Republic of the Philippines ENERGY REGULATORY COMMISSION ...

Republic of the Philippines ENERGY REGULATORY COMMISSION

San Miguel Avenue, Pasig City

IN THE MATTER OF THE APPLICATION FOR THE APPROVAL OF THE PROPOSED THREE (3) YEAR CAPITAL EXPENDITURE PROJECTS FOR THE YEARS 2017-2019

ERC CASE NO. 2016-140 RC

CEBU III ELECTRIC COOPERATIVE, INC. (CEBECO III)

Applicant. x-------------------------------------x

DECISION

Before the Commission for resolution is the Application dated 08 June 2016 filed by Applicant Cebu III Electric Cooperative, Inc. (CEBECO III) on 13 June 2016, seeking the Commission’s approval of its proposed three (3) year capital expenditure projects for the years 2017-2019.

FACTUAL ANTECEDENTS

The pertinent allegations of the said Application are hereunder quoted as follows:

THE APPLICANT

1. Applicant CEBECO Ill is an Electric Cooperative created and existing pursuant to the provisions of Presidential Decree No. 269 as amended, with principal office located at Luray II, Toledo City, Cebu, Philippines, represented herein by its General Manager, VIRGILIO C. FORTICH, duly authorized by virtue of Board Resolution No. 44, series of 2016 dated 21 March 2016, of the Board of Directors, copy of which is attached hereto as Annex "A" and made an integral part hereof; The filing of the instant Application is likewise authorized under the afore-mentioned Resolution;

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2. Applicant has been granted by the National Electrification

Administration (NEA) an authority to operate and distribute electric light and power within the coverage area comprising the City of Toledo and the Municipalities of Aloguinsan, Pinamungajan, Balamban and Asturias all in the province of Cebu;

THE APPLICATION AND ITS PURPOSE

3. This Application is filed in compliance with ERC RESOLUTION NO. 26, Series of 2009 (A Resolution Amending the Rules for Approval of Regulated Entities' Capital Expenditure Projects)" adopted pursuant to the mandate of Section 43 of Republic Act No. 9136 otherwise known as the Electric Power Industry Reform Act of 2001 (EPIRA) and its implementing Rules and Regulations, which categorically provides that all capital expenditure projects (CAPEX) shall be submitted to and for the approval of the Commission prior to its implementation, in relation to ERC Resolution No. 20, Series of 2011 which sets the timelines for the filing of the instant application;

4. The aforecited amended rules was issued by the Honorable

Commission to ensure that the projects are timely, appropriate, necessary and cost efficient; to ensure that the proposed capital projects are consistent with the Distribution Development Plan (DDP), the Philippine Grid Code (PGC), the Philippines Distribution Code (PDC), and other relevant government issuances; and to ensure that the procurement of equipment, materials and services are transparent, competitive and compliant with the applicable laws and regulations.

5. In accordance with the Amended CAPEX Rules, consistent

with the Distribution Development Plan and the Philippine Distribution Code, Applicant shall acquire, construct and implement the following three (3) year capital expenditure projects with a total approximate cost of One Hundred Forty-Three Million Five Hundred Thirty-Eight Thousand Four Hundred Four Pesos (PhP 143,538,404.00).

THE PROPOSED CAPITAL EXPENDITURE PROJECTS 5.a.1 Network CAPEX Projects

SAFETY PROJECTS

Project Code

Project Description Fund Source

Amount per Year of Implementation

Total Cost (PHP)

2017 2018 2019

NCP-001

Rehab/Uprating/Rerouting of Toledo Feeder 1 Phase 1: From Toledo S/S to Bulubungan via 69 kV Underbuilt on 336/4 MCM ACSR

Bank

13,888,629 13,888,629

NCP-002

Rehab/Uprating/Rerouting of Toledo Feeder 1 Phase 2: From Bulubugan to Pinamungajan S/S

Bank 6,669,982 6,669,982

DECISION/30 JUNE 2020


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via 69 kV Underbuilt on Steel Poles using 336.4 MCM ACSR

NCP-003

Rehab/Rerouting/Reconductoring of Toledo Feeder 1 From Pina S/S to Dakit, Bonbon and Cement Plant via Triple Circuit Design via 4/0 ACSR

Bank

7,653,478 7,653,478

NCP-004

Installation of Gang Type Disconnect Switches

Bank 600,000 350,000 375,000 1,325,000

NCP-005

Installation of Disconnect Switches

Bank 650,000 780,000 910,000 2,340,000

NCP-006

Installation of Fuse Cutouts Bank 418,000 498,960 586,971 1,503,931

Sub-Total (PhP) 33,381,020

POWER QUALITY PROJECTS

Project Code


Amount per Year of Implementation Total Cost (PHP) 2017 2018 2019

NCP-007

Construction of 13 km, 69 kV Substrans on 336.4 MCM Conductors from Toledo to Poog

Bank

NCP-008

Rehab and Uprating of Poog to DASUNA Line Section (Lutopan Feeder 3)

Bank 1,861,591 1,861,591

NCP-009

Repair and Refurbishment of 10/12.5 MVA Power Transformer

Bank 4,468,564 4,468,564

NCP-010

Construction of 5/6.25 MVA Asturias Substation

Bank

27,000,000 27,000,000


5.a.2 OTHER NETWORK CAPEX PROJECTS

Project Code



ONCP-001

Installation of Amorphous Distribution Transformers

Bank 4,740,600 5,476,400 6,327,450 16,544,450

ONCP-002

Installation of Service Drop Wire

Bank 3,656,048 2,145,110 2,252,365 8,053,523

ONCP-003

Purchase of Metering Equipment

Bank 4,373,494 6,245,067 6,557,530 17,176,091


5.a.3 NON-NETWORK CAPEX PROJECTS

Project Code



NNCP-001

Acquisition and Installation of SCADA System

Bank 450,000 1,800,000 1,200,000 3,450,000

NNCP-002

Purchase of Vehicles Bank 6,630,000 7,736,500 2,343,326 16,709,826

NNCP-003

Purchase of Test Equipment Bank 1,100,000 2,550,000 3,650,000

NNCP-004

Purchase of Line Maintenance Tools

Bank 880,000 880,000

NNCP-005

Purchase of Safety Apparel Bank 715,000 747,500 780,000 2,242,500

NNCP-006

Acquisition of Lot and Site Development

Bank 2,000,000 2,000,000

NNCP-007

Acquisition of Lot for Asturias Area Office Building

Bank 1,000,000 1,000,000

NNCP-008

Construction of Asturias Area Office Building

Bank 1,250,000 1,250,000

NNCP-009

Purchase of Tools and Equipment

Bank 327,150 18,000 58,000 403,150

NNCP-010

Bagonan Renovation Bank 500,000 500,000



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NNCP-011

Purchase of IT Softwares and Hardwares

Bank 1,213,607 437,275 493,886 2,144,768

NNCP-012

Purchase of Communication Equipment

Bank 66,500 89,909 97,100 253,509

NNCP-13

Purchase of Meter Reading Equipment

Bank 64,000 67,200 70,560 201,760

NNCP-014

Purchase of Office Equipment

Bank 220,000 50,400 97,252 367,652


SUMMARY OF PROJECTS

Capital Expenditure Project Type

Source of

Funds

Project Costs to be Financed

Amount per Year of Implementation

2017 2018 2019

Network CAPEX Projects

Safety Bank 33,381,020 29,880,089 1,628,960 1,871,971 Power Quality Bank 33,330,155 6,330,155 27,000,000 -

Sub-Total 36,210,244 28,628,960 1,871,971

Other Network CAPEX Projects

Service Drop Wire Bank 8,053,523 3,656,048 2,145,110 2,252,365 Metering Equipment Bank 17,176,091 4,373,494 6,245,067 6,557,530 Distribution Transformers

Bank 16,544,450 4,740,600 5,476,400 6,327,450

Sub-total 12,770,142 13,866,577 15,137,345

Non-Network CAPEX Projects

SCADA Bank 3,450,000 450,000 1,800,000 1,200,000 Vehicles 16,709,826 6,630,000 7,736,500 2,343,326 Test Equipment Bank 3,650,000 1,100,000 2,550,000 Line Maintenance Tools

Bank 880,000 880,000

Safety Apparel Bank 2,242,500 715,000 747,500 780,000 Land Bank 3,000,000 3,000,000 Building Bank 1,750,000 500,000 1,250,000 Tools and Equipment Bank 403,150 327,150.00 18,000 58,000 IT Softwares and Hardwares

Bank 2,144,768 1,213,607 437,275 493,886

Communication Bank 253,509 66,500 89,909 97,100 Meter Reading Equipment

Bank 201,760 64,000 67,200 70,560

Office Equipment Bank 367,652 220,000 50,400 97,252 Sub-total 11,286,257 11,826,784 11,940,124

GRAND TOTAL per Year (in PhP) 60,266,643 54,322,321 28,949,440

5.b. TYPE OF THE CAPITAL EXPENDITURE PROJECTS IN

ACCORDANCE WITH SECTION 2.3 OF RESOLUTION NO. 26, SERIES OF 2009;

5.b.1 As described above in Section 5.a.1, the projects are

categorized as Network CAPEX which will address safety, power quality and reliability of the distribution system of the electric cooperative.

5.b.2 The Other Network CAPEX projects as shown in

5.a.2 are necessary in terms of additional distribution transformers, meters and metering materials due to annual customer growth as forecasted including replacement.

5.b.3 And the Non-Network CAFEX projects of the

cooperative as categorized and indicated in 5.a.3 will enhance its capability in responding customer requests and concerns for better and efficient



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electric service. Further, its facilities and equipment will be responsive to the quality service that the consumers deserve.

JUSTIFICATION OF THE CAPITAL PROJECTS

6. With the prevailing situation in the electric power industry

vis-à- vis the consumers' demand, Applicant deems it appropriate to embark on asset development and expansion in order to meet the growing demands; and

7. The procurement of the aforementioned project is of great

necessity in the schedules herein provided, otherwise service decline is imminent, to the prejudice of the consumers.

8. If a Force Majeure or Fortuitous event, as the case may be,

occurs, the Applicant shall seek the ERC's confirmation of the implementation of the capital projects arising from such event.

RELATED AND INDISPENSABLE DOCUMENTS

9. Consistent with the requirement of the filing of applications for approval of capital projects, Applicant attached and made an integral part of this Application the detailed justifications, related and indispensable documents chronologically arranged and contained in Annex "B" hereof.

BOARD APPROVAL OF THE PROPOSED PROJECTS

10. Finding the proposed capital expenditure projects reasonable, appropriate, necessary and beneficial to the consumers, it being envisioned to further their interests; there being no adverse effects on its implementation, but rather results to service decline if not achieved and implemented on the periods it is projected to occur, the Board of Directors of the Applicant passed Resolution No. 43 Series of 2016 dated March 21, 2016 approving the proposed CAPEX, copy of which is attached hereto as Annex “C”;

11. Information on the proposed capital projects had been widely

disseminated through posting in the conspicuous places of the City of Toledo and the Municipalities of Aloguinsan, Pinamungajan, Balamban and Asturias all in the province of Cebu as certified to by Engr. Edgardo H. Hernaez Jr., employee of the Applicant tasked to undertake such dissemination, copy of which is attached hereto as Annex "D". The Notices posted in the areas aforementioned specifically contained the following:

a. the proposed projects; b. the reasons for proposing said projects; c. the source of fund for the said projects; d. indicative rate impact of the said project.



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SOURCES OF FUNDS FOR THE PROJECTS

12. In the implementation of the proposed projects, the Applicant shall utilize the Reinvestment Fund for Sustainable Capital Expenditures (RFSC) and the big part shall be sourced through loans from interested lenders/financial institutions that shall charge the least interest. A separate application for authority to secure loan shall be filed with the Honorable Commission.

13. The implementation of the proposed CAPEX shall bring forth

an indicative rate impact of PhP 0.0734/kWh as follows:

RATE IMPACT CALCULATION

2011-2013 2014-2016

Total 2017 2018 2019 kWh Sales 277,669,460 330,583,264 126,948,814 134,380,551 141,899,758 1,011,481,846 Approved RFSC Rate, PhP/kWh

0.2508 0.2508 0.2508 0.2508 0.2508 0.2508

Cash balance beginning, PhP, excess/(shortfall)

5,475,413 (33,903,280) 7,654,320 (18,249,961) (47,794,261) 5,475,413

CASH INFLOWS

Current year RFSC Collection, PhP

69,639,501 82,910,283 31,838,762 33,702,642 35,588,459 253,679,647

50% income on leased properties PhP

540,761 540,761 180,254 180,254 180,254 1,622,284

Subsidy 9,622,438 14,292,881 23,915,319 Loan proceeds from financial institutions, PhP (Capex 2011-2013)

98,225,508 52,095,003 7,000,000 157,320,511

Loan proceeds from financial institutions, PhP (Capex 2014-2016)

146,343,213 10,197,914 156,541,127

Loan proceeds from financial institutions, PhP (Capex 2017-2019)

60,266,643 54,322,321 28,949,439 143,538,404

Total Cash Inflows, Php

79,802,699 343,312,646 154,578,576 95,205,217 64,718,152 736,617,291

Available cash for disbursement, PhP

85,278,112 308,409,366 162,232,897 76,955,257 16,923,891 742,092,704

CASH OUTFLOWS

CAPEX Requirement, PhP (2011-2013)

96,216,523 46,903,784 52,095,003 7,000,000 202,215,309


196,042,558 10,197,914 206,240,471


60,266,643 54,322,321 28,949,439 143,538,404

Previous Loan Amortization with NEA, PhP

21,443,883 2,749,684 24,193,567

Previous Loan Amortization with PNB, PhP

26,116,748 12,759,150 10,686,928 7,204,356 56,767,182

New Loan Amortization with PNB, 2011-2013

6,442,615 14,040,741 14,586,774 14,049,977 49,120,106

New Loan Amortization with PNB, 2014-2016

20,907,465 21,692,298 20,989,828 20,288,504 83,878,095

Sheet 1 8,979,108 16,756,250 20,475,721 46,211,078



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ERC Permit Fees, PhP (Capex 2011-2013)

1,520,986 1,520,986


1,592,194 1,592,194


450,000 407,417 217,121 1,076,538

Total Cash Outflows, PhP

119,181,392 300,755,046 180,482,857 124,749,518 91,185,118 816,353,931

Cash balance ending, PhP, excess/(shortfall)

(33,903,280) 7,654,320 (18,249,961) (47,794,261) (74,261,227) (74,261,227)

Rate Impact on RFSC, PhP/kWh, excess/(shortfall)

(0.1221) 0.0232 (0.1438) (0.3557) (0.5233) (0.0734)

COMPLIANCE WITH PRE-FILING REQUIREMENTS

14. In compliance with Section 2, Rule 6 of the ERC Rules of Practice and Procedure, copies of this Application together with all its annexes and accompanying documents had been furnished by Applicant the Legislative Body of the City of Toledo, where Applicant principally operates and the Legislative Body of the Province of Cebu. Likewise, the Application was published in The Freeman, a newspaper of general circulation within the franchise area of the Applicant.

15. As proof of such compliances is the Affidavit of Service

executed by Kareen T. Pagdalian, an employee of the Applicant, and the first page of the Application bearing the stamp "RECEIVED", herewith attached as Annex "E", "F" and "G", and the Affidavit of Publication executed by the Editor, and original copy of the issue showing the published application, copies of which are attached hereto as Annexes "H" and "I", respectively;

16. Moreover, prior to the filing of this Application, a pre-filing

conference with the concerned staff of the Commission was conducted pursuant to Section 4 of Rule 6, and for purposes of determining completeness of the supporting documents attached to the Application.

PRAYER

WHEREFORE, foregoing premises considered, Applicant most respectfully prays:

1. That after due notice and hearing the proposed capital

projects/expenditures subject of this application be APPROVED, declared just, reasonable, and equitable pursuant to the provisions of ERC Resolution No. 26, Series of 2009, and other related laws, rules and regulations.

2. That, Applicant be allowed/authorized to recover from the

members-consumers its expenditures/costs incurred in the implementation of the Capital Expenditure Projects.



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On 27 September 2016, the Commission issued an Order and Notice of Public Hearing, both dated 15 September 2016, setting the Application for hearing on 12 January 2017.

On 09 December 2016, CEBECO III filed an Urgent Motion for Resetting (Motion), praying that the scheduled hearing on 12 January 2017 be set on another date due to conflict of schedule.

On 05 January 2017, the Commission issued an Order dated 12 December 2016, granting the above Motion. On even date, the Commission issued an Order with the Notice of Public Hearing, both dated 22 December 2016, setting the case for hearing for determination of compliance with the jurisdictional requirements, expository presentation, pre-trial conference, and presentation of evidence on 01 February 2017.

On 25 January 2017, CEBECO III filed its Pre-trial Brief.

