the Philippine Distribution Code, a power qualitymitigation program by GillMELCO with Trans-Asia wasimplemented;

7. Without Trans-Asia providing the electricity supply,GillMELCO will be heavily dependent on the WESM whichmay be subject to market interventions and volatility, therebyaffecting the power supply stability of GillMELCO;

8. In view of the long standing partnership for more than tenyears between GillMELCO and Trans-Asia in ensuring stableelectricity especially when there occurs a PMS by NGCP orpower outages occur in the main grid, the parties conducted

I ERC Case No. 2004-92.2 ERC Case No. 2006-024;3 ERC Case No. 2011-073.


several meetings to discuss entering into another agreement,the Contract for the Sale of Electricity ("CSE"). After dueconsideration of Trans-Asia's proposal and following a series ofmeetings and negotiations, the parties entered into the CSE.With the expiration of the ESA and taking into considerationGUIMELCO's peaking and back-up power supplyrequirements, Trans-Asia provided an offer sheet which wasthoroughly discussed and recommendations of GUIMELCOwere incorporated in the contract. An evaluation has beenmade and the Board of Directors decided to engage againTrans-Asia under the new CSE;

ABSTRACT OF THE CONTRACTFOR THE SALE OF ELECTRICITY

9. The following are the salient provisions and terms of the CSEbetween GUIMELCOand Trans-Asia:

9.1. Term. The CSE shall have a term often (10) years fromthe start of supply by Trans-Asia upon compliance withthe Conditions Precedents as stipulated in the contract.

9.2. Contracted Electricity. Trans-Asia shall supply all ofGUIMELCO's electricity requirements that is beyond orin excess of its base load supply in accordance with thefollowing formula:

The Contracted Electricity for each hour shall becomputed as follows:

DQ=MQ-BLCC

where:DQ = delivered quantity for each hour, in kW;

Whenever BLCCis greater than MQ, DQ shallbe zero;

MQ = GUIMELCO's WESM final settlement meteredquantities (inclusive of SSLA) for each hour asprocessed by the Market Operator, in kW;


BLCC = Base Load Contract Capacity, or 4MW,whichever is lower.

GUIMELCO and Trans-Asia agree that the meter datafurnished by the Meter Services Provider ("MSP") andvalidated by the Philippine Electricity MarketCorporation ("PEMC") for the Billing Period shall bethe basis for determining the quantity of electricitydelivered to GUIMELCO for such Billing Period.

9.3. Service Reliability. Trans-Asia shall provide continuoussupply of electricity to GUIMELCO in accordance withthe Contracted Electricity except for interruption due toForce Majeure, transmission, sub-transmission,distribution failure in the Grid that will prevent Trans-Asia from delivering electricity to the Delivery Point orany suspension of the Wholesale Electricity SpotMarket. I

I

9-4. Delivery Points. Trans-Asia shall supply electricity toGUIMELCO at the Market Trading Nodes of Trans-Asiaas designated by the Market Operator.

9.5. Power Quality Mitigation. To address GUIMELCO'spower supply reliability and voltage quality needs,GUIMELCO may request Trans-Asia to operate and runits Power Plant whenever necessary. :

I

For each hour of requested supply by the BUYER, theelectricity to be supplied by the SELLER shall becomputed as follows:

If BLCC = 0 thenDQ=MQ

IfBLCC >= MQthenDQ=GPPMQ

IfBLCC < MQ thenDQ = GPPMQorDQ = MQ - BLCC;whichever is higher

Where:DQ =GPPMQ =

delivered quantity for each hour, in kW;Nominated quantity required by BUYER to begenerated from Trans-Asia's Power' Plant, inkW


MQ = GUIMELCO WESM final settlement meteredquantities (inclusive of SSLA) for each hour asprocessed by the Market Operator, in kW

BLCC = Base Load Contract Capacity, or 4MW,whichever is lower

The Power Quality Mitigation Fee computation shall bethe same as the Electricity Fee computation asprovided in 9.7 below.

9.6. Back-up Power. In case GUIMELCO is disconnectedfrom the Grid, Trans-Asia may provide, upon request ofGUIMELCO, back-up power. The Back-up power feecomputation shall be the same as the Electricity Feecomputation as provided in 9.7 below.