During the 01 February 2017 hearing, only Applicant CEBECO III appeared. There was no intervenor or oppositor who appeared nor was there any intervention or opposition that was filed within the reglementary period. Thereafter, the Applicant presented proofs of its compliance with the Commission’s jurisdictional requirements, to wit:

1. Complete issue of the Business World dated 12 January 2017,1 where the Notice of Public Hearing was published;

2. Complete issue of the Business World dated 19 January 2017,2 where the Notice of Public Hearing was published;

3. Affidavit of Publication executed by Edwin L. Monforte of the Business World, dated 20 January 2017, attesting that the Notice of Public Hearing was published on the said newspaper;3

4. Complete issue of the Daily Tribune dated 12 January 2017,4 where the Notice of Public Hearing was published;

5. Complete issue of the Daily Tribune dated 19 January 2017,5 where the Notice of Public Hearing was published;

1 Exhibit “D”, Compliance with Jurisdictional Requirements dated 01 February 2017; 2 Exhibit “D-1”, ibid; 3 Exhibit “D-2”, ibid; 4 Exhibit “D-4”, ibid; 5 Exhibit “D-5”, ibid;



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6. Affidavit of Publication executed by Teresita Z. Sorsogon of the Daily Tribune, dated 19 January 2017, attesting that the Notice of Public Hearing was published on the said newspaper;6

7. Certificates of Posting issued by the Offices of the Governor7 and Sangguniang Panlalawigan8 of the Province of Cebu;

8. Certificates of Posting issued by the Offices of the City Mayor9 and Sangguniang Panlungsod10 of Toledo, Cebu;

9. Certificates of Posting issued by the Offices of the Municipal Mayor of Aloguinsan11, Pinamungajan12, Balamban13, and Asturias14, all in the province of Cebu;

10. Certificates of Posting issued by the Offices of the

Sangguniang Bayan of Aloguinsan15, Pinamungajan16, Balamban17, and Asturias18, all in the province of Cebu;

11. Transmittal Letters executed by Mr. Virgilio C. Fortich, Jr., General Manager of CEBECO III, furnishing the Order and Notice of Public Hearing to the following offices: Committee on Energy of the Senate,19 Committee on Energy of the House of Representatives,20 Commission on Audit (COA),21 Office of the Solicitor General (OSG),22 and the Philippine Chamber of Commerce (PCC);23

12. Affidavit of Service24 executed by Ms. Kareen T. Pagdalian, stating that the above transmittal letters were furnished to the abovementioned offices;

6 Exhibit “D-6”, ibid; 7 Exhibit “E”, ibid; 8 Exhibit “E-2”, ibid; 9 Exhibit “E-4”, ibid; 10 Exhibit “E-6”, ibid; 11 Exhibit “E-8”, ibid; 12 Exhibit “E-12”, ibid; 13 Exhibit “E-16”, ibid; 14 Exhibit “E-20”, ibid; 15 Exhibit “E-10”, ibid; 16 Exhibit “E-14”, ibid; 17 Exhibit “E-18”, ibid; 18 Exhibit “E-22”, ibid; 19 Exhibit “F”, ibid; 20 Exhibit “F-2”, ibid; 21 Exhibit “F-4”, ibid; 22 Exhibit “F-6”, ibid; 23 Exhibit “F-8”, ibid; 24 Exhibit “F-10”, ibid;



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13. Certificate of Posting,25 dated 20 January 2017, executed

by Mr. Edgardo H. Hernaez, Jr. of CEBECO III, certifying that the Order and Notice of Public Hearing was posted in several conspicuous places in the City of Toledo and the Municipalites of Aloguinsan, Pinamungajan, Balamban and Asturias;

14. Affidavit of Publication26 dated 20 January 2017,

certifying that the Order and the Notice of Public Hearing was posted in CEBECO III’s website;

15. Affidavit of Broadcast,27 dated 23 January 2017, issued by Radyo Natin, stating that the date of the initial hearing was aired over the said ratio station for the widest information dissemination; and

16. Affidavit of Broadcast,28 dated 24 January 2017, issued by Toledo Cable TV, stating that the date of the initial hearing was announced to the public via the said local cable network for widest information dissemination.

Having found the Applicant’s compliance with the Commission’s publication and posting of notice requirements in accordance with the Order dated 22 December 2016, the Commission declared that it acquired jurisdiction over the instant Application.

Thereafter, Applicant conducted its expository presentation, discussing in detail the CAPEX Application, to wit: (a) CEBECO III’s Consumer Profile; (b) Significance of the CAPEX Application; (c) The projects of the subject Application; and (d) The benefits of the proposed projects when implemented. At the end of the presentation, the Commission propounded questions relative thereto. Likewise, the Commission directed the Applicant to submit the following documents within thirty (30) days from 01 February 2017:

1. The comparative date of the brand new units and rewound power transformer units;

2. The economic evaluation in order to determine the least

cost solution between the brand new and rewound power transformer units;

25 Exhibit “G”, ibid; 26 Exhibit “G-2”, ibid; 27 Exhibit “G-4”, ibid; 28 Exhibit “G-6”, ibid;



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3. The miscellaneous non-operating income from disposal

of scrap wires, kWh meters and distribution transformers; and

4. The amortization schedule of the Commission-

approved CAPEX projects.

The hearing proceeded with the conduct of the Pre-trial Conference where the Applicant moved for a declaration of general default, in light of the absence of any intervenor or oppositor. Likewise, the Applicants moved to adopt the facts and issues stated in its Pre-trial Brief. The Commission granted both motions and terminated the pre-trial conference.

Thereafter, Applicant presented its first witness, Mr. Edgardo H. Hernaez, Jr. (Mr. Hernaez), the Planning and Design Division Manager and Regulatory Compliance Officer of CEBECO III. Mr. Hernaez’ testimony was offered to prove that CEBECO III’s proposed capital projects, to be undertaken within a period of three (3) years and submitted for approval with the Commission, are necessary, appropriate, reasonable, justifiable, responsive to the needs of the Applicant and beneficial to the consumers. Mr. Hernaez’ testimony was likewise offered to prove that the Application complied with the requirements provided for under Resolution No. 26, Series of 2009.

The foregoing testimony was contained in Mr. Hernaez’ Judicial Affidavit, which he identified together with his signature thereon, duly marked as Exhibits “L” and “L-1”, respectively.

Thereafter, Applicant presented its second witness, Mr. Rolando L. Vicente (Mr. Vicente), the Finance Manager of CEBECO III. Mr. Vicente testified on the sources of funds necessary to finance the implementation of CEBECO III’s capital projects, and the indicative rate impact once the said projects are implemented.

Mr. Vicente’s testimony was contained in his Judicial Affidavit, which he identified together with his signature thereon, duly marked as Exhibits “M” and “M-1”, respectively.

On 08 February 2017, Applicant filed a hard copy of its Expository Presentation and its Compliance with Jurisdictional Requirements.



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On 01 March 2017, Applicant filed its Compliance to the

Commission’s directive to submit documents during the 01 February 2017 hearing.

On even date, Applicant filed its Formal Offer of Evidence (FOE), attaching thereto its documentary exhibits, to wit:

Exhibit Document Purpose A Copy of the Application Exhibits “A” to “C-3” are offered

to prove compliance with the pre-filing requirements under Rule 6 of this Honorable Commission’s Rules of Practice and Procedure. A-1 Name and Signature of Atty.

Alan Byrne S. Gaviola, Counsel for the Applicant

A-2 Name and Signature of Virgilio C. Fortich, Jr., General Manager of Applicant, in the Verification and Certification of Non-Forum Shopping portion of the Application

B The Freeman Newspaper dated June 11, 2016, where the published Verified Application appears

B-1 Affidavit of Publication of Quennie S. Bronce of the Freeman Daily dated June 11, 2016

B-2 Name and Signature of Quennie S. Bronce

C Certification of Pulchra Marie E. Acevedo, Secretary of Provincial Board of Cebu Province, dated January 24, 2017 to the effect that a copy of the Verified Application with all its annexes was received by the said legislative body

C-1 Name and signature of Pulchra Marie E. Acevedo

C-2 Certification of Bonifacio T. Tatad, Jr., Secretary of the Sangguniang Panlungsod of Toledo City, dated June 28, 2016 to the effect that a copy of the Verified Application with all its annexes was received by the said legislative body

C-3 Name and Signature of Bonifacio T. Tatad, Jr.



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Exhibit Document Purpose

D Business World Newspaper dated January 12, 2017 issue, a newspaper of general circulation in the Philippines where the first publication of the Notice of Public Hearing appears

Exhibits “D” to “G-9” are offered to prove compliance with the jurisdictional requirements as per Honorable Commission’s Order dated 07 October 2016.

D-1 Business World Newspaper dated January 19, 2017 issue, a newspaper of general circulation in the Philippines where the second publication of the Notice of Public Hearing appears

D-2 Affidavit of Publication issued by Edwin L. Monforte of Business World Newspaper dated January 20, 2017

D-3 Name and Signature of Edwin L. Monforte

D-4 Daily Tribune Newspaper dated January 12, 2017 issue, a newspaper of general circulation in the Philippines where the first publication of the Notice of Public Hearing appears

D-5 Daily Tribune Newspaper dated January 19, 2017 issue, a newspaper of general circulation in the Philippines where the first publication of the Notice of Public Hearing appears

D-6 Affidavit of Publication issued by Teresita Z. Sorsogon, dated January 19, 2017.

D-7 Name and Signature of Teresita Z. Sorsogon

E Certification of Posting dated January 26, 2017 issued by the Office of the Sangguniang Panlalawigan of the Province of Cebu

E-1 Name and Signature of Atty. Ramil P. Abing, Executive Assistant V

E-2 Certification of Posting dated January 26, 2017 issued by the Office of the Sangguniang Panlalawigan of the Province of Cebu

E-3 Name and Signature of Vanessa N. Abines, Board Secretary III



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E-4 Certification of Posting dated January 18, 2017 issued by the Office of the Mayor of Toledo City

E-5 Name and Signature of Hon. John Henry R. Osmena, Mayor

E-6 Certification of posting dated January 31, 2017 issued by the Office of the Sangguniang Panglungsod of the City of Toledo

E-7 Name and Signature of Bonifacio T. Tatad, Jr., SP Secretary

E-8 Certification of posting dated January 13, 2017 issued by the Office of the Mayor of the Municipality of Alonguinsan, Cebu

E-9 Name and Signature of Hon. Augustus Caesar L. Moreno, Municipal Mayor

E-10 Certification of posting dated January 23, 2017 issued by the Office of the Sangguiniang Bayan of the Municipality of Aloguinsan, Cebu

E-11 Name and Signature of Teddie H. Albarico, Secretary of the Sanggunian

E-12 Certification of posting dated January 16, 2017 issued by the office of the Mayor of the Municipality of Pinamungajan, Cebu

E-13 Name and Signature of Hon. Glenn F. Baricuatro, Municipal Mayor

E-14 Certification of posted dated January 16, 2017 issued by the office of the Sangguniang Bayan of the Municipality of Pinamungajan, Cebu

E-15 Name and Signature of Melucina P. Erames, Secretary to the Sanggunian

E-16 Certification of Posting dated January 17, 2017 issued by the Office of the Mayor of Municipality of Balamban, Cebu

E-17 Name and Signature of Hon. Ace Stefan V. Binghay, Municipal Mayor



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E-18 Certification of Posting dated January 13, 2017 issued by the Office of the Sangguniang Bayan of Municipality of Balamban, Cebu

E-19 Name and Signature of Rufo Hayag, SB Secretary

E-20 Certification of Posting dated January 17, 2017 issued by the Mayor of the Municipality of Asturias

E-21 Name and Signature of Hon. Jose Antonio T. Pintor, Municipal Mayor

E-22 Certification of posting dated January 23, 2017 issued by the office of the Sangguniang Bayan of the Municipality of Asturias, Cebu

E-23 Name and Signature of Grace M. Roble, Secretary to the Sanggunian

F Letter of Virgilio C. Fortich, Jr., General Manager of CEBECO III addressed to the Senate Committee on Energy dated January 11, 2017 furnishing said office a copy of the ERC Order and Notice of Public Hearing

F-1 Postal Office Registry Receipt No. 103 dated January 13, 2017

F-2 Letter of Virgilio C. Fortich, Jr., General Manager of CEBECO III addressed to the House of Representatives Committee on Energy dated January 11, 2017 furnishing said office a copy of the ERC Order and Notice of Public Hearing


F-4 Letter of Virgilio C. Fortich, Jr., General Manager of CEBECO III addressed to the Commission on Audit dated January 11, 2017 furnishing said office a copy of the ERC Order and Notice of Public Hearing


F-6 Letter of Virgilio C. Fortich, Jr., General Manager of CEBECO



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III addressed to the Office of the Solicitor General dated January 11, 2017 furnishing said office a copy of the ERC Order and Notice of Public Hearing


F-8 Letter of Virgilio C. Fortich, Jr., General Manager of CEBECO III addressed to the Philippine Chamber of Commerce dated January 11, 2017 furnishing said office a copy of the ERC Order and Notice of Public Hearing


F-10 Affidavit of Service dated January 20, 2017 executed by Kareen T. Pagdalian to the effect that the letters to the offices of the Solicitor General, Senate Committee on Energy, House of Representatives’ Committee on Energy, the Commission on Audit, the Office of the Solicitor General and the Philippine Chamber of Commerce were actually sent by registered mail through Toledo City Postal Office

F-11 Name and Signature of Kareen T. Pagdalian

G Certification of Posting dated January 20, 2017 executed and signed by Edgardo H. Hernaez, Jr. of CEBECO III on the posting of the Order and Notice of Public Hearing in conspicuous places of the City of Toledo and the Municipalities of Aloguinsan, Pinamungajan, Balamban and Asturias.

G-1 Name and signature of Edgardo H. Hernaez, Jr.

G-2 Affidavit of Publication dated January 20, 2017 executed and signed by Jerome A. Llevado of CEBECO III of posting of the Order and Notice of Public Hearing in the CEBECO III Website



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G-3 Name and signature of Jerome A. Llevado

G-4 Affidavit of Broadcast dated January 23, 2017 executed and signed by Miflyn Tabayag of Radyo Natin, to the effect that the Order as well as the Notice of Public Hearing setting the hearing of the application today had been aired over said radio station for the widest information dissemination.

G-5 Name and signature of Miflyn Tabayag

G-6 Affidavit of Broadcast dated January 24, 2017 executed and signed by Amuerfino Perales of Toledo Cable TV, to the effect that the Order as well as the Notice of Public Hearing setting the hearing of the application today had been aired over said local cable network for the widest information dissemination

G-7 Name and signature of Amuerfino Perales

H CEBECO III Board Resolution No. 44 Series of 2016 dated 21 March 2016

Exhibit “H” is offered to prove the authority of CEBECO III, through its General Manager, Virgilio C. Fortich to file the instant Application.

I Capital Project Details with all the Annexes

Exhibit “I” is offered to prove the details of the Capital Projects and its justifications for its acquisition and implementation and that the Capital Projects are necessary, appropriate, reasonable, justified, responsive to the needs of the Applicant and beneficial to the member-consumers.

J CEBECO III Board Resolution No. 43 Series of 2016 dated 21 March 2016

Exhibit “J” is offered to prove that the proposed Capital Projects were approved by the Board of Directors of CEBECO III.

K Affidavit of Posting executed by Edgardo H. Hernaez, Jr.

Exhibit “K” and its sub-marking is offered to prove that the proposed Capital Projects has been posted in the conspicuous places of the city and municipalities within the franchise area of the Applicant as

K-1 Name and signature of Edgardo H. Hernaez, Jr.



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required under Resolution No. 26 in order to inform the member-consumers of the proposed Capital Projects, the reasons for proposing said projects, the source of funds and the indicative rate impact of the said projects.

L Judicial Affidavit of witness Edgardo H. Hernaez, Jr.

Exhibit “L” and its sub-marking is offered to prove that the CAPEX Project are necessary, justified and appropriate

L-1 Name and Signature of Edgardo H. Hernaez, Jr.

M Judicial Affidavit of witness Roland L. Vicente

Exhibit “M” and its sub-marking is offered to prove the financial circumstances in the acquisition of the CAPEX Projects as well as the sources of funds necessary therefore.

M-1 Name and signature of Roland L. Vicente

N Hard copies of the Expository Presentation

Exhibit “N” and “N-1” are offered for the purpose of explaining the necessity of the CAPEX Projects as well as the rationale and compelling circumstances leading to the filing of the Application.

N-1 Soft copies of the Expository Presentation

O Comparative Date of Brand New and Rewound Power Transformer Units

Exhibits “O” to “R” are offered to prove compliance with the mandated submission of documents during the 01 February 2017 public hearing.

P Economic Evaluation to Determine the Least Cost Solution Between Brand New and Rewound Power Transformer Units

Q Miscellaneous Non-Operating Income from Disposal of Scrap Wires, kWh Meters and Distribution Transformers

R Amortization Schedules of ERC Approved CAPEX Projects

On 21 November 2017, CEBECO III filed an Urgent Motion for Early Implementation.

On 10 July 2019, CEBECO III filed a Motion for Partial Withdrawal of Applied Capital Expenditure Projects (Motion for Partial Withdrawal) where it prayed for the withdrawal of the following unimplemented CAPEX projects:

1. Bagonan Renovation Phase 2;



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2. Proposed 13-km 69/34.5kV Toledo-Poog Subtransmission

Line;

3. Rehabilitation/Uprating/Rerouting of Toledo Feeder Phase 1: From Toledo S/S to Bulubugan via 69kV Underbuilt on 336.4 MCM ACSR;

4. Rehabilitation/Uprating/Rerouting of Toledo Feeder 1 Phase 2: From Bulubugan to Pinmungajan via 69kV Underbuilt on Steel Poles using 336.4 MCM ACSR; and

5. Rehabilitation/Rerouting/Reconductoring of Toledo Feeder 1 From Pina S/S to Dakit, Bonbon and Cement Plant via Triple Circuit Design via 4/0 ACSR.

On 18 September 2019, CEBECO III filed its Compliance with Supplemental Offer of Evidence, wherein it submitted an additional document to aid the evaluation of the case, to wit:

Exhibit Document Exhibit S Update on the Implemented

CAPEX Projects for the years 2017-2019 including the actual costs vis-à-vis the costs as applied

Exhibit “S” is offered to prove compliance to the directive of the Regulatory Operations Services Division of the Honorable Commission during the technical conference.

The Commission, having found the exhibits contained in the Applicant’s FOE, as well as its subsequent submissions relevant and material in the final resolution of this case, admitted the same and declared the instant case submitted for resolution.

ISSUES

The issues for the Commission’s resolution are the following:

1. Whether or not the Commission should approve the proposed capital expenditure projects of CEBECO III covered by the instant Application; and

2. Whether or not the Commission should

allow/authorize CEBECO III to recover the costs incurred in the implementation of the capital expenditure projects covered by the instant Application from the members-consumers.



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COMMISSION’S RULING

After due deliberation and thorough evaluation of all evidence and information gathered by the Commission pursuant to its regulatory powers, the Commission resolves the above issues, as follows:

1. The Commission APPROVES, with modification, the Application of CEBECO III for approval of its Capital Expenditure Project; and

2. The Commission AUTHORIZES CEBECO III to recover the cost incurred in the implementation of its capital expenditure projects from its member-consumers.