9.7. Charges and Adjustments. In consideration of theelectricity supplied by Trans-Asia, GUIMELCO shallpay Electricity Fees ("EF") in accordance with thefollowing:

n

EF = I(BERx Delivered Quantity)jj = 1

where:

Delivered Quantity =

n

j

=

=

Actual electricity delivered forhour "j", in kWhnumber of hours in the billingmonthcorresponding hour ofthebilling month

BASE ELECTRICITY RATE (BER)

BER = FEF + DELTA OM + DELTA FUEL

where:

FEF = Fixed Energy Fee, 2.30 Php/kWh

ERC CASE NO. 2016-071 RCNotice of Public Hearing/02 August 2016of13

= Based on 2013 TAOFinancialStatements:Costs components includeRepairs and Maintenance, andOverhead costs net ofdepreciation

DELTA FUEL = 7.5*(FDP/FPR) Php/kWh= Based on afuel rate of 0.26

liter/kWh and FPR of $93.12 /bblfor the December 2013 billingmonth

DELTA OM = l*(CPln/CPlr) Php/kWh= Based on 2013 TAO Financial

Statements:Costs components includeManpower operating costs

FPR = Mean of Platts Singapore (MOPS) for HighSulfur Fuel Oil 180 cSt 3.5% S for thecalendar month immediately preceding thebilling month of December 2013, in $/bbl.

= $93.12/bblFDP = Mean of Platts Singapore (MOPS) for High

Sulfur Fuel Oil 180 cSt 3.5% S for thecalendar month immediately preceding thebilling month, in $/bbl.

CPlr = 2013 Philippine CPI for All IncomeHouseholds - All Items (base year 2000),as published by the Philippine NationalStatistics Coordination Board (or itssubstitute or replacement agency, as thecase may be).

CPln = Philippine CPI of the year previous to thecurrent year of the billing month, for AllIncome Households - All Items (base year2000), as published by the PhilippineNational Statistics Coordination Board (orits substitute or replacement agency, as thecase may be).

9.8. Other applicable charges. Charges for transmission,sub-transmission, ancillary services, metering services,universal charges, all associated WESM fees and otherregulatory charges shall be for the account of

ERCCASENO. 2016-071 RCNotice of Public Hearingj02 August 2016 of 13

GUIMELCO. WESM line rentals from Trans-Asia'sPower Plants shall be for the account of Trans-Asia,provided GUIMELCO will allow Trans-Asia's PowerPlant to be dispatched to the WESM at full capacity andwith no restrictions.

9.9. Prompt Payment Discount. GUIMELCO shall beentitled to two percent (2%) adjustment on thegeneration component of the Power Bill, provided fullpayment has been received by Trans-Asia not later thanten (10) Business Days upon receipt of the Invoice andGUIMELCOhas no unpaid balances.

9.10. Interest. Any amounts which remain unpaid in excessof the Security Deposit shall earn interest at the rateequal to the sum of the Philippine Dealing System(PDS) Treasury Fixing or "PDST-F" 3-monthbenchmark rate (or such successor benchmark rate) aspublished on the Market Page (or such successor page)of the PDEx System (or such successor system) on DueDate, plus three percent (3%), computed daily based ona year of 360 days.

ADVANTAGES OF TRANS-ASIA'S SUPPLY

10. With the long standing partnership between Trans-Asia andGUIMELCO, Trans-Asia as an embedded generator connectedto GUIMELCO's system is committed to provide stable andreliable back-up power to GUIMELCO and its memberconsumers. Trans-Asia's supply to GUIMELCO potentiallyreduces overall system cost by providing efficient back-uppower since Trans-Asia's power plant is located within thefranchise area of GUIMELCO,thus enabling it to meet its back-up power supply requirements;

11. With the renewal of the partnership and contract betweenTrans-Asia and GUIMELCO, Trans-Asia guaranteesGUIMELCO's electricity requirements that is beyond or notcovered its base load supply, coupled with the power qualitymitigation mechanisms and back-up supply, the renewal of theTrans-Asia's supply will address GUIMELCO's power supplyreliability and voltage quality needs which would result toimproved stability, ensure adequacy and reliability of the


supply of electricity to the residents and consumers in itsfranchise areas;