DISCUSSION

In determining the merits of the instant Application, the Commission evaluated it based on the following parameters: (1) Legal Basis for the filing of the Application; (2) Franchise Area of CEBECO III; (3) Forecast of Future Requirement; (4) Performance Assessment of the Distribution System; (5) Project Evaluation; (6) Project Cost Summary; (7) Project Status; (8) Financing Scheme and Impact to Reinvestment Fund for Sustainable CAPEX (RFSC); and (9) Payment of Permit Fee.

1. Legal Basis for the filing of the Application

Section 23 of Republic Act (R.A.) No. 9136, otherwise known as “Electric Power Industry Reform Act (EPIRA)” provides that a Distribution Utility (DU) shall have the obligation to provide distribution services and connections to its system to any end-user within its franchise area consistent with the Distribution Code. For purposes of providing such service, every DU shall operate, maintain, and provide safe, reliable, adequate, efficient and continuous electric service.29

To fulfill said legal obligation and in the interest of public good, DUs must constantly upgrade and expand its existing facilities and assets, or construct new facilities or assets to be able to meet the growing demands for electricity of consumers within its franchise area.

29 Article 1.6, , ERC Resolution No. 2, Series of 2010, entitled “Amended Distribution Service and

Open Access Rules” (Amended DSOAR);



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In the course of operating its distribution system, distribution utilities encounter technical issues that often results to power interruptions. DUs must be able to timely act and provide remedies for any incidents to avoid or at least minimize these power interruptions. Cognizant of such obligation imposed upon every DU, the Commission promulgated Resolution No. 26, Series of 2009 (CAPEX Guidelines), pursuant to Section 43 f(v) of the EPIRA which provides that:

Any significant operating costs or project investments of the TRANSCO and distribution utilities which shall become part of the rate base shall be subject to verification by the ERC to ensure that the contracting and procurement of the equipment, assets and services have been subjected to transparent and accepted industry procurement and purchasing practices to protect the public interest.

In compliance with the said mandate, CEBECO III filed the instant Application and sought the Commission’s approval of its CAPEX projects.

2. Franchise Area of CEBECO III

CEBECO III 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 offices at Toledo City, Cebu.

It holds the exclusive franchise, issued by the defunct National

Electrification Commission (NEC) under the National Electrification Administration (NEA), to operate an electric light and power distribution service in the Municipalities of Aloguinsan, Pinamungajan, Balamban and Asturias and the City of Toledo, all in the province of Cebu.

3. Forecast of Future Requirement

The ability of an electric cooperative to accurately forecast future energy, demand requirement, and number of consumers of the distribution system is a critical component for effective and correct identification of CAPEX projects. This forecast will ensure that the formulated solution will properly address the needs of CEBECO III and benefit its consumers.



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Under the Electric Cooperative’s Distribution Utility Planning

Manual (ECDUPM)30, all forecasting models must be tested for validity and accuracy31. Valid models should meet the criteria of the following statistical value:

a. Adjusted R2, which is also called coefficient of determination, determines how good the estimated regression equation is (also a measure of “goodness of fit”). To meet the criteria, the adjusted R2 should be at least 80% for econometric analysis, or 99% for trend analysis. The closer the value to 100%, the better the estimated function fits the data;

b. T-statistic shows the significance of each explanatory

variable in predicting the dependent variable. To pass this criteria, the T-statistic should be greater than two (2), or less than negative two (-2); and

c. P-value is the probability that the population

parameter (β) is equal to zero (0). This criterion should be lower than 0.1.

Likewise, the accuracy of the model should have a Mean Absolute Percentage Error (MAPE) of less than 5%.

Hence, in determining the validity and accuracy of the forecasting models utilized by CEBECO III in its project planning, the same must be based on the foregoing parameters.

The Commission verified all models formulated by CEBECO III to determine whether or not its resulting forecast conforms to the criteria under the ECDUPM. Upon verification, the Commission determined that the forecasting models used by CEBECO III are compliant with the criteria under the ECDUPM.

30 The Planning Manual collaboratively crafted by National Electrification Administration (NEA),

Philippine Rural Electric Cooperatives Association, Inc. (PHILRECA), National Association of General Managers of Electric Cooperatives, Inc. (NAGMEC), Association of Mindanao Rural Electric Cooperatives, Inc. (AMRECO), and the Commission with the assistance of the International Finance Corporation (IFC) that provides guidance for the systematic and economic expansion and rehabilitation of distribution facilities and the acquisition of assets necessary to respond to the needs of the electric cooperative’s consumers and enable the Electric Cooperatives (ECs) to meet safety performance standards and regulatory requirements and the structural and/or institutional planning and development of ECs. (Section 1.3, Resolution No. 26, Series of 2009, entitled “Resolution Amending the Rules for the Approval of Regulated Entities’ Capital Expenditure Projects”);

31 Section 2.4, ECDUPM (2009);



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4. Performance Assessment of the Distribution System

CEBECO III assessed the performance of its distribution system and submitted the results thereof before the Commission as part of its evidence in the instant Application.

The Commission evaluated the performance assessment submitted by CEBECO III using the standards and mandatory requirements provided in the following issuances of the Commission and pertinent regulations: (1) 2016 Philippine Grid Code (PGC)32; (2) 2017 Philippine Distribution Code (PDC)33; (3) Distribution Service and Open Access Rules (DSOAR)34; (4) Magna Carta for Residential Electricity Consumers35; (5) Resolution No. 26, Series of 2009 or the Amended CAPEX Guidelines36; and (6) ECDUPM37.

Shown hereunder are the criteria and summarized assessment on the condition of the distribution system of CEBECO III in terms of safety, capacity, power quality, reliability, system loss, and service efficiency.

4.1 Safety

Under the ECDUPM, the following criteria shall be considered in conducting safety analysis:

a) The short circuit duty of all protective devices must

be at least 110% of the maximum available fault; b) Minimum fault at the farthest end of feeders must be

sensed by protective devices; and c) The Electric Cooperative (EC) must also include the

line and equipment that need to be rehabilitated because of violations in safety criteria specified by the Philippine Electrical Code (PEC) such as

32 Energy Regulatory Commission A Resolution Approving the Publication of the Approved

Philippine Grid Code 2016 Edition, Resolution No. 22, Series of 2016 [2016 Philippine Grid Code] (05 October 2016);

33 Energy Regulatory Commission, A Resolution Approving the Philippine Distribution Code (PDC) 2017 Edition, Resolution No. 02, Series of 2018 [2017 Philippine Distribution Code] (27 February 2018);

34 Supra note Error! Bookmark not defined.; 35 Energy Regulatory Commission, Magna Carta for Residential Electricity Consumers (17 June

2004); 36 Energy Regulatory Commission, Resolution Amending the Rules for Approval of Regulated

Entities’ Capital Expenditure Projects, Resolution No. 26, Series of 2009 [The Amended CAPEX Guidelines] (09 December 2009);

37 Supra note Error! Bookmark not defined.;



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clearances and insulations.

Per Application, all protection equipment installed at the substations of the CEBECO III are safe since it is compliant with the safety standards set by the PGC and PDC in terms of short circuit duty and capability to withstand maximum fault current and sense minimum fault current. The protective device rating is more than 110% of the computed maximum fault, while the protective relay settings are less than the computed minimum fault.

The summary of the safety assessment are shown in Tables

1 and 2.

Table 1: Short Circuit Analysis of Toledo 20MVA S/S Existing Feeders

SHORT CIRCUIT ANALYSIS OF EXISTING FEEDERS OF TOLEDO 20 MVA SUBSTATION

Toledo S/S Max Fault (kA) Min Fault (kA) Protective Device Rating

(kAIC)

Protective Relay

Settings (kA)

Remarks Feeder Name 3-Phase SLG 3-Phase SLG

Toledo Feeder 1 10.140 14.769 1.203 0.385 25 0.244 safe






Table 2: Short Circuit Analysis of Balamban 10 MVA S/S Existing Feeders

SHORT CIRCUIT ANALYSIS OF EXISTING FEEDERS OF BALAMBAN 10 MVA SUBSTATION

Balamban S/S Max Fault (kA) Min Fault (kA) Protective Device Rating

(kAIC)

Protective Relay

Settings (kA) Remarks

Feeder Name 3-Phase SLG 3-Phase SLG

Balamban Feeder 1 5.693 8.210 1.015 0.298 31.5 0.099 safe




Further, CEBECO III identified several deteriorated assets, such as rotten poles, meters, broken hardware, for replacement.

Table 3 shows the proposed projects of CEBECO III aimed to address the above safety issues:

(This space is intentionally left blank.)



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Table 3: Safety Projects

Proposed Project Description / Justification Proposed Cost

(PhP) 1. “Rehab/Uprating/Rerouting of Toledo

Feeder 1 (Phase 1): From Toledo S/S to Bulubugan via 69 kV Underbuilt on 336.4 MCM ACSR.”

The project intends to replace the dilapidated/corroded distribution line of CEBECO III.

13,888,629

2. “Rehab/Uprating/Rerouting of Toledo Feeder 1 (Phase 2): From Bulubugan to Pinamungajan S/S via 69 kV Underbuilt on Steel Poles using 336.4 MCM ACSR.”


6,669,982

3. “Rehab/Rerouting/Reconductoring of Toledo Feeder 1 From Pina S/S to Dakit, Bonbon and Cement Plant via Triple Circuit Design via 4/0 ACSR”


7,653,478

4. “Installation of Gang Type Disconnect Switches”

To provide a safe and reliable distribution system

1,325,000

5. “Installation of Disconnect Switches” To provide a safe and reliable distribution system

2,340,000

6. “Installation of Fuse Cutouts” To provide a safe and reliable distribution system

1,503,931

The evaluations of the proposed safety projects are discussed in items 5.1, 5.2, 5.3, 5.4, 5.5, and 5.6 of this Decision.

4.2 Capacity

Under the ECDUPM, the following criteria shall be considered in capacity assessment:

a) Plan for augmentation of substation capacity in any

given year that a substation reaches seventy percent (70%) load of its maximum rated capacity; and

b) A substation is considered properly sized if the loading of the transformers exceeds seventy percent (70%) of the maximum rated capacity in reference to a ten (10) year planning horizon; and

Moreover, demand and location of new and future customers must be anticipated.

Table 4 show the projected loading condition of the

existing substations of CEBECO III, as provided in its Application, to wit:



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Table 4: Projected CEBECO III Substation Loading Condition

Loading Conditions of Existing Substations

Year

Toledo Substation Balamban Substation

Rating Max Rating Rating Max Rating

20 MVA 25 MVA 10 MVA 12.5 MVA

Demand (kVA) at 95% pf % loading Demand (kVA) at 95%

pf % loading

2016 16,662.87 66.65% 7,380.32 59.04%

2017 17,885.97 71.54% 7,580.46 60.64%

2018 19,155.76 76.62% 7,802.01 62.42%

2019 20,472.22 81.89% 8,044.95 64.36%

2020 21,835.37 87.34% 8,309.29 66.47%

2021 23,245.19 92.98% 8,595.04 68.76%

2022 24,701.70 98.81% 8,902.19 71.22%

2023 26,204.89 100.82% 9,230.74 73.85%

2024 27,754.75 111.02% 9,580.67 76.65%

2025 29,351.30 117.41% 9,952.02 79.62%

2026 30,994.53 123.98% 10,344.77 82.76%

Note: Red and italic font represents values not compliant with the required limits.

– Based on Table 4, the Toledo Substation was projected to be loaded beyond the 70% threshold as early as 2017, while Balamban Substation is nearing said threshold and will be breached by 2022. Thus, both substations require capacity augmentation. CEBECO III intends to resolve the capacity issue of the Toledo Substation through construction of new substation. However, the said project is already included in its Regular CAPEX application filed under ERC Case No. 2013-097 RC for the regulatory years of 2014 to 2016.

CEBECO III, on the other hand, intends to resolve the capacity issues of the Balamban Substation through a project included in this application entitled as “Construction of 5/6.25 MVA Asturias Substation.” Such project will be discussed in detail under Project No. 10 hereunder.

Additionally, the Commission noted the following based on the capacity assessment on the distribution system of CEBECO III, to wit:

a) CEBECO III needs to provide distribution

transformers due to increasing demand of its system as shown in Table 3 and Table 4; and

b) CEBECO III needs to provide connection facilities, such as distribution line extensions, meters and service drop, including its accessories, for



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new/prospective customers.

Table 5 shows the proposed projects of CEBECO III aimed to address the above capacity issues:

Table 5: Capacity Projects

Proposed Project Description / Justification

Proposed Cost (PhP)

11. “Installation of Amorphous Distribution Transformers”

The project will accommodate the increasing demand requirement of CEBECO III.

16,544,450

12. “Installation of Service Drop Wire”


8,053,523

13. “Purchase of Metering Equipment”


17,176,091

The evaluations of the proposed capacity projects are discussed in items 5.11, 5.12, and 5.13 of this Decision.

4.3 Power Quality

Under the ECDUPM, the criteria to be considered in the power quality assessment are as follows:

a) Voltage variation should be within the range of ±10%

of the nominal voltage (207-253 volts), or 0.9 – 1.1 per unit (p.u.) of the nominal voltage; and

b) A 2.5% limit on the maximum unbalance voltage should be observed.

CEBECO III conducted a power quality assessment of its distribution system which include under/over-voltage and voltage unbalance in its primary distribution feeders.

Tables 6 and 7 shows the voltage profile of Toledo and

Balamban Substation. (This space is intentionally left blank.)



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Table 6: Toledo Substation Voltage Profile

Feeder Name

Voltage Profile

Voltage Level (p.u) Maximum Voltage Unbalance (%)

2016 2017 2018 2019 2020 2016 2017 2018 2019 2020

Toledo Feeder 1 0.7490 0.7410 0.7340 0.7260 0.7187 2.540 3.060 4.520 5.450 5.796

Toledo Feeder 2 0.7290 0.7180 0.7100 0.7030 0.6917 2.820 3.640 4.710 6.080 6.323

Toledo Feeder 3 0.9820 0.9810 0.9800 0.9790 0.9780 1.460 1.660 1.750 1.840 1.985

Toledo Feeder 4 0.9800 0.9790 0.9780 0.9770 0.9760 1.370 1.460 1.550 1.640 1.730

Toledo Feeder 5 0.9800 0.9790 0.9780 0.9770 0.9760 2.070 2.048 2.448 2.840 2.912

Toledo Feeder 6 0.9980 0.9980 0.9980 0.9980 0.9970 0.220 0.198 0.216 0.225 0.234


Table 7: Balamban Substation Voltage Profile

Feeder Name

Voltage Profile

Voltage Level (p.u) Maximum Voltage Unbalance (%)

2016 2017 2018 2019 2020 2016 2017 2018 2019 2020

Balamban Feeder 1 0.927 0.923 0.918 0.914 0.909 1.90 2.16 2.90 3.09 3.411

Balamban Feeder 2 0.851 0.838 0.825 0.811 0.798 1.92 2.05 2.17 2.30 2.304

Balamban Feeder 3 0.999 0.999 0.999 0.999 0.999 0.14 0.14 0.14 0.14 0.140

Balamban Feeder 4 0.758 0.747 0.735 0.724 0.710 2.14 2.20 2.71 2.75 2.883


As can be seen in Tables 6 and 7, Feeders 1 and 2 of Toledo Substation, and Feeders 1, 2, and 4 of Balamban Substation are not compliant with the required voltage limits.

CEBECO III intends to resolve the voltage issues existing

in Feeders 1 and 2 of Toledo Substation through a substation project. The said project is included in its Regular CAPEX application filed under ERC Case No. 2013-097 RC for the regulatory years 2014 to 2016.

Meanwhile, CEBECO III intends to resolve the voltage

issues of Feeders 2 and 4 of Balamban Substation through Project No. 10, which, as discussed in the previous item, will also resolve capacity issues of the said substation.

With regard to the Voltage Unbalance issues of Toledo

Feeders 1, 2 and 5, and Balamban Feeders 1 and 4, CEBECO III plans to resolve these by load balancing among feeders.

Aside from the above discussed feeders, the remaining backbone lines of CEBECO III are compliant with the power quality standards.



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Table 8 shows the proposed projects of CEBECO III aimed

at addressing the power quality problems discussed above:

Table 8: Power Quality Projects

Proposed Project Description / Justification Proposed

Cost (PhP)

7. “Construction of 13 km, 69 kV Subtrans on 336.4 MCM Conductors from Toledo to Poog”

The proposed project is intended to improve the power quality issues on Feeder 2 of Toledo Substation.

-

8. “Rehab and Uprating of Poog to DASUNA Line Section (Lutopan Feeder 3)”

Rehabilitation and Uprating of portion of Feeder 3 of the Lutopan Substation (Poog to DASUNA Line Section).

1,861,591

9. “Repair and Refurbishment of 10/12.5 MVA Power Transformer”

Refurbishment of the busted 10 MVA Sangi power transformer to be installed subsequently in the proposed Lutopan Substation.

4,468,564

10. “Construction of 5/6.25 MVA Asturias Substation”

Project Justification Address the power quality issues in Balamban Feeder 4.

27,000,000

The evaluations of the proposed power quality projects are discussed in items 5.7, 5.8, 5.9, and 5.10 of this Decision.

4.4 Reliability

The reliability performance of an EC is measured through indices, namely, the System Average Interruption Frequency Index (SAIFI) and the System Average Interruption Duration Index (SAIDI).

Under the ECDUPM, the following are the criteria for reliability indices:

a) Maximum System Average Interruption Frequency Index (SAIFI): Twenty (20) customer-interruption per average customer per year; and

b) Maximum System Average Interruption Duration

Index (SAIDI): Forty-five (45) hours per average customer per year

SAIFI indicates how often the average customer experiences a sustained interruption over a pre-defined period of time. SAIDI, on the other hand, indicates the total duration of interruption for the average customers during the pre-defined



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period of time. These indices are commonly measured in customer minutes or hours of interruption.