12. More importantly, whenever power outages occur in the maingrid, the whole island of Guimaras will have no other source ofsupply except the supply provided by Trans-Asia. In caseswhen the National Grid Corporation of the Philippines (NGCP)undertakes a Preventive Maintenance Schedule (PMS), Trans-Asia provides the much needed electricity supply asGUIMELCOcan operate on an island mode operation. Duringthese situations, Trans-Asia can aptly provide electricity inBarangay San Miguel, where primary government facilities,offices and hospitals are located;

13. Recently, the island of GUIMARAS experienced a totalblackout caused by the destruction and damage of thesubmarine cable brought about by a cargo ship's anchor.Electricity was restored in limited areas in the Province withTrans-Asia providing the much needed back up supply in keygovernment offices and facilities delivering basic services;

14. During the onslaught of Typhoon Yolanda, transmission lineswere damaged preventing full supply of power to the VisayasRegion. Because of the embedded generator of Trans-Asia,GUIMELCO was able to provide power supply immediatelyafter Typhoon Yolanda left the area of Western Visayas,becoming the only distribution utility to provide electricity toparts of its franchise area to parts of its member-consumers,allowing the efficient delivery of much needed emergencyservices;

15. Having Trans-Asia within the franchise area of GUIMELCOallows the immediate availability of a standby/embeddedgenerator within the franchise area, ensures the reliability ofpower supply and voltage requirements are stabilized. Moreimportantly, as shown during the events described above, incases of unavailability of power from the main grid, Trans-Asiais able to provide the back-up power necessary to ensureelectricity to its member-consumers and continuity in thedelivery of government services;

ERC CASE NO. 2016-071 RCNotice of Public Hearingj 02 August 2016 of 13

16. The proposed rates under the CSE between GUIMELCO andTrans-Asia are reasonable and cheaper as compared to therates under the old ESA. A rate analysis using the proposedrate and the rate in the old ESAwould show the following:

Using the old ESA Under the CSE

Guimelco Rate, 7-4932 5.1945PhPjkWh

With Trans-Asia Without Trans-Asia(Baseload and (Baseload only and withoutPeaking) WESM purchases)

Generation Rate 5.6840 5.3742(PhPjkWh)

Notably, the simulation of the rate impact (without Trans-Asia)above does not include the purchases made by GUIMELCO withWESM which is volatile. It only covers the base load supply fromGCGI and with Trans-Asia. The rate impact analysis excludes VAT.The rate of Php 5.6840jkWh with Trans-Asia considers the supply byits baseload supplier together with supply of Trans-Asia during peakhours while the rate of Php 5.3742jkwh is purely from the baseloadsupply.

17. The cheaper price under the CSE is advantageous to themember-consumers as this results to cheaper electricity pricesas compared to the old ESA.

OTHER DOCUMENTS AND COMPLIANCEWITH PRE-FILING REQUIREMENTS

18. Applicants hereby submit the following documents to theHonorable Commission in support of the approval of the ratestructure as embodied in the CSE:

Annex Document"I" Secretary's Certificate of Trans-Asia authorizing the

signing of the CSEand the filing of the Aoolication"J" Board Resolution of GUIMELCOauthorizing the

signing of the CSE"K" Load profile ofthe DU"L" Distribution Development Plan"M" Rate Impact Simulation

ERCCASENO. 2016-071 RCNotice of Public Hearingj02 August 2016of 13

"N" Detailsof the Contract of the Sale of Electricity"0" SwornStatement on the procurement process of fuel"P" Allrelevant technical and economiccharacteristics of

the generation capacity"Q" Allcost analysisin support ofthe pricing provisionsof

the contract

19. In compliance with Rule 6 of the ERC Rules of Practice andProcedure, a copy of the Joint Application, with all itsaccompanying documents were furnished to the legislativebody of the municipality and province where GUMELCOprincipally operates. Copies of the proofs of receipt orAffidavits of Service are attached to the application as Annex"R" and series.,

20. A copy of the Joint Application was also published byApplicants in a newspaper of generation circulation withinGUIMELCO's franchise area. A copy of the newspaper wherethe Joint Application was published together with thecorresponding Affidavit of Publication is attached to theapplication as Annexes "s" and "S-1"respectively;

MOTION FOR PROVISIONAL AUTHORITY

21. The provisional approval of the instant Joint Applicationincluding the rate structure as embodied in the CSE iswarranted to ensure continued and uninterrupted supply ofpower to GUIMELCO's franchise areas that is beyond or inexcess of its base load electricity supply. A provisionalauthority would also ensure reliable and stable voltageespecially when GUIMELCO requests Trans-Asia to providemuch needed electricity during critical times, this preventspower interruptions or disturbances redounding to the benefitof the member-consumers of GUIMELCO;

22. The provisional approval of the rate structure as embodied inthe CSE is also important for Trans-Asia to allow it to operateat sustainable and viable levels necessary for Trans-Asia tofully pay all its contractual obligations and costs with itssuppliers. It will also allow GUIMELCO to charge and collectthe respective electricity fees as provided in the PSA from itsmember-consumers. Hence, Applicants respectfully move forthe provisional approval of the CSE pursuant to Rule 14 of theERC Rules of Practice and Procedure;


23. Copies of the Sworn Statements supporting the said motion areattached to the application as Annexes "T" and "T-1".

24. Applicants pray that the Commission:

a. Pending hearing, immediately issue an order provisionallyapproving the Contract for the Sale of Electricity andauthorizing the rate structure as embodied therein andauthorizing GUIMELCO to charge and collect the rates,charges and fees under the agreement to its member-consumers;

b. After due hearing, issue a final authority authorizing theContract for the Sale of Electricity including the ratestructure as applied and authorizing GUIMELCO to chargeand collect the rates, charges and fees under the agreementto its member-consumers;

The Commission has set the application for jurisdictionalhearing, expository presentation, pre-trial conference and evidentiaryhearing on 15 September 2016 (Thursday) at ten o'clock inthe morning (10:00 A.M.) at GUIMELCO'sMain office, SanMiguel, Jordan, Guimaras.

All persons who have an interest in the subject matter of theproceeding may become a party by filing, at least five (5) days prior tothe initial hearing and subject to the requirements in the ERC's Rulesof Practice and Procedure, a verified petition with the Commissiongiving the docket number and title of the proceeding and stating: (1)the petitioner's name and address; (2) the nature of petitioner'sinterest in the subject matter of the proceeding, and the way andmanner in which such interest is affected by the issues involved in theproceeding; and (3) a statement of the relief desired.

All other persons who may want their views known to theCommission with respect to the subject matter of the proceeding mayfile their opposition to the application, or comment thereon, at anystage of the proceeding before the applicant concludes thepresentation of its evidence. No particular form of opposition orcomment is required, but the document, letter or writing shouldcontain the name and address of such person and a concise statementof the opposition or comment and the grounds relied upon.

ERCCASENO. 2016-071 RCNotice of Public Hearing/02 August 2016 of 13 .

All such persons who wish to have a copy of the application mayrequest from the applicant that they be furnished with the same, priorto the date of the initial hearing. The applicant is hereby directed tofurnish all those making such request with copies of the applicationand its attachments, subject to the reimbursement of reasonablephotocopying costs. Any such person may likewise examine theapplication and other pertinent records filed with the Commissionduring standard office hours.

WITNESS, the Honorable Chairman, JOSE VICENTE B.SALAZAR, and the Honorable Commissioners, ALFREDO J.NON, GLORIA VICTORIA C. YAP-TARDC, JOSEFINAPATRICIA A. MAGPALE-ASIRIT, and GERONIMO D. STA.ANA, Energy Regulatory Commission, this 2nd day of August,2016 at Pasig City.

ATTY. NA J. MARASIGANC efof8taff

Office of the Chairman and CEO

Applicants, ---------- - - - - - - - · INC.,ANDTRANS-ASIA OIL AND ENERGY DEVELOPMENT CORPORATION...

Documents

Transcript of Applicants, ---------- - - - - - - - · INC.,ANDTRANS-ASIA OIL AND ENERGY DEVELOPMENT CORPORATION...