The Table 9 shows that CEBECO III is compliant with the abovementioned reliability criteria.

Table 9: CEBECO III Feeder Reliability Performance

Feeder Name SAIFI SAIDI Remarks

Toledo Feeder 1 0.799 2.02 Within Limit




Toledo Feeder 5 0 0 Within Limit

Toledo Feeder 6 0 0 Within Limit

Toledo 20 MVA S/S 1.7 5.122 Within Limit

Balamban Feeder 1 0.247 0.342 Within Limit


Balamban Feeder 3 0 0 Within Limit


Balamban 10 MVA S/S 1.076 2.533 Within Limit

Total System 2.776 7.656 Within Limit

The Commission notes further, that in the instant case, CEBECO III did not propose any project aimed at addressing or improving system reliability performance.

4.5 System Loss

The System Loss recoverable cap for ECs prior to 2010 was at 14%, pursuant to RA 7832 and its IRR. The Commission subsequently updated the system loss cap through Resolution No. 17, Series of 200838, setting the cap at 13% effective January 2010 billing for ECs

In 2018, the Commission issued Resolution No. 10, Series

of 201839 (New System Loss Cap Rules), setting a new cap for system loss for Distribution Utilities (both PDU and EC). The said Resolution classified ECs into three (3) clusters, and provided another cluster for PUs.

CEBECO III was classified under Cluster 2 where the distribution feeder loss cap was set at twelve percent (12%) for

38 Resolution No. 17, Series of 2008, entitled, “A Resolution Adopting a New System Loss Cap for

Distribution Utilities”; 39 Resolution No. 10, Series of 2018, entitled, “A Resolution Clarifying the System Loss Calculation

and Providing the Effectivity of the Rules for Setting the Distribution System Loss Cap”;



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the year 2018, eleven percent (11%) for the year 2019, ten and 25/100 percent (10.25%) for the years 2020 onwards.

Notwithstanding the effectivity of the New System Loss Cap Rule, the Commission finds the old system loss cap applicable in the instant case.

Table 10 shows the nine (9) year historical system loss

performance of CEBECO III.

Table 10: CEBECO III’s System Loss Performance

Year Historical System Loss

2007 6.42%

2008 5.17%

2009 4.08%

2010 5.51%

2011 5.96%

2012 6.46%

2013 7.67%

2014 6.955%

2015 7.96%

Based on Table 10, CEBECO III’s system loss performance for the years 2007 to 2015, was within the system loss recoverable cap of 14% and 13% under RA 7832 and Resolution No. 17, Series of 2008, respectively.

It should be noted, however, that from 2019 onwards, the

new system loss cap under Resolution No. 10, Series of 201840 shall govern. Thus, the System Loss Performance of CEBECO III, henceforth, shall be assessed pursuant to the said Resolution until otherwise amended.

The Commission notes further, that in the instant case, CEBECO III did not propose any project aimed at addressing distribution system efficiency issues or reducing further its distribution system loss.

4.6 Service Efficiency

Under the ECDUPM, electric cooperatives are required to assess the condition of its existing facilities to determine the

40 A Resolution Clarifying the System Loss Calculation and Providing the Effectivity of the Rules

for Setting the Distribution System Loss Cap;



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necessary non-network assets needed by the utility to provide efficient service to its customers.

As part of its overall assessment of its distribution system, CEBECO III identified the following concerns affecting its service towards its customers:

a) Insufficient and deteriorated service vehicles;

b) Lack of office space and deteriorated main office building;

c) Insufficient tools and personnel’s protection equipment;

d) Obsolete and defective computer hardware and network switch;

e) Outdated software;

f) Lack of reliable communication network within the franchise area of CEBECO III; and

g) Insufficient measuring and testing equipment.

CEBECO III proposed the projects in Table 11 to address these concerns on service efficiency.

Table 11: Service Efficiency Projects

Proposed Project Description / Justification Proposed Cost

(PhP)

14. Acquisition and Installation of SCADA System

Installation of SCADA41 Remote Terminal Units (RTU) and Fiber Optics in the following substations: 1) Pinamungajan Substation; 2) Asturias Substation; and 3) Lutopan Substation.

3,450,000

15. Purchase of Vehicles To facilitate delivery of service and maintenance activity.

16,709,826

16. Purchase of Test Equipment Procurement of measuring instrument to properly monitor the condition of CEBECO III’s distribution asset.

3,650,000

17. Purchase of Line Maintenance Tools

Line personnel should be fully equipped with complete and appropriate tools and gears vital in the performance of their duties.

880,000

18. Purchase of Safety Apparel To maximize the performance of CEBECO III's personnel and ensure their safety.

2,242,500

19. Acquisition of Lot and Site Development

Purchase of 800 sq. m. lot for 5MVA Asturias Substation and Site Development/ Perimeter fence for substation.

2,000,000

41 Supervisory Control And Data Acquisition (SCADA) is a control system architecture

comprising computers, networked data communications and graphical user interfaces (GUI) for high-level process supervisory management, while also comprising other peripheral devices like programmable logic controllers (PLC) and discrete proportional-integral-derivative (PID) controllers to interface with process plant or machinery. The use of SCADA has been considered also for management and operations of project-driven-process in construction;



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20. Acquisition of Lot for Asturias Area Office

to provide a convenient and safe place for the normal transactions of the member-consumers of CEBECO III and its personnel.

1,000,000

21. Construction of Asturias Area Office Building

to provide a convenient and safe place for the normal transactions of the member-consumers of CEBECO III and its personnel.

1,250,000

22. Purchase of Tools and Equipment

The project is intended to maintain and improve the efficiency in terms of customer services.

403,150

23. Bagonan Renovation Repair and renovation of the Bagonan Building. 500,000

24. Purchase of IT Softwares and Hardwares

To ensure an efficient and reliable service to customers.

2,144,768

25. Purchase of Communication Equipment


253,509

26. Purchase of Meter Reading Equipment


201,760

27. Purchase of Office Equipment

Procurement of complete furniture and equipment facilities (i.e. steel cabinet, office table, office chair, file rack, air conditioner, and television).

367,652

The evaluation of the proposed projects to address service efficiency issues are discussed in items 5.14 to 5.27 of this Decision.

5. Project Evaluation

In the instant Application, CEBECO III manifested that its proposed CAPEX projects were formulated for the systematic expansion and rehabilitation of its distribution facilities to respond to the needs of its customers. It also claims that its CAPEX projects will enable it to meet operational capacity requirements, reliability, safety, performance standards, and regulatory requirements.

These projects were proposed to address the deficiencies identified in the performance assessment of CEBECO III’s distribution system, grouped accordingly to the type of attributes being addressed, to wit:

a. Six (6) CAPEX project to address safety deficiencies of the distribution network;

b. Three (3) CAPEX projects to address capacity inadequacies;

c. Four (4) CAPEX projects to address power quality issues; and

d. Fourteen (14) CAPEX projects to improve service efficiency.



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Upon thorough evaluation of all the proposed CAPEX

projects of CEBECO III, the Commission resolved as follows: (i) to approve twenty (20) out of the twenty-seven (27) proposed projects with modifications; (ii) grant the withdrawal of six (6) projects; and (iii) disapprove one (1) project without prejudice to its refiling in CEBECO III’s next CAPEX Application, as summarized in Table 12:

Table 12: Project Technical Assessment Summary

No. Project Description Project Cost (PhP) Action Assessment

Proposed Cost Approved Cost

1

Rehab/Uprating/Rerouting of Toledo Feeder 1 Phase 1: From Toledo S/S to Bulubugan via 69 kV Underbuilt on 336.4 MCM ACSR

13,888,629.00 - Withdrawn due to applicant’s request

Grant the request for withdrawal

2

Rehab/Uprating/Rerouting of Toledo Feeder 1 Phase 2: From Bulubugan to Pinamungajan S/S via 69 kV Underbuilt on Steel Poles using 336.4 MCM ACSR



3

Rehab/Rerouting/ Reconductoring of Toledo Feeder 1 From Pina S/S to Dakit, Bonbon and Cement Plant via Triple Circuit Design via 4/0 ACSR



4 Installation of Gang Type Disconnect Switches

1,325,000.00 1,038,000.00 Approved with cost modification

The updated actual cost was adopted but subject for validation as provided in Article 5.1 Reportorial Requirements of the CAPEX Guidelines

5 Installation of Disconnect Switches

2,340,000.00 767,360.00 Approved with cost modification

The updated actual cost are lower than the 2018 NEA Price Index benchmark

6 Installation of Fuse Cutouts 1,503,931.00 1,112,540.00 Approved with cost modification


7 Construction of 13 km, 69 kV Subtrans on 336.4 MCM Conductors from Toledo to Poog

- - Withdrawn due to applicant’s request


8 Rehab and Uprating of Poog to DASUNA Line Section (Lutopan Feeder 3)



9 Repair and Refurbishment of 10/12.5 MVA Power Transformer

4,468,564.00 - Disapproved Project disapproved without prejudice to re-filing

10 Construction of 5/6.25 MVA Asturias Substation



11 Installation of Amorphous Distribution Transformers



12 Installation of Service Drop Wire 8,053,523.00 5,513,366.00 Approved with cost modification

The updated actual cost are lower than the NEA Price Index benchmark



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13 Purchase of Metering Equipment 17,176,091.00 17,309,500.00 Approved with cost modification


14 Acquisition and Installation of SCADA System



15 Purchase of Vehicles 16,709,826.00 18,596,545.63 Approved with cost modification


16 Purchase of Test Equipment 3,650,000.00 3,665,000.00 Approved with cost modification


17 Purchase of Line Maintenance Tools

880,000.00 808,480.50 Approved with cost modification


18 Purchase of Safety Apparel 2,242,500.00 1,770,007.00 Approved with cost modification


19 Acquisition of Lot and Site Development



20 Acquisition of Lot for Asturias Area Office



21 Construction of Asturias Area Office Building

1,250,000.00 966,298.20 Approved with cost modification


22 Purchase of Tools and Equipment



23 Bagonan Renovation 500,000.00 Withdrawn due to applicant’s request


24 Purchase of IT Softwares and Hardwares



25 Purchase of Communication Equipment





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The detailed evaluation by the Commission of the subject CAPEX projects are hereinafter discussed below:

5.1 Phase 1 of Rehab/Uprating/Rerouting of Toledo Feeder: From Toledo S/S to Bulubugan via 69kV Underbuilt on 336.4 MCM ACSR; and

5.2 Phase 2 of Rehab/Uprating/Rerouting of Toledo Feeder 1: From Bulubugan to Pinamungajan S/S via 69 kV Underbuilt on 336.4 MCM ACSR

Project Code NCP-001 & NCP-002 Project Type Safety

Priority Rank 1

Project Category Primary Distribution Line Project

Proposed CAPEX Cost (PhP)

Year Cost (PhP)

Phase 1 (2017) 13,888,629.00

Phase 2 (2017) 6,669,982.00

Total (PhP) 20,558,611.00

Project Duration 2017

Project Description

The project involves the rehabilitation, uprating, and re-routing of Toledo Feeder 1 from Toledo Substation to Pinamungajan Substation using the 69 kV underbuilt with conductor size of 336.4 MCM ACSR. The project is divided into 2 phases.

Project Justification

The project was intended to replace the dilapidated/corroded distribution line of CEBECO III as well as address the increasing power requirement of the Municipalities of Pinamungajan and Aloguinsan and the transfer of large load customers namely the Therma Visayas Inc. Powerplant.

Technical and Economic/Cost Analysis

On 10 July 2019, CEBECO III submitted a Motion for Partial Withdrawal, in which the instant project is withdrawn. CEBECO III deemed it proper to withdraw the proposed project since implementing this project now will no longer achieve the

26 Purchase of Meter Reading Equipment



27 Purchase of Office Equipment 367,652.00 232,890.00 Approved with cost modification


Grand Total 143,538,404.00 97,668,134.78



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purpose it was originally intended for. The withdrawal is also due to the prohibitive cost of implementing the project today. In view thereof, the Commission grants the said motion.

Action The Commission grants the request of the Applicant to withdraw the project from the application.

5.3 Rehab/Uprating/Rerouting of Toledo Feeder 1 from Pina S/S to Dakit, Bonbon and Cement Plant via Triple Circuit Design via 4/0 ACSR

Project Code NCP-003 Project Type Safety

Priority Rank 1



Year Cost (PhP)

2017 7,653,478.00


Project Description

The project involves the rehabilitation, re-routing and reconductoring of Toledo Feeder 1 from Pina Substation to Dakit, Bonbon and Cement Plant using triple circuit design with conductor size of 4/0 ACSR.


The project was intended to replace the dilapidated/corroded distribution line of CEBECO III.


On 10 July 2019, CEBECO III submitted a Motion for Partial Withdrawal, in which the instant project is withdrawn. CEBECO III deemed it proper to withdraw the proposed project since implementing this project now will no longer achieve the purpose it was originally intended for. The withdrawal is also due to the prohibitive cost of implementing the project today. In view thereof, the Commission grants the said motion.


5.4 Installation of Gang Type Disconnect Switches


Priority Rank 1


Project Title Installation of Gang Type Disconnect Switches



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Year Cost (PhP)

2017 600,000.00

2018 350,000.00

2019 375,000.00

Total 1,325,000.00

Project Duration 2017-2019

Project Description

Installation of 4 units of gang type Disconnect Switches (DS) in lieu of the indiviually-operated disconnect switches at the following locations: 1) Aliwanay, Balamban; 2) Buanoy, Balamban; 3) Bulubogan, Pinamungajan; and 4) Bawod, Pinamungajan.


The project is intended to maintain the security of the distribution system.


A Disconnect Switch is used to ensure that an electrical circuit is completely de-energized for service or maintenance. It also serves to connect or disconnect tie lines to enable the provision of alternative power source in the event the default power source is intentionally isolated or otherwise. Disconnect switches are necessary to ensure a safe and secure distribution system, as alternative power sources are facilitated by the functionality of these disconnect switches. Power transfers between Toledo and Balamban Substations are frequently being implemented by CEBECO III considering that these two (2) substations cater to a greater bulk of CEBECO III power demand. Large loads like industrial customers in the franchise area are avoiding outages as their nature of operation necessitates continuous and bulk supply of power. Interruptions in their operations affects the productivity, labor, and economy in the immediate community. To respond to such interruptions, CEBECO III facilitates the transfer of alternative power sources to such large load customers. However, the opening and closing of individual disconnect switches causes significant delays and in the effort to quickly eliminate power interruptions, safety is often compromised. A more reliable and efficient response in terms of supply transferring can be accomplished if gang type disconnect switches are used. Considering that the said device can be



PAGE 39 OF 92

remotely operated through SCADA42 system, the risks of possible accidents are diminished, if not totally avoided, during supply transfer. Based on the submitted CAPEX update, the actual cost incurred for the implementation of the subject project is One Million Thirty-Eight Thousand Pesos (PhP1,038,000.00). Shown below are the images of the locations of the subject project.

The Commission approved the proposed project based on updated cost which was found to be reasonable, subject to validation, as provided in Article 5.1 (Reportorial Requirements) of the CAPEX Guidelines as follows:

A Regulated Entity shall submit the results of the competitive bidding which shall include proposals purchase orders, the as-built drawings and bill of materials and the actual cost incurred in the implementation of the planned

42 Supervisory Control And Data Acquisition (SCADA) is a control system

architecture comprising computers, networked data communications and graphical user interfaces (GUI) for high-level process supervisory management, while also comprising other peripheral devices like programmable logic controllers (PLC) and discrete proportional-integral-derivative (PID) controllers to interface with process plant or machinery. The use of SCADA has been considered also for management and operations of project-driven-process in construction;



PAGE 40 OF 92

capital expenditure projects not later than the 30th of January of the succeeding year.

Since this project is necessary in order to comply with minimum standard to preserve the safety and integrity of the distribution system, the Commission approves the project and adopts the updated cost thereof, in the amount of One Million Thirty-Eight Thousand Pesos (PhP1,038,000.00).

Table 13: Project Cost Evaluation

Proposed Project Project Cost (PhP) Approved Cost

(PhP) Original Updated

Installation of Gang Type Disconnect Switches

1,325,000.00 1,038,000.00 1,038,000.00

Action The Commission approved the proposed project based on updated cost which was found to be reasonable, subject to validation, as provided in Article 5.1 (Reportorial Requirements) of the CAPEX Guidelines.

Approved CAPEX Cost (PhP)

Year Cost (PhP)

2017 438,000.00

2018 -

2019 600,000.00

Total 1,038,000.00

5.5 Installation of Disconnect Switches


Priority Rank 1



Year Cost (PhP)

2017 650,000.00

2018 780,000.00

2019 910,000.00

Total 2,340,000.00


Project Description

Installation of Disconnect Switches on both three-phase and single-phase lateral lines that could loop two or more power sources. CEBECO III proposed 221 units of Disconnect Switches, which is based on the identified new lateral sections and the quantity of units to be replaced that are due for retirement.



PAGE 41 OF 92


To provide a safe and reliable distribution system.


Disconnect Switces shall serve as tie line that enable the provision of alternative power source in the event the default power source is either intentionally isolated or otherwise. Disconnect switches are necessary to ensure safe and secured distribution system as alternative power sources are facilitated by the functionality of these disconnect switches. This is to improve reliability, particularly SAIDI. Faulted laterals could be isolated through disconnect switches, thus, only affected lines would experience power interruption instead of the whole feeder. Disconnect switch could also be used to connect unaffected lines during fault to alternative power source, thus, reduced power interruption duration. Based on the submitted CAPEX update, the project is partially implemented. The proposed implementation schedule and quantity of units to be acquired were modified due to the delayed implementation of the proposed Lutopan Substation project. Also, the withdrawal of some originally proposed projects that also needed new disconnect switches that will interconnect one line to another necessitated a modification of the project timeline. The following are the said projects that caused the modification of the project’s schedule of implementation, to wit:

1. Rehab/Uprating/Rerouting of Toledo Feeder 1 Phase 1:

From Toledo S/S to Bulubugan via 69 kV Underbuilt;

2. Rehab/Uprating/Rerouting of Toledo Feeder 1 Phase 2: From Bulubugan to Pinamungajan S/S via 69 kV Underbuilt;

3. Rehab/Rerouting/Reconductoring of Toledo Feeder 1 From Pina S/S to Dakit, Bonbon and Cement Plant via Triple Circuit Design; and

4. Construction of Lutopan 10 MVA Substation.

On 18 September 2019, CEBECO III submitted its CAPEX update on the project as shown in Table 14:



PAGE 42 OF 92

Table 14: Updated Installation of Disconnect Switches

Year Quantity Unit Cost Cost

Proposed 2017

65 10,000.00 650,000.00

Actual 32 8,980.00 287,360.00

Proposed 2018

74 10,540.54 780,000.00

Actual - - -

Proposed 2019

82 11,097.56 910,000.00

Actual 48 10,000.00 480,000.00

Table 15 shows the comparison of the unit costs of the equipment between CEBECO III’s proposed cost and the 2018 NEA Price Index.

Table 15: Unit Cost Comparison (PhP)

Particulars Updated Cost 2018 NEA

Price Index Switch, Disconnecting, 15 kV, 600 A

10,000.00 17,000.00

As shown in Table 15, CEBECO III’s updated cost of the equipment is lower than the 2018 NEA Price Index. Since this project is necessary in order to comply with minimum standard to preserve the safety and integrity of the distribution system, the Commission approves the project and adopts the updated cost thereof, in the amount of Seven Hundred Sixty-Seven Thousand Three Hundred Sixty Pesos (Php767,360.00).




Installation of Disconnect Switches

2,340,000.00 767,360.00 767,360.00

Action The Commission approved the proposed project based on updated cost and revised timeline of implementation, which were found to be reasonable, subject to validation, as provided in Article 5.1 (Reportorial Requirements) of the CAPEX Guidelines.


Year Cost (PhP)

2017 287,360.00

2018 -

2019 480,000.00

Total 767,360.00



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5.6 Installation of Fuse Cutouts


Priority Rank 1



Year Cost (PhP)

2017 418,000.00

2018 498,960.00

2019 586,971.00

Total 1,503,931.00


Project Description

Installation of Fuse Cutouts with arrester on all lateral sections to provide protection for the feeder and isolate the faulted section from the unfaulted sections, thus, reducing the effects of faults emanating from the lateral section. Morevoer, the device provides protection to distribution transformers and power capacitors installed within the distribution system.


Fuse Cutouts is the most basic protective device for distribution lines, transformers and other electrical equipment. The said equipment will absorb the impact of the threshold breaching and self destruct, thus, preventing any damage on the distribution assets during fault incidence.


The safety features of the proposed device are invaluable since it provides clear indication of the overcurrent during electrical fault incidence. The mechanics of the device is that it will break or self-destruct once it measured overcurrent in certain section of the distribution lines, thus, isolating such from the rest of the distribution system. This function is essential in order to maintain the security of the distribution system since all devices installed in it will be spared from being damaged. On 18 September 2019, CEBECO III submitted its CAPEX update on the project as shown in Tables 17, 18, and 19:

Table 17: Quantity of Fuse Cutout with Arrester

Year Proposed Actual

100A 200A 100A 200A

2017 45 25 50 14

2018 50 30 45 0

2019 55 37 55 37



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Table 18: Unit Cost of Fuse Cutout with Arrester

Year Proposed (PhP) Actual (PhP)

100A 200A 100A 200A

2017 5,511 6,800 5,170 7,700

2018 5,776 7,004 3,300 -

2019 5,823 7,208 5,429 8,085

Table 19: Total Project Cost (PhP)

Year Proposed Actual

100A 200A 100A 200A

2017 248,000 170,000 258,500 107,800

2018 288,840 210,120 148,500 -

2019 320,275 266,696 298,595 299,145

Total 1,503,931.00 1,112,540.00

Table 17 shows the actual quantity procured, while Table 18 shows the actual cost per unit, and Table 19 shows the actual total cost. Table 20 shows the comparison of the unit costs of the equipment between CEBECO III’s actual cost (highest) and the 2018 NEA Price Index.


Particulars Updated

Cost 2018 NEA

Price Index Remarks

Fuse Cut-Out, 100A with Arrester

5,429.00 6,500.00 Lower than the NPI

Fuse Cut-Out, 200A with Arrester

8,085.00 8,100.00 Lower than the NPI

As shown in Table 20, the unit costs of the equipment/materials as updated by CEBECO III are lower than the 2018 NEA Price Index benchmark. Since this project is necessary in order to comply with minimum standard to preserve the safety and integrity of the distribution system, the Commission approves the project and adopts the updated cost thereof, in the amount of One Million One Hundred Twelve Thousand Five Hundred Forty Pesos (Php 1,112,540.00).



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5.7 Construction of 13 km, 69 kV Subtrans on 336.4 MCM Conductors from Toledo to Poog

Project Code NCP-007 Project Type Power Quality

Priority Rank 3

Project Category Subtransmission Line Project


Year Cost (PhP)

2017 -


Project Description

Construction of 13 km, 69 kV subtransmission line from Toledo City to Poog using conductor size of 336.4 MCM ACSR on steel poles.


The project will connect the previously approved Lutopan 10/12.5 MVA substation project. The proposed project is intended to improve the power quality issues on Feeder 2 of Toledo Substation.


On 10 July 2019, CEBECO III submitted a Motion for Partial Withdrawal, in which the instant project is withdrawn. CEBECO III deemed it proper to withdraw the proposed project since implementing this project now will no longer achieve the purpose it was originally intended for. The withdrawal is also due to the prohibitive cost of implementing the project today. It can be noted further that the proposed project has no cost based on the newspaper publication submitted to the Commission. CEBECO III manifested that it intends to fund




Installation of Fuse Cut-Out 1,503,931.00 1,112,540.00 1,112,540.00

o



Year Cost (PhP)

2017 366,300.00

2018 148,500.00

2019 597,740.00

Total 1,112,540.00



PAGE 46 OF 92

the said project from RFSC collections that were allocated to fund the unimplemented capital expenditure projects previously approved by the Commission, thus, no additional funding is required. In view thereof, the Commission grants the said motion.


5.8 Rehab and Uprating of Poog to DASUNA Line Section


Priority Rank 3



Year Cost (PhP)

2017 1,861,591.00


Project Description

Rehabilitation and Uprating of portion of Feeder 3 of the Lutopan Substation (Poog to DASUNA Line Section).


On 10 July 2019, CEBECO III submitted a Motion for Partial Withdrawal, in which the instant project is withdrawn. CEBECO III deemed it proper to withdraw the proposed project since implementing this project now will no longer achieve the purpose it was originally intended for. The withdrawal is also due to the prohibitive cost of implementing the project today. In view thereof, the Commission grants the said motion.


5.9 Repair and Refurbishment of 10/12.5 MVA Power Transformer


Priority Rank 3

Project Category Substation Project

Year Cost (PhP)



PAGE 47 OF 92


2017 4,468,564.00


Project Description

Refurbishment of the busted 10 MVA Sangi power transformer to be installed subsequently in the proposed Lutopan Substation.


CEBECO III did not provide the necessary technical analysis to justify its claim that the subject project will correct the power quality issues of its system as stated in the Application.

Action With insufficient data to justify its claim of the necessity to implement the project, the Commission disapproves the subject project without prejudice to re-filing and may be included in its next CAPEX application

5.10 Construction of 5/6.25 MVA Asturias Substation


Priority Rank 3

Project Category Substation Project


Year Cost (PhP)

2018 27,000,000.00


Project Description

Construction of 5/6.25 MVA substation at Guinabasan, Asturias with two (2) outgoing feeders.


Address the power quality issues of Balamban Feeder 4


The town of Asturias is being served by the Balamban Substation through Feeder 4 using conductor size 2/0 ACSR with a span of twenty-six (26) kilometers. The said distribution line is the longest feeder of the Balamban Substation and has the highest demand requirement. Coincidentally, the said feeder has been experiencing power quality issues due to its line length and the high demand it caters. Table 22 shows the Voltage profile of the Balamban Substation.



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Table 22: Balamban Substation Voltage Profile

Feeder Name

Voltage Level (p.u) Maximum

Voltage Unbalance (%)

2016 2017 2018 2016 2017 2018

Balamban F1 0.943 0.948 0.946 0.60% 0.70% 0.80%

Balamban F2 0.970 0.973 0.969 0.60% 0.70% 2.80%

Balamban F3 1.000 1.000 0.995 0.60% 0.60% 0.80%

Balamban F4 0.876 0.881 0.823 0.70% 0.60% 0.80% Note: Red and italic font represents values not compliant with the required limits.

CEBECO III deemed the subject project necessary in order to resolve the said system power quality issue. Table 23 shows the system power quality profile that resulted from the implementation of the proposed project. It can be observed that the voltage level, as well as the voltage unbalance, have been corrected with the implementation of the project in year 2019, complying with the power quality standards prescribed in the PDC.

Table 23: Voltage Profile with the Project

Feeder Name Voltage Level (p.u)

Maximum Voltage Unbalance (%)

2019 2019

Balamban F1 0.946 0.60%

Balamban F2 0.966 0.60%

Balamban F3 0.995 0.60%

Balamban F4 0.928 0.70%

Asturias F1 0.966 1.30%

Asturias F2 0.952 1.30%

Asturias F3 1.000 1.30%


Based on the applicant’s analysis, the construction of a new substation in a strategic location is the only technically viable solution to resolve the said system issue. Subsequently, the applicant considered the following transformer rating capacities in order to determine the optimal capacity for the proposed substation, to wit: 1) 5 MVA; 2) 10 MVA; and 3) 15 MVA. The simulated capacity performances of the Balamban Substation and the subject Asturias Substation are shown in Table 24.



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Table 24: Loading Conditions with the Project

Year

Balamban Substation Asturias Substation

Demand (MVA)

% loading Demand

(MVA)

% loading

10/12.5 MVA

Option 1 5/6.25 MVA

Option 2 10/12.5

MVA

Option 3 15/18.75

MVA

2019 4.73 37.88% 3.31 52.96% 26.48% 17.65%

2020 4.89 39.12% 3.42 54.72% 27.36% 18.24%

2021 5.06 40.47% 3.54 56.64% 28.32% 18.88%

2022 5.24 41.91% 3.66 58.56% 29.28% 19.52%

2023 5.43 43.46% 3.80 60.80% 30.40% 20.27%

2024 5.64 45.11% 3.94 63.04% 31.52% 21.01%

2025 5.90 47.18% 4.05 64.80% 32.40% 21.60%

2026 6.16 49.31% 4.18 66.88% 33.44% 22.29%

2027 6.17 49.39% 4.31 68.96% 34.48% 22.99%

2028 6.34 50.75% 4.43 70.88% 35.44% 23.63%

2029 6.51 52.11% 4.56 72.96% 36.48% 24.32%

The simulation in Table 24 shows that all considered options can to cater to the forecasted demand requirement for the next ten (10) years. It can be noted, however, that the subject project (Option 1) is technically more acceptable considering that it will be maximized compared to other higher rating capacities. The substation capacity of 5 MVA will be loaded more than 70% of its maximum rating on the last year of the 10-year planning horizon, which is compliant planning criteria for capacity augmentation in reference with the guidelines provided in the ECDUPM43. Meanwhile, based on the Commission’s cost assessment, the actual costs/prices of the materials are lower than the 2018 NEA Price Index (NPI). Table 25 shows the said assessment, to wit:


Materials Actual Cost 2018 NEA

Price Index Remarks

Power Transformer, 5/6.25MVA

6,578,693.77 8,750,000.00 Lower than the NPI

Circuit Breaker, Dead Tank, SF6

2,459,667.84 2,700,000.00 Lower than the NPI

Potential Transformer 261,000.00 295,000.00 Lower than the NPI

Current Transformer 261,000.00 275,000.00 Lower than the NPI

Based on the submitted CAPEX update, the subject project has been completed. The actual total project cost incurred amounted to Twenty- Six Million Fifty-One Thousand Three



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Hundred Nineteen Pesos and 58/100 (PhP26,051,319.58), as shown in Table 26.

Table 26: Project Cost Summary

Particulars Project Cost (PhP)

Proposed Actual


27,000,000.00 24,800,000.00

Construction of Associated 69 kV and 13.2 kV Structures

- 1,251,319.58

Total Cost (PhP) 27,000,000.00 26,051,319.58

It is worthy to note that the proposed initial location of the substation was near the existing feeder, which renders minimal 13.2kV structures. Based on the CAPEX update, however, the proposed site did not materialize and was transferred 800 meters away from the existing 13.2 kV structures, as shown in figure 1.The planned acquisition of the original proposed site encountered legal issues on the land title, thus, the decision to consider another lot.

Figure 1: Asturias 5 MVA substation

In view of the clear benefit of the project in addressing the power quality issue of Balamban Feeder 4, the Commission approves the project and adopts the updated cost in the amount of Twenty-Six Million Fifty-One Thousand Three Hundred Nineteen Pesos and 58/100 (PhP26,051,319.58).


Proposed Project Project Cost (PhP) Approved

Cost (PhP) Original Updated


27,000,000.00 26,051,319.58 26,051,319.58

d

Action The Commission approved the proposed project based on updated actual cost which was found to be reasonable, subject

43 Supra note 3;



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to validation, as provided in Article 5.1 (Reportorial Requirements) of the CAPEX Guidelines.


Year Cost (PhP)

2018 26,051,319.58

5.11 Installation of Amorphous Distribution Transformers

Project Code ONCP-01 Project Type Capacity

Priority Rank 2

Project Category Other Network


Year Cost (PhP)

2017 4,740,600.00

2018 5,476,400.00

2019 6,327,450.00

Total 16,544,450.00


Project Description

Installation of Distribution Transformers of various ratings with the following specifications:

Overhead Type;

7620/13200 Volts Primary;

480/240 Volts Secondary;

Amorphophous Core; and

with external tap changer. Project Justification

To address the forecasted growth in demand requirement and customer load growth.


The quantity of Distribution Transformer (DT) per rating to be acquired is directly proportional to load growth. Historical data of retired units due to damage and old age were used to determine said requirement. The original proposal involved the use of amorphous DTs. Amorphous core transformers, amorphous alloy is used as a core material. Amorphous alloy is caratherized by its low losses, low magnetizing current, and less noise, compared to the conventional cold rolled grain oriented silicon (CRGO) steel. Amorphous core transformers are considered as energy efficient transformers. While it is more expensive, it has lesser technical loss than conventional transformers. In order to merit the Commission’s approval of the original application, CEBECO should show proof that the avoided cost in reducing system loss by procuring more expensive



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amorphous transformer should be more than the incremental cost of the said transformer. Shown in Figure 2 is the submitted comparison of transformer losses between amorphous type and conventional type distribution transformers. Figure 2 indicates that the “no load loss” or “core loss” of an amorphous distribution transformer is significantly lower compared to conventional type of DT; hence, the amorphous type can significantly reduce losses.

Figure 2: Comparison between Amorphous and Silicon type DT’s

Table 28 shows the estimated total project cost, per application using amorphous type of DT.

Table 28: Proposed Amorphous Distribution Transformer (DT)

Amorphous DT 2017 2018 2019

Rating Unit Cost Qty Cost Qty Cost Qty Cost

10 kVA 58,000 13 754,000 16 928,000 18 1,044,000

15 kVA 69,000 14 966,000 18 1,242,000 18 1,242,000

25 kVA 83,000 12 996,000 14 1,162,000 16 1,328,000

37.5 kVA 102,500 3 307,500 3 307,500 4 410,000

50 kVA 119,800 7 838,600 8 958,400 9 1,078,200

75 kVA 161,750 2 323,500 2 323,500 3 485,250

100 kVA 185,000 3 555,000 3 555,000 4 740,000

Total 54 4,740,600 64 5,476,400 72 6,327,450.00

CEBECO III’s more recent study, however, shows that the conventional type of DT is cheaper, in acquisition cost, than the amorphous type of DT. Thus, CEBECO III decided to use conventional type DTs rather than the originally proposed amorphous type of DT. Based on the submitted CAPEX update, CEBECO III procured a conventional type of DT instead of the proposed Amorphous type. CEBECO III manifested that such decision was based on



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their determination that the conventional type requires lower maintenance and operating cost. On 18 September 2019, CEBECO III reported that the implementation of the subject project is still on-going. Incurred cost totalled Ten Million Six Hundred Forty-Nine Thousand Nine Hundred Sixty Pesos (PhP10,649,960.00), as shown in Table 29.

Table 29: Updated Actual Cost

Silicon DT

Rating

Year 2017 Year 2018 Year 2019

Qty Unit Cost

Cost Qty Unit Cost

Cost Qty Unit Cost

Cost

10 kVA - - - 16 36,000 576,000 18 34,000 576,000.00

15 kVA 29 38,000 1,102,000 18 39,950 719,100 18 42,000 966,000.00

25 kVA 27 55,000 1,485,000 14 52,965 741,510 16 48,000 996,000.00

37.5 kVA 11 70,000 770,000 3 71,700 215,100 4 62,000 307,500.00

50 kVA - - - 8 80,610 644,880 9 74,000 838,600.00

75 kVA - - - 2 106,235 212,470 3 92,000 323,500.00

100 kVA - - - 3 139,300 417,900 4 110,000 555,000.00

Sub Total

67 3,357,000 64 3,526,960 72 3,766,000

Total Cost

(PhP) 10,649,960.00

Table 30 shows the comparison of the actual cost incurred in 2018 against the 2018 NEA Price Index (NPI).

Table 30: Comparison of Actual Cost vs 2018 NEA Price Index

Silicon Type Distribution Transformer

2018 Actual Cost

2018 NEA Price Index

Remarks

10 kVA 36,000 48,500.00 Lower than the NPI



37.5 kVA 71,700 89,450.00 Lower than the NPI




Table 30, shows that the updated unit costs of the equipment are significantly lower than the NEA Price Index. Considering that this project is vital in ensuring continuous electric service and cater to the forecasted load growth of CEBECO III, the Commission approves the project and adopts the updated cost in the amount of Ten Million Six Hundred Forty-Nine Thousand Nine Hundred Sixty Pesos (PhP10,649,960.00).



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Installation of Amorphous Distribution Transformers

16,544,450 10,649,960 10,649,960

Action

The Commission approved the proposed project based on updated cost which was found to be reasonable, subject to validation, as provided in Article 5.1 (Reportorial Requirements) of the CAPEX Guidelines.


Year Cost (PhP)

2017 3,357,000.00

2018 3,526,960.00

2019 3,766,000.00

Total 10,649,960.00

5.12 Installation of Service Drop Wire


Priority Rank 2



Year Cost (PhP)

2017 3,656,048.00

2018 2,145,110.00

2019 2,252,366.00

Total 8,053,523.00


Project Description

Installation of Service Drop Wire using insulated #6 ACSR, AWG 6/1


Address increasing customer requirements within the franchise.


CEBECO III is mandated to provide its new customers the required electrical facilities consistent with the standards provided in the PDC. The forecast of the new customers was based on the 7-year historical customer data of CEBECO III. The customer types are forecasted separately to capture the best model fitted to each customer type. The forecasted model used to determine the quantity of customer requirement is represented by the equation:



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Customer=65.071t2+3,239.286t+47,442.286.

The said model passed the criteria necessary to validate the accuracy of the forecasted model. The selected forecasting model has a percentage error or MAPE of 0.4758%. CEBECO III estimated its service drop requirement based on the forecasted customer growth and requirements. Table 32 shows the forecasted additional customers and the corresponding service drop needed and the proposed project cost:

Table 32: Proposed Service Drop Wire

2017 2018 2019

Proposed Total Cost

Additional Customer Additional Customer Additional Customer

4,950 6,468 6,120

Qty (meters)

Cost Qty

(meters) Cost

Qty (meters)

Cost

203,114 3,656,048 115,702 2,145,110 118,049 2,252,366 8,053,523

Based on the submitted CAPEX update, the subject project has been completed. The actual total project cost incurred amounted to Five Million Five Hundred Thirteen Thousand Three Hundred Sixty-Six Pesos (PhP5,513,366), as shown in Table 33.

Table 33: Updated Project Cost

2017 2018 2019

Actual Total Cost

Additional Customer Additional Customer Additional Customer

4,264 4,391 4,606

Qty (meters)

Cost Qty

(meters) Cost

Qty (meters)

Cost

100,000 1,501,000 100,000 1,760,000 100,000 2,252,366 5,513,366

Table 34 shows the comparisons of unit costs of the equipment based on the proposed, actual, and in reference with 2018 NPI, to wit:


Service Drop Wire Updated

Cost 2018 NEA

Price Index Remarks

Conductor, Set of Insulated and Bare, ACSR #6, AWG 6/1, Twisted

17.03 24.00 Lower than

the NPI

Table 34 shows that the updated unit costs of the equipment are significantly lower than the prices provided in NPI.



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Since the implementation of the subject project will allow CEBECO III to accommodate the increasing number of consumer applications, the Commission hereby approves this project and adopts the updated cost amounting to Five Million Five Hundred Thirteen Thousand Three Hundred Sixty-Six Pesos (PhP5,513,366).




Installation of Service Drop Wire

8,053,523.00 5,513,366.00 5,513,366.00



Year Cost (PhP)

2017 1,501,000.00

2018 1,760,000.00

2019 2,252,366.00

Total 5,513,366.00

5.13 Purchase of Metering Equipment


Priority Rank 2



Year Cost (PhP)

2017 4,373,494.00

2018 6,245,067.00

2019 6,557,530.00

Total 17,176,091.00


Project Description

Procurement of 17,538 units of kWh meters.


This project intends to address the forecasted growth in consumer base. With the growth in consumer base comes additional requirements for metering equipment. This project will address that need.


The forecast on new customers was based on the 7-year historical customer data of CEBECO III. The customer types are forecasted separately to capture the best model fitted to each customer type.



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The forecasted models used to determine the quantity of residential, low voltage, and high voltage customer requirement is represented by the equation: Residential Customer=65.071t2 + 3,239.286t + 47,442.286, Low Voltage Customer=7.6607t2 + 38.3036t + 3,615.8571, and High Voltage Customer=-13.5968(Ln)t - 12.8456t-1 + 0.0155t3 – 0.4074t2 + 6.1150t + 11.1224, respectively.

The chosen models passed the criteria necessary to validate the accuracy of the forecasted model. The selected forecasting models have a percentage error or MAPE of 0.4758% for residential customer, 0.5049% for low voltage customer, and 0.0119% for high voltage customer. Table 36 shows the proposed quantity of the kWh meters and its proposed type of meters to be installed.

Table 36: Forecasted Number of kWh Meters

Kilowatt-hour Meters 2017 2018 2019

Residential, Meter, kWh, 1-Phase, Class 1, 240V, 10(60)A, Bottom Connected, Electronic

4,734 6,189 5,833

Low Voltage, Meter, kWh, 1-Phase, Class 100, 2W, 240V, 60Hz. 15A, Form 15, Electro Mechanical

216 277 280

High Voltage, Meter, kWh, 3-Phase, Class 20, 120/480V, 3W, Form 45,Electronlc, Energy & Demand w/ TOU

- 2 7

Total 4,950 6,468 6,120

On 18 September 2019, CEBECO III submitted an update of the proposed project, as shown in Table 37:

Table 37: Updated Number of Customers

Item Description 2017 2018 2019

Proposed Actual Proposed Actual Proposed Updated

Meter, kWh, 1-Phase, 10(60)A, Electronic

4,734 8,400 6,189 5,400 5,833 6,396

Meter, kWh, 1-Phase, Class 100, Electronic

216 400 277 - 280 656

Meter, kWh, 3-Phase, Class 20

- 5 2 2 7 12

Table 38: Updated Cost and Unit Cost Comparison (PhP)

Item Description

2017 2018 2019 Updated Cost per

unit

2018 NPI per unit

Remarks Actual Actual Updated

Meter, kWh, 1-Phase, 10(60)A, Electronic

6,300,000 4,050,000 4,797,000 750.00 1,100.00 Lower than the NPI

Meter, kWh, 1-Phase, Class 100, Electronic

700,000 - 1,148,000 1,750.00 1,750.00 Same with the NPI

Meter, kWh, 3-Phase, Class 20

92,500 - 222,000 18,500.00 26,000.00 Lower than the NPI

Grand Total 7,092,500 4,050,000 6,167,000



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Table 38 shows the annual cost/updated from 2017 to 2019. It also shows that the updated unit cost of materials are lower than the 2018 NEA Price Index except for item 2 which has the same price as the NPI. The proposed updated cost was adopted but subject to further validation as provided in Article 5.1 Reportorial Requirements of the CAPEX Guidelines as follows:

A Regulated Entity shall submit the results of the competitive bidding which shall include proposals purchase orders, the as-built drawings and bill of materials and the actual cost incurred in the implementation of the planned capital expenditure projects not later than the 30th of January of the succeeding year.

Since the implementation of the subject project is necessary to meet the increasing number of consumer applications, the Commission hereby approves this project and adopts the updated cost in the amount of Seventeen Million Three Hundred Nine Thousand Five Hundred Pesos (Php17,309,500.oo).




Purchase of Metering Equipment

17,176,091.00 17,309,500.00 17,309,500.00



Year Cost (PhP)

2017 7,092,500.00

2018 4,050,000.00

2019 6,167,000.00

Total 17,309,500.00

5.14 Acquisition and Installation of SCADA System

Project Code NNCP-01 Project Type Service Efficiency

Priority Rank 4

Project Category Non Network

Year Cost (PhP)



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2017 450,000.00

2018 1,800,000.00

2019 1,200,000.00

Total 3,450,000.00


Project Description

Installation of SCADA44 Remote Terminal Units (RTU) and Fiber Optics in the following substations: 1) Pinamungajan Substation; 2) Asturias Substation; and 3) Lutopan Substation.


To improve service efficiency


CEBECO III informed that a similar project it implemented in 2015, particularly the Toledo Substation SCADA Project, had provided significant improvement in the system reliability and customer service efficiency. Manpower was reduced and execution of necessary operation in the system has been more efficient with the implementation of the project. In that regard, CEBECO III decided to continue implementing such projects and fully automate the remaining substations of the franchise. On 18 September 2019, CEBECO III submitted its update on the project with the following details, to wit:

Table 40: Updated Project Cost (PhP)

Item No. Particulars Proposed Updated

1 RTU and Labor Cost for SCADA Integration Pinamungajan S/S

450,000.00 2,581,737.00*

2 RTU, Fiber Optics and Labor for Installation for Asturias Substation

1,200,000.00 1,574,000.00*

3 RTU, Fiber Optics and Labor for Installation for Lutopan Substation

1,800,000.00 2,587,447.05**

Grand Total 3,450,000.00 6,743,184.05

Notes: (*) represents actual cost incurred; and (**) represents re-estimated cost.

It is worthy to note that components of the project are not available in the NEA Price Index. It can also be observed that the implemented project cost components had increased significantly. The increase was due to the significant or substantial changes in the conceptual engineering design, specifications, and bill of

44 Supervisory Control And Data Acquisition (SCADA) is a control system architecture comprising

computers, networked data communications and graphical user interfaces (GUI) for high-level process supervisory management, while also comprising other peripheral devices like programmable logic controllers (PLC) and discrete proportional-integral-derivative (PID) controllers to interface with process plant or machinery. The use of SCADA has been considered also for management and operations of project-driven-process in construction;



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materials that had to be introduced only during the project implementation.

Since the project will provide significant improvement in the system reliability and customer service efficiency of CEBECO III, the Commission approves the proposed project and adopts the actual cost thereof, in the amount of Four Million One Hundred Fifty-Five Thousand Seven Hundred Thirty Seven Pesos.

Table 41: Approved Project Cost Breakdown

Item No.

Particulars Year Project Cost

(PhP)

1 RTU and Labor Cost for SCADA Integration Pinamungajan S/S

2017 2,581,737.00

2 RTU, Fiber Optics and Labor for Installation for Asturias Substation

2018 1,574,000.00

Grand Total 4,155,737.00

Nevertheless, the said actual expenditures will be subjected for validation as required in Article 5.1 Reportorial Requirements of the CAPEX Guidelines, provided as follows:

“A Regulated Entity shall submit the results of the competitive bidding which shall include proposals purchase orders, the as-built drawings and bill of materials and the actual cost incurred in the implementation of the planned capital expenditure projects not later than the 30th of January of the succeeding year.”

Action The Commission approved the proposed project based on

updated actual cost, subject to validation, as provided in Article 5.1 (Reportorial Requirements) of the CAPEX Guidelines.


Year Cost (PhP)

2017 2,581,737.00

2018 1,574,000.00

Total 4,155,737.00

5.15 Purchase of Vehicles


Priority Rank

Project Category Non-Network Project

Project Title Purchase of Vehicles

Year Cost (PhP)



PAGE 61 OF 92


2017 6,630,000.00

2018 7,736,500.00

2019 2,343,326.00

Total 16,709,826.00


Project Description

Procurement of the following vehicles, to wit: 1. 2 units of Boom truck; 2. 2 units of Auger truck; 3. 2 units of Man-lift; 4. 6 units of motorcycles; and 5. 2 units of Service vehicle.


To improve service efficiency.

Technical Analysis

The proposed vehicles, in addition to the existing vehicles, are necessary in responding to customer needs, maintenance and operation of CEBECO III distribution system, and rendering better service to consumers. The availability of service vehicles when needed, would be of great help in the performance of the daily routine and activities of Technical Services Department, Engineering Services Department and Institutional Services Department. Successful operation is based on ability to respond to consumer complaints/request, line inspection, and other concerns in the electric distribution system in a timely manner. Additional vehicles are of utmost importance in order to be able to respond to the customer’s request and accomplish the projects or activities at the soonest possible time. On 18 September 2019, CEBECO III submitted its update on the project as shown in Table 42. Further, enumerated hereunder are the detailed comparisons of the actual unit cost of materials and prices provided in the NPI, to wit:

Table 42: Unit Cost Comparison

Item No. Description

Updated/ Actual Unit

Cost

2018 NPI/ *Market

Price Remarks

1 Boom Truck 1,680,000 5,250,000.00

Lower than the NPI by 68%

2 Auger Truck 1,100,000 - No reference price

3 Man-lift 1,050,000 1,800,000.00

Lower than the NPI by 41.67%

4 Motorcycles (2017) 15,488.29 - No reference price

5 Motorcycles (2019) 32,200.00 - No reference price

6 Service Vehicle 1,394,000 - No reference price

7 Service Vehicle 1,505,933.03 - No reference price



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Table 42 shows that only items 1 and 3 have NPI reference and the updated unit costs of equipment, are significantly lower than the prices provided in the NPI. However, other items have no reference 2018 NEA Price Index and the Commission could not verify the market price due to lack of information/data of the vehicles in the submitted update.

Nevertheless, the corresponding expenditure will still be subject to further validation as provided in Article 5.1 Reportorial Requirements of the CAPEX Guidelines as follows:


Since this project is necessary for the day-to-day operations of CEBECO III, and essential to the efficient and expeditious service of CEBECO III’s consumers, the Commission approves the proposed project and adopts the updated cost thereof in the amount of Eighteen Million, Five Hundred Ninety-Six Thousand Five Hundred Forty Five Pesos and 63/100 (PhP 18,596,545.63), subject to validation.


Particulars Qty. Unit Cost

(PhP/unit) Year

Project Cost

(PhP)

Motorcycles 4 61,953.15 2017 247,812.60

Service Vehicle 1 1,394,000.00 2017 1,394,000.00

Motorcycles 2 64,400.00 2018 128,800.00

Service Vehicle 1 1,505,933.00 2018 1,505,933.03

Boom Truck 2 3,360,000.00 2019 6,720,000.00

Auger Truck 2 2,200,000.00 2019 4,400,000.00

Man-lift 2 2,100,000.00 2019 4,200,000.00

Grand Total (PhP) 18,596,545.63

Action The Commission approved the proposed project which was found to be reasonable, adopting the updated cost subject to validation, as provided in Article 5.1 (Reportorial Requirements) of the CAPEX Guidelines.


Year Cost (PhP)

2017 1,641,812.60

2018 1,634,733.03

2019 15,320,000.00



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Total 18,596,545.63

5.16 Purchase of Test Equipment


Priority Rank 4



Year Cost (PhP)

2017 1,100,000.00

2019 2,550,000.00

Total 3,650,000.00

Project Duration 2017 and 2019

Project Description

Procurement of three (3) units of load logger and one (1) unit of transformer loss tester.


The procurement of measuring instrument is necessary to properly monitor the condition of CEBECO III’s distribution asset.

Technical Analysis

The project is intended to maintain the distribution utility’s capacity to measure the actual operating parameters of various network assets. It will also improve and expand network data and tools with the selection and application of electrical diagnostic tools and equipment. On 18 September 2019, CEBECO III submitted its update on the project as shown in the Table 44. Further, enumerated hereunder are the detailed comparisons of the proposed and actual unit cost of materials compared to NPI, to wit:


Particulars Proposed

Cost Updated

Cost 2018 NPI Remarks

Transformer Turns Ratio Tester

450,000.00 445,000.00 1,800,000 Lower than the NPI 75.28%

Transformer Loss Tester

1,200,000.00 1,195,000.00 3,600,000 Lower than the NPI by 66.81%

Load Logger 650,000.00 675,000.00 450,000 Higher than the NPI by 50%

Table 44 shows that the updated unit costs of equipment, except for the Load Logger, are significantly lower than the prices provided in NPI. Nevertheless, the overall updated cost of the project is still lower than NPI. Since this project is necessary to ensure safe, efficient and reliable operation of the distribution network for the benefit of the consumers, the Commission approves the project and



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adopts the updated cost in the amount of Three Million Six Hundred Sixty-Five Thousand Pesos (PhP3,665,000.00).


Particulars Unit Cost

(PhP/unit) Year

Project Cost

(PhP)

Transformer Turns Ratio Tester (1 unit)

445,000.00 2017 445,000.00

Transformer Loss Tester (1 unit) 1,195,000.00 2019 1,195,000.00

Load Logger (3 units) 675,000.00 2019 2,025,000.00

Grand Total 3,665,000.00



Year Cost (PhP)

2017 445,000.00

2019 2,025,000.00

Total 3,665,000.00

5.17 Purchase of Line Maintenance Tools


Priority Rank

Project Category Non-Network

Project Title Purchase of Line Maintenance Tools


Year Cost (PhP)

2018 880,000.00


Project Description

Procurement of a variety of basic tools and gears used in electrical line maintenance.


CEBECO III’s line personnel should be fully equipped with complete and appropriate tools and gears vital in the performance of their duties. Being highly exposed to the great hazards of electricity, it is only proper that they are best fitted out with such equipment. Table 46 shows the proposed line maintenance tools of CEBECO III to be procured from 2017 t0 2019.



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Table 46: Proposed Quantity and Cost of Line Maintenance Tools

Description Qty. Unit Cost

(PhP) Project Cost

(PhP)

Hydraulic Compression Tool 3 110,000.00 330,000.00

Hot-stick (Telescopic Type) 6 38,000.00 228,000.00

Ratchet, 2.5 ton 3 15,000.00 45,000.00

Ratchet, 3 ton 2 17,500.00 35,000.00

Ladder, Aluminum, 12 Feet 6 10,000.00 60,000.00

Pulley, Double Block 1 80,000.00 80,000.00

Conductor Grip, 4/0 6 11,000.00 66,000.00

Conductor Grip, 336 2 13,000.00 26,000.00

Bolt Cutter 2 5,000.00 10,000.00

Total (PhP) 880,000.00

On 18 September 2019, CEBECO III submitted the updates of the project with the breakdown of actual procurement done in 2017 and 2018, and the proposed procurement (still to be implemented). Table 47 shows the breakdown of actual procurement done in 2017 and 2018:

Table 47: 2017 and 2018 Actual Procurement

Description Qty. Unit Cost Actual Cost

2017

Tool, Telescopic Disconnect, 35 ft. 5 42,275.00 211,375.00

Hoist, 1.6 Tons Ratchet 3 29,700.00 89,100.00

Ladder, Extension, Fiber Glass, 24 ft., 2-Section

1 13,700.00 13,700.00

Ladder, Aluminum 8 ft. 2 4,232.00 8,464.00

Grip, Conductor (Come Along) #2/0-4/0 ACSR Grip

2 12,909.00 25,818.00

Grip, Conductor Smooth Jaw #2-4/0 ACSR

2 13,000.00 26,000.00

Grip, Conductor Smooth Jaw 336 1 22,000.00 22,000.00

2018

Pulley, Double 3/4" Groove Fiberglass

2 18,000.00 36,000.00

Bolt Cutter 1 11,770.00 11,770.00

The Commission noted that the specifications of the submitted CAPEX update are different from the proposal, particularly the ratchet and ladder. For purposes of the application, the actual items procured will be the basis of the commission action. In relation to the still-to-be-implemented projects (when the update was submitted), CEBECO III submitted the breakdown as shown in Table 48:



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Table 48: Still-to-be-implemented Project Activities

Table 48 likewise shows the comparisons of the updated unit cost of still-to-be-implemented project activities and the unit cost in reference with the NPI/Market Price, vis a vis the cost approved by the Commission; while Table 49 shows the detailed comparisons:

Table 49: Unit Cost Comparison

Table 49 shows that the unit cost of materials in the updated project cost are lower than the 2018 NEA Price Index except for item 1 which is higher than the NPI by 110.81%, thus the Commission approves the project by adopting the lower cost between the updated cost and the 2018 NPI. Since this project is necessary to ensure safe, efficient and reliable operation of the distribution network for the benefit of the consumers, the Commission approves the project.

Description Qty. Updated Unit Cost

(PhP)

2018 NPI/ *Market Price per

unit

Approved Total Cost

(PhP)

Hydraulic Compression Tool 1 390,000.00 185,000.00 185,000.00

Tool, Telescopic Disconnect, 35 ft 1 35,500.00 48,000.00 35,500.00

Hoist, 1.6 Tons Ratchet 3 30,800.00 *34,761.72 92,400.00

Ladder, Extension, Fiber Glass, 24 ft, 2-Section

1 14,385.00 21,000.00 14,385.00

Ladder, Aluminum 8 ft 2 5,480.00 *5,530.00 10,960.00


1 13,650.00 *14,959.00 13,650.00

Bolt Cutter 1 12,358.50 14,500.00 12,358.50

TOTAL 364,253.50

Description Updated

Cost 2018 NPI/

*Market Price Remarks

Hydraulic Compression Tool

390,000.00 185,000.00 Higher than the NPI by 110.81%

Tool, Telescopic Disconnect, 35 ft

35,500.00 48,000.00 Lower than the NPI by 26.04%

Hoist, 1.6 Tons Ratchet 30,800.00 *34,761.72 Lower than the NPI by 11.40%

Ladder, Extension, Fiber Glass, 24 ft, 2-Section

14,385.00 21,000.00 Lower than the NPI by 31.50%

Ladder, Aluminum 8 ft 5,480.00 *5,530.00 Lower than the NPI by 0.90%


13,650.00 *14,959.00 Lower than the NPI by 8.75%

Bolt Cutter 12,358.50 14,500.00 Lower than the NPI by 14.77%



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The Commission adopted the reported actual project cost for the years 2017 to 2018, while for the still-to-be-implemented projects, the lower cost between the updated cost and the 2018 NPI was adopted. Details of the approved total project cost amounting to Eight Hundred Eight Thousand Four Hundred Eighty Pesos and 50/100 (PhP808,480.50) are shown in Table 50.


Year Project Cost (PhP)

2017 396,457.00

2018 47,770.00

2019 364,253.50

Total 808,480.50

Action The Commission approved the proposed project based on updated cost with modification, subject to validation, as provided in Article 5.1 (Reportorial Requirements) of the CAPEX Guidelines.


Year Cost (PhP)

2017 396,457.00

2018 47,770.00

2019 364,253.50

Total 808,480.50

5.18 Purchase of Safety Apparel


Priority Rank 4


Project Title Purchase of Safety Apparel


Year Cost (PhP)

2017 715,000.00

2018 747,500.00

2019 780,000.00

Total 2,242,500.00


Project Description

Procurement of protective garments to equip new technical personnel of CEBECO III and replace the existing damaged and worn out safety apparels used by the existing personnel.



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Electric Cooperatives must be responsible in guaranteeing the operating procedures and safety measures of its personnel in the operation and maintenance of the distribution network. These include being specific about the industry standards that will be applied, the competencies required, and the level of protective equipment to be used. The technical personnel of CEBECO III, particularly linemen, are presently equipped with tools and safety personal protective devices, but these are already old and worn-out, due to ordinary wear-and-tear. Some of the DU's field technical men are presently deficient in the necessary safety apparels such as safety shoes, hardhats and working gloves. The proposed project will resolve the said issues. On 18 September 2019, CEBECO III submitted an update of the proposed project as follows:

Table 51: Updated Cost of the Project

Year Proposed Cost (PhP) Actual Cost (PhP)

2017 715,000.00 805,065.00

2018 747,500.00 328,300.00

2019 780,000.00 636,642.00

Total 2,242,500.00 1,770,007.00

As shown in Table 51, the actual cost in implementing the project is lower than the proposed cost. Since this project is necessary to ensure safe, efficient and reliable operation of the distribution network for the benefit of the consumers, the Commission approves the project and adopts the updated cost thereof, in the amount of One Million Seven Hundred Seventy Thousand Seven Pesos (PhP1,770,007.00).



Cost (PhP) Original Updated Purchase of Safety Apparel

2,242,500.00 1,770,007.00 1,770,007.00

Action The Commission approved the proposed project based on updated actual cost which was found to be reasonable, subject to validation, as provided in Article 5.1 (Reportorial Requirements) of the CAPEX Guidelines.

Year Cost (PhP)

2017 805,065.00



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2018 328,300.00

2019 636,642.00

Total 1,770,007.00

5.19 Acquisition of Lot and Site Development for Asturias Substation


Priority Rank 4



Year Cost (PhP)

2019 2,000,000.00


Project Description

Purchase of an 800-square meter lot for 5MVA Asturias Substation and site development/perimeter fence for the said substation.


The proposed project is in connection with Project No. 10 entitled, “Construction of 5MVA Asturias Substation”, as previously discussed. The subject lot is necessary for the installation of the said substation, as well as to the protection and safekeeping of such equipment. On 18 September 2019, applicant CEBECO III submitted its update on the project as shown in Table 53. It can be noted that the project has been completed in 2019, as scheduled.


Particulars Qty. Actual Cost

Lot Purchase for Asturias Substation

500 sq. m. 500,000.00

Site Development/ Perimeter Fence for Asturias SS

1 985,530.43

Total Cost (PhP) 1,485,530.43

Details of the proposed changes on the cost of the project however could not be validated by the Commission due to lack of information/data in the submitted update. Nevertheless, the corresponding expenditure will still be subject to further validation as provided in Article 5.1 Reportorial Requirements of the CAPEX Guidelines as follows:



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Since this project is indispensable to the installation, safekeeping, and operation of the 5MVA Asturias Substation, the Commission approves the project and adopts the updated cost thereof, in the amount of One Million Four Hundred Eighty-Five Thousand Five Hundred Thirty Pesos and 43/100 (PhP1,485,530.43).



Cost (PhP) Original Updated Acquisition of Lot and Site Development for Asturias Substation

2,000,000.00 1,485,530.43 1,485,530.43



Year Cost (PhP)

2019 1,485,530.43

5.20 Acquisition of Lot for Asturias Area Office; and

5.21 Asturias Area Office Building

Project Code NNCP-07 and NNCP-08 Project Type Service Efficiency

Priority Rank 4

Project Category Non-Network Projects

Project Title Acquisition of Lot for Asturias Area Office and Asturias Area Office Building


Year Cost (PhP)

2019 2,250,000.00


Project Description

The Procurement of a lot, approximately 100-150 sq. meters in size, located in the municipality of Asturias.

Construction of medium-sized building with space that could accommodate billing activities, consumer welfare desk, seminar venue and regular office space.



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The proposed project is intended to provide a convenient and safe place for the normal transactions of the member-consumers of CEBECO III and its personnel. The project is essential for the personnel to perform its duties properly in a risk-free environment considering these duties are crucial to the daily operations of the DU. On 18 September 2019, applicant CEBECO III submitted its update on the project as shown in Table 55. It can be noted that the project has been completed in 2019, as scheduled.


Particulars Proposed Cost Actual Cost

Lot Purchase for Asturias Area Office 1,000,000.00 1,568,579.12

Construction of Asturias Area Office 1,250,000.00 966,298.20

Total (PhP) 2,250,000.00 2,534,877.32

Details of the proposed changes on the cost of the project, however, could not be validated by the Commission due to lack of information/data in the submitted update.

Nevertheless, the corresponding expenditure will still be subject to further validation as provided in Article 5.1 Reportorial Requirements of the CAPEX Guidelines as follows:


Since this project is necessary and essential for CEBECO III to fulfill its mandate of providing continuous, safe, reliable, convenient, and efficient service to its customers, the Commission approves the subject project and adopts the updated cost in the amount of Two Million Five Hundred Thirty-Four Thousand Eight Hundred Seventy-Seven and 32/100 (PhP2,534,877.32).




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Lot Purchase for Asturias Area Office

1,000,000.00 1,568,579.12 1,568,579.12

Construction of Asturias Area Office

1,250,000.00 966,298.20 966,298.20

Total 2,250,000.00 2,534,877.32 2,534,877.32

Action The Commission approved the proposed project based on updated cost which was found to be just and reasonable, subject to validation, as provided in Article 5.1 (Reportorial Requirements) of the CAPEX Guidelines.


Year Cost (PhP)

2019 2,534,877.32

5.22 Purchase of Tools and Equipment


Priority Rank 4


Project Title Purchase of Tools and Equipment


Year Cost (PhP)

2017 327,150.00

2018 18,000.00

2019 58,000.00

Total 403,150.00


Project Description

Procurement of tools and equipment used for motor pool department and construction activities.



Technical and Economic Cost Analysis

The project is intended to maintain and improve the efficiency in terms of customer services. The project components consist primarily of tools and equipment used to maintain facilities intended for customer services. On 18 September 2019, applicant CEBECO III submitted its capex update and compared this in 2018 NEA Price Index as shown in Table 57.



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Description Unit Cost (PhP)

Remarks Updated Cost

2018 NPI/ Market Price*

Ladder 5,800.00 5,666.67 Higher than the NPI by 2.35%

Drill, Hand Electric 3,485.00 3,598.00* Lower than the NPI by 3.14%

Grinder, Angle 7,600.00 9,695.00* Lower than the NPI by 21.61%

Sander, Electric 3,850.00 5,500.00* Lower than the NPI by 30%

Planer, Electric 6,000.00 11,000.00* Lower than the NPI by 45.45%

Compactor (Jumping Jack)

40,000.00 50,000.00* Lower than the NPI by 20%

Portable Demolition Hammer

8,000.00 12,000.00* Lower than the NPI by 33.33%

Table 57 shows that the unit cost of materials in the updated project cost are lower than the 2018 NEA Price Index/market price except for item 1 which is higher than the NPI by 2.35%. Nevertheless, the corresponding expenditure will still be subject to further validation as provided in Article 5.1 Reportorial Requirements of the CAPEX Guidelines as follows:


Since this project is necessary and essential for CEBECO III to fulfill its mandate of providing continuous, safe, reliable, convenient, and efficient service to its customers, the Commission approves the subject project and adopts the updated cost in the amount of Eighty-Six Thousand Three Hundred Thirty-Five Pesos (PhP86,335.00).

Table 58: Approved Project Cost Breakdown (PhP)

Description Qty. Year Unit Cost Project Cost

Ladder 3 2017 5,800.00 17,400.00

Drill, Hand Electric 1 2018 3,485.00 3,485.00

Grinder, Angle 1 2018 7,600.00 7,600.00

Sander, Electric 1 2018 3,850.00 3,850.00

Planer, Electric 1 2019 6,000.00 6,000.00

Compactor (Jumping Jack) 1 2019 40,000.00 40,000.00

Portable Demolition Hammer

1 2019 8,000.00 8,000.00

Total (PhP) 86,335.00



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updated cost which was found to be reasonable, subject to validation, as provided in Article 5.1 (Reportorial Requirements) of the CAPEX Guidelines.


Year Cost (PhP)

2017 17,400.00

2018 14,935.00

2019 54,000.00

Total 86,335.00

5.23 Bagonan Renovation


Priority Rank 4


Project Title Bagonan Renovation


Year Cost (PhP)

2017 500,000.00


Project Description

Repair and renovation of the Bagonan Building.


The project involves the rehabilitation of the flooring, ceiling, walls and other structures of the Bagonan Office to make it conducive to seminars, group dynamics, and other coop group activities. On 10 July 2019, however, CEBECO III submitted a Manifestation with motion to withdraw certain proposed projects, among which is this project. CEBECO III deemed it proper to withdraw the proposed project since implementing this project now will no longer achieve the purpose it was originally intended for. The withdrawal is also due to the prohibitive cost of implementing the project today. In view thereof, the Commission grants the said motion.





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5.24 Purchase of IT Softwares and Hardwares


Priority Rank 4

Project Category Non-Network Projects


Year Cost (PhP)

2017 1,213,607.00

2018 437,275.00

2019 493,886.00

Total 2,144,768.00


Project Description

Acquisition and replacement of IT hardware and software assets.




CEBECO III intends to acquire the necessary IT hardware and software licenses of its existing computer programs (i.e. power system simulator, drafting/mapping software, etc.) to ensure continuous operation of the respective software applications. These IT hardware and software are utilized in the day to day monitoring activity of the distribution system and for the preparation of CEBECO III’s capital expenditure projects. The proposed expenditure will increase the current capability of its existing software programs. The capitalization/inclusion of the above proposal in the capital expenditure projects of CEBECO III is allowed and consistent with the provisions stated under Section 2.1.2 of Resolution No. 26, Series of 2009 (CAPEX guidelines) which provides that:

“…2.1.2 The following constitute the general plant assets (non-network) are:

x x x

1. Information system equipment – this shall include all information system equipment used to provide support services to the distribution function, including desktop computers, software, back-up storage devices, computer network assets, UPS or similar systems, etc.

x x x

2. Miscellaneous equipment – this shall include the cost of equipment, apparatus, etc., used in the utility operations, which is not included in any other account enumerated in this Rule.



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In view thereof, CEBECO III is allowed to implement the said activity and to recover the corresponding cost in its RFSC account.

On 18 September 2019, applicant CEBECO III submitted its update on the project as shown in table 59.


Year Proposed Cost Actual Cost

2017 1,213,607.00 372,250.00

2018 374,800.00 793,278.32

2019 397,090.85 341,271.00

Total 2,144,768.00 1,506,799.32

The corresponding expenditure will still be subject to further validation as provided in Article 5.1 Reportorial Requirements of the CAPEX Guidelines as follows:


Since this project is necessary to ensure safe, efficient and reliable operation of the distribution network for the benefit of the consumers, the Commission approves the project and adopts the updated cost thereof, in the amount of One Million Five Hundred Six Thousand Seven Hundred Ninety-Nine and 32/100 (PhP1,506,799.32)



Cost (PhP) Original Updated Purchase of IT Softwares and Hardwares

2,144,768.00 1,506,799.32 1,506,799.32


updated actual cost which was found to be reasonable, subject to validation, as provided in Article 5.1 (Reportorial Requirements) of the CAPEX Guidelines.


Year Cost (PhP)

2017 372,250.00

2018 793,278.32

2019 341,271.00

Total 1,506,799.32



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5.25 Purchase of Communication Equipment


Priority Rank 4



Year Cost (PhP)

2017 66,500.00

2018 89,909.00

2019 97,100.00

Total 253,509.00


Project Description

Procurement of handheld radio and mobile radios


To ensure sufficient and reliable service to customers


The communication equipment is essential in providing an efficient and reliable service to the customers of CEBECO III. The project will expedite the coordination and dissemination of field personnel that leads to prompt actions to consumer requests, complaints, and line services. On 18 September 2019, applicant CEBECO III submitted its update on the project as shown in table 61.



2017 66,500.00 136,304.00

2018 89,909.00 37,600.00

2019 97,100.00 28,400.00

Total 253,509.00 202,304.00

The corresponding expenditure will still be subject to further validation as provided in Article 5.1 (Reportorial Requirements) of the CAPEX Guidelines as follows:


Since this project is necessary to ensure safe, efficient and reliable operation of the distribution network for the benefit of the consumers, the Commission approves the project and adopts



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the updated cost thereof, in the amount of Two Hundred Two Thousand Three Hundred Four Pesos (PhP202,304.00).



Cost (PhP) Original Updated Purchase of Communication Equipment

253,509.00 202,304.00 202,304.00



Year Cost (PhP)

2017 136,304.00

2018 37,600.00

2019 28,400.00

Total 202,304.00

5.26 Purchase of Meter Reading Equipment


Priority Rank 4


Project Title Purchase of Meter Reading Equipment


Year Cost (PhP)

2017 64,000.00

2018 67,200.00

2019 70,560.00

Total 201,760.00


Project Description

Procurement of android cellphones for CEBECO III as meter reading device for field meter reader personnel upon installation of a meter reading application.


To ensure efficient and reliable service to customers by providing remote meter reading and sending information directly to the main server of CEBECO III.


The use of mobile communication equipment helps provide efficient services to member-consumers. Such equipment, with the appropriate platform/software application, will help expedite meter reading and the billing procedures of CEBECO. The phone will serve the dual purpose as a meter reading tool and also to help expedite coordination and dispatch of field



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personnel, thus ensuring prompt service to address consumer requests, complaints and other services. On 18 September 2019, applicant CEBECO III submitted its update on the project, which shows that the project cost was decreased from Two Hundred One Thousand Seven Hundred Sixty Pesos (PhP201,760) to One Hundred Eighty-One Thousand Five Hundred Eighty-Three Pesos (PhP181,583).


Year Proposed Cost Actual Cost

2017 64,000.00 29,995.00

2018 67,200.00 99,596.00

2019 70,560.00 51,992.00

Total 201,760.00 181,583.00

The corresponding expenditure will still be subject to further validation as provided in Article 5.1 (Reportorial Requirements) of the CAPEX Guidelines as follows:


Since this project helps in ensuring safe, efficient and reliable operation of the distribution network for the benefit of the consumers, the Commission approves the project and adopts the updated cost thereof, amounting to One Hundred Eighty-One Thousand Five Hundred Eighty-Three Pesos (PhP181,583).



Cost (PhP) Original Updated Purchase of Meter Reading Equipment

201,760.00 181,583.00 181,583.00



Year Cost (PhP)

2017 29,995.00

2018 99,596.00

2019 51,992.00

Total 181,583.00



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5.27 Purchase of Office Equipment


Priority Rank 4



Year Cost (PhP)

2017 220,000.00

2018 50,400.00

2019 97,252.00

Total 367,652.00


Project Description

This project includes procurement of complete furniture and equipment facilities (i.e. steel cabinet, office table, office chair, file rack, air conditioner, and television).




The project is intended to provide the personnel of CEBECO III a suitable working environment. This project includes procurement of complete furniture and equipment facilities necessary in the performance of duties and responsibilities of its personnel. On 18 September 2019, applicant CEBECO III submitted its update on the project cost, which decreased from Three Hundred Sixty-Seven Thousand Six Hundred Fifty-Two Pesos (PhP367,652.00) to Two Hundred Thirty-Two Thousand Eight Hundred Ninety Pesos (PhP232,890.00).



2017 220,000.00 78,890.00

2018 50,400.00 154,000.00

2019 97,252.00 -

Total 367,652.00 232,890.00

Details of the proposed changes on the cost of the project however could not be validated by the Commission due to lack of information/data in the submitted update. Nevertheless, the corresponding expenditure will still be subject to further validation as provided in Article 5.1 (Reportorial Requirements) of the CAPEX Guidelines as follows:

A Regulated Entity shall submit the results of the competitive bidding which shall include proposals purchase orders, the as-built drawings and bill of materials and the actual cost



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incurred in the implementation of the planned capital expenditure projects not later than the 30th of January of the succeeding year.

Since this project is necessary to ensure safe, efficient and reliable operation of the distribution network for the benefit of the consumers, the Commission approves the project and adopts the updated cost thereof, in the amount of Two Hundred Thirty-Two Thousand Eight Hundred Ninety Pesos (PhP232,890.00).



Cost (PhP) Original Updated Purchase of Office Equipment

367,652.00 232,890.00 232,890.00



Year Cost (PhP)

2017 78,890.00

2018 154,000.00

Total 232,890.00

6. Project Cost Summary

In its Application, CEBECO III’s proposed CAPEX Projects amounted to One Hundred Forty-Three Million Five Hundred Thirty-Eight Thousand Four Hundred Four Pesos (PhP143,538,404.00). Upon evaluation, the Commission only approves the amount of Ninety-Seven Million Six Hundred Sixty-Eight Thousand One Hundred Thirty-Four Pesos and 78/100 (PhP97,668,134.78).

Majority of the adjustments made by the Commission were based

on the submitted update of the projects which, in most cases, are lower than the 2018 NEA Price Index.

Further, costs/prices that were not found in the 2018 NEA Price

Index were verified by the Commission through an independent market survey, while the cost/price of some projects could not be validated by the Commission due to lack of information/data in the submitted update.



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Nevertheless, the corresponding expenditure will still be subject

to further validation as provided in Article 5.1 (Reportorial Requirements) of the CAPEX Guidelines.

7. Project Status

Table 67 shows the project status of the capital projects of CEBECO III as of 18 September 2019, based on the submitted CAPEX update.

Table 67: Project Status

Project No.

Project Description Status

1 Rehab/Uprating/Rerouting of Toledo Feeder 1 Phase 1: From Toledo S/S to Bulubugan via 69 kV Underbuilt on 336.4 MCM ACSR.

Not Implemented (Withdrawn)

2 Rehab/Uprating/Rerouting of Toledo Feeder 1 Phase 2: From Bulubugan to Pinamungajan S/S via 69 kV Underbuilt on Steel Poles using 336.4 MCM ACSR.


3 Rehab/Rerouting/Reconductoring of Toledo Feeder 1 From Pina S/S to Dakit, Bonbon and Cement Plant via Triple Circuit Design via 4/0 ACSR


4 Installation of Gang Type Disconnect Switches Implemented

5 Installation of Disconnect Switches Implemented

6 Installation of Fuse Cutouts Implemented





9 Repair and Refurbishment of 10/12.5 MVA Power Transformer Not Implemented

(Disapproved)

10 Construction of 5/6.25 MVA Asturias Substation Implemented

11 Installation of Amorphous Distribution Transformers Implemented

12 Installation of Service Drop Wire Implemented

13 Purchase of Metering Equipment Implemented

14 Acquisition and Installation of SCADA System Partially

Implemented

15 Purchase of Vehicles Implemented

16 Purchase of Test Equipment Implemented

17 Purchase of Line Maintenance Tools Implemented

18 Purchase of Safety Apparel Implemented

19 Acquisition of Lot and Site Development Implemented

20 Acquisition of Lot for Asturias Area Office Implemented

21 Construction of Asturias Area Office Building Implemented

22 Purchase of Tools and Equipment Implemented

23 Bagonan Renovation Not Implemented

(Withdrawn)

24 Purchase of IT Software’s and Hardware’s Implemented

25 Purchase of Communication Equipment Implemented

26 Purchase of Meter Reading Equipment Implemented

27 Purchase of Office Equipment Implemented



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The Commission determined that the implementation of the approved projects is essential and necessary for continuous, safe, reliable, secure, and efficient service of CEBECO III to its consumer, pursuant to Section 2 of the EPIRA, to wit:

SECTION 2: Declaration of Policy. – It is hereby declared the policy of the state:

(a) To ensure and accelerate the total electrification of the

country.

(b) To ensure the quality, reliability, security and affordability of the supply of electric power;

xxx

(f) To protect the public interest as it is affected by the

rates and services of electric utilities and other providers of electric power;

xxx

With the identified deficiencies of the distribution system of CEBECO III, non-implementation of the said projects would result to inefficient service, poor power quality and power interruption among its affected customers.

DUs must be able to minimize interruptions in power service, act on issues affecting the distribution system on a timely basis, and provide contingency measures toward fulfilling its obligations under the EPIRA and other pertinent legislations and rules.

Cognizant of such obligation imposed upon every DU, the

Commission promulgated the Amended CAPEX Guidelines prescribing the following timelines for filing applications:

Table 68: CAPEX Filings Timelines Applications

Types of CAPEX Application

Timeline of Filing

Multi-year/Regular CAPEX projects (3-years)

Staggered application every thee (3) years (per group schedule; ECs are group relative to the RSEC-WR groupings) and five (5) years (per group schedule for SPUG and ECs excluded in the RSEC-WR groupings)

Force Majeure or Fortuitous Event Capital Expenditure

Notice within three (3) months.



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Formal application for confirmation within thirty (30) days from the submission of the FM or FE Notice

Emergency Capital Expenditure

Formal application within sixty (60) days after the start of construction

Unplanned Capital Expenditure

Formal application prior to the start of implementation of such projects

Contingency Capital Expenditure

Formal application sixty (60) days from the start of implementation of such projects

Table 69: EC Entrant Group 1st RP Capex Filing Schedule

Entrant Group

1st Regulatory Period CAPEX Filing (Subsequent Filing Shall Be

Made Every 3 Years Thereafter)

1st Regulatory Period CAPEX Plan Coverage

1 April 2013 2014-2016

2 April 2014 2015-2017

3 April 2015 2016-2018

1 April 2016 2017-2019

2 April 2017 2018-2020

3 April 2018 2019-2021

Under the aforesaid rules, CEBECO III is part of Group 1 and should have filed the subject multi-year or regular CAPEX application with the Commission on or before April 2016. The Commission takes note that CEBECO III filed the instant Application beyond the timeline set in the Amended CAPEX Rules.

While the Commission acknowledges the necessity of these projects, the Applicant, however, is reminded to observe, in future applications, the ERC rules and regulations with respect to CAPEX Applications.

8. Financing Scheme and Impact on the Reinvestment Fund for Sustainable CAPEX (RFSC)

In its Application, CEBECO III shall utilize the Reinvestment Fund for Sustainable Capital Expenditures (RFSC) and the majority of the capital expenditures shall be sourced through loans from interested lenders/financial institutions that shall charge the least interest in the implementation of the projects.

However, CEBECO III, in this Application, did not apply for the authority to secure loan.



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Notwithstanding the absence of an application for authority to secure loan in this Application, the Commission reviewed and calculated the Reinvestment Fund of CEBECO III to validate the necessity of such loan, by simulating the following conditions/scenarios:

Scenario 1: RFSC cash flow analysis using the RSEC-WR

approved rate of PhP0.2508/kWh and without availing of any loan/s; and

Scenario 2: RFSC cash flow analysis using the RSEC-WR

approved rate of PhP0.2508/kWh and with availment of loan/s.

The scenarios or conditions enumerated above considers the RFSC cash flow calculation of CEBECO III by utilizing the ERC approved rate of PhP0.2508/kWh45, with corresponding variation of with or without loan availment to finance the CAPEX projects.

Shown in Table 70 is the summary of the Commission’s RFSC

cash flow calculation utilizing the aforesaid scenarios, to wit:

Table 70: Result of Commission’s Calculation

Scenario Available Cash for

Disbursement Cash Outflows

Ending Balance, Excess/(Shortfall)

1 PhP129,924,266.51 PhP192,754,220.8 (PhP62,829,954.29)

2 PhP227,592,401.29 PhP200,920,726.14 PhP26,671,675.15

The Commission made a computation on the above scenarios

using the actual data from CEBECO III’s 2017-2018 Audited Financial Statement (AFS) and its forecasted data from its Application.

As indicated in Table 70, under Scenario 1, without any loan,

CEBECO III will have a shortfall of Sixty-Two Million Eight Hundred Twenty-Nine Thousand Nine Hundred Fifty-Four Pesos and 29/100 (PhP62,829,954.29) in its RFSC account upon implementation of the projects. Thus, the availment of loan is necessary in order to finance the subject CAPEX projects.

On the other hand, Scenario 2 shows that with the availment of

loan in the amount of Ninety-Seven Million Six Hundred Sixty-Eight Thousand One Hundred Thirty-Four Pesos and 78/100

45Under the RSEC-WR that took effect in January 2010;



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(PhP97,668,134.78) (The Approved Project Cost), CEBECO III will have an excess/buffer fund in the amount of Twenty-Six Million Six Hundred Seventy-One Thousand Six Hundred Seventy-Five Pesos and 15/100 (PhP26,671,675.15) by the end of 2019.

According to CEBECO III, it did not acquire any loan in the

implementation of its projects for the years 2017-2019. The electric cooperative temporarily utilized the available fund from its General Fund account to finance its respective projects, which it intends to replenish upon approval of the projects and upon filing and approval of the authority to secure loan.

Considering the foregoing, CEBECO III is hereby DIRECTED to file an application for the authority to secure loan for projects necessitating funding through loans, if it deems necessary.

9. Manifestation and Motion to Withdraw Certain Projects On 10 July 2019, CEBECO III filed a Motion for Partial

Withdrawal of Applied Capital Expenditure Projects (Motion for Partial Withdrawal) where it prayed for the withdrawal of the unimplemented CAPEX projects. Table 71 shows the six (6) withdrawn projects, to wit:

Table 71: Withdrawn Projects

Project No.

Project Title Project Cost (PhP)

1 Rehab/Uprating/Rerouting of Toledo Feeder 1 (Phase 1): From Toledo S/S to Bulubugan via 69 kV Underbuilt on 336.4 MCM ACSR.

13,888,629.00

2

Rehab/Uprating/Rerouting of Toledo Feeder 1 (Phase 2): From Bulubugan to Pinamungajan S/S via 69 kV Underbuilt on Steel Poles using 336.4 MCM ACSR.

6,669,982.00

3

Rehab/Rerouting/Reconductoring of Toledo Feeder 1 From Pinamungajan S/S to Dakit, Bonbon and Cement Plant via Triple Circuit Design via 4/0 ACSR

7,653,478.00


-


1,861,591.00

23 Bagonan Renovation 500,000.00

Total Cost of Withdrawn Projects (PhP) 30,573,680.00

CEBECO III deemed it proper to withdraw the proposed projects in Table 71 since implementing these projects now will no longer



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achieve the purpose it was originally intended for. The withdrawal is also due to the prohibitive cost of implementing the projects today.

The Commission finds the said Manifestation in order.

Accordingly, the Commission grants CEBECO III’s Motion for Partial Withdrawal.

10. Permit Fee

Section 40 of CA No. 146 provides the legal basis for the collection of Permit Fee, to wit:

The Commission is authorized and ordered to charge and collect from any public service or applicant, as the case may be, the following fees as reimbursement of its expenses in the authorization, supervision and/or regulation of the public services:

x x x

g) For each permit authorizing the increase of equipment, the installation of new units or authorizing the increase of capacity, or the extension of means or general extensions in the services, xxx for each one hundred pesos or fraction of the additional capital necessary to carry out the permit

The permit fee shall be paid in accordance with Section 4.2 of the

CAPEX Guidelines, which provides:

4.2 Payment of Fees

x x x

Payment of permit fee shall be on an annual basis. The amount of permit fee to be paid shall correspond to the estimated cash flow per year of the project. The first of the series of payments shall be made fifteen (15) days from receipt of the Decision approving the application. The succeeding annual payments shall be paid every 15th day of January of the pertinent year.

Based on the approved projects, the total amount of permit fee is Seven Hundred Thirty-Two Thousand Five Hundred Eleven and 01/100 Pesos (PhP732,511.01), computed as follows:

PhP97,668,134.78 x PhP0.75 = PhP732,511.01

PhP100.00

A perusal of the evidence presented herein showed that the approval of CEBECO III’s Application is in accordance with the CAPEX



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Guidelines and the subject projects herein approved will redound to the benefit of the electricity consumers in terms of continuous, reliable and efficient power supply as mandated by Section 2 of EPIRA.

WHEREFORE, the foregoing premises considered, the application filed by Cebu III Electric Cooperative, Inc. (CEBECO III) for approval of its capital expenditure projects is hereby RESOLVED, as follows:

1. The following capital expenditure projects are APPROVED

WITH MODIFICATIONS;

Project No.

Project Title Approved Cost

(PhP)

4 Installation of Gang Type Disconnect Switches 1,038,000.00

5 Installation of Disconnect Switches 767,360.00

6 Installation of Fuse Cutouts 1,112,540.00

10 Construction of 5/6.25 MVA Asturias Substation

26,051,319.58

11 Installation of Amorphous Distribution Transformers

10,649,960.00

12 Installation of Service Drop Wire 5,513,366.00

13 Purchase of Metering Equipment 17,309,500.00

14 Acquisition and Installation of SCADA System 4,155,737.00

15 Purchase of Vehicles 18,596,545.63

16 Purchase of Test Equipment 3,665,000.00

17 Purchase of Line Maintenance Tools 808,480.50

18 Purchase of Safety Apparel 1,770,007.00

19 Acquisition of Lot and Site Development 1,485,530.43

20 Acquisition of Lot for Asturias Area Office 1,568,579.12

21 Construction of Asturias Area Office Building 966,298.20

22 Purchase of Tools and Equipment 86,335.00

24 Purchase of IT Softwares and Hardwares 1,506,799.32

25 Purchase of Communication Equipment 202,304.00

26 Purchase of Meter Reading Equipment 181,583.00

27 Purchase of Office Equipment 232,890.00

Total 97,668,134.78

2. The following capital expenditure projects requested by CEBECO III to be withdrawn from the Application, through a Motion, is hereby GRANTED;

Project No.

Project Title

1 Rehab/Uprating/Rerouting of Toledo Feeder 1 (Phase 1): From Toledo S/S to Bulubugan via 69 kV Underbuilt on 336.4 MCM ACSR.

2 Rehab/Uprating/Rerouting of Toledo Feeder 1 (Phase 2): From Bulubugan to Pinamungajan S/S via 69 kV Underbuilt on Steel Poles using 336.4 MCM ACSR.



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3 Rehab/Rerouting/Reconductoring of Toledo Feeder 1 From Pina S/S to Dakit, Bonbon and Cement Plant via Triple Circuit Design via 4/0 ACSR



23 Bagonan Renovation

3. The following capital expenditure project is DISAPPROVED without prejudice to refiling and may be included it in its next CAPEX application;

Project No.

Project Title

9 Repair and Refurbishment of 10/12.5 MVA Power Transformer

4. CEBECO III is hereby DIRECTED to pay the Commission, within fifteen (15) days from receipt hereof, the full amount of Seven Hundred Thirty-Two Thousand Five Hundred Eleven Pesos and One Centavo (PhP732,511.01), as payment for the permit fee, pursuant to Section 40 (g) of Commonwealth Act No. 146, the Commission’s CAPEX Guidelines, and the Commission’s Revised Schedule of Fees and Charges;

5. CEBECO III is hereby DIRECTED to submit the results of the competitive bidding in accordance with good governance practice which shall include the proposals and purchase orders, the as-built drawings and bill of materials of the planned capital expenditure projects, using the ERC prescribed template (Annex “A”), not later than:

5.1 The 30th day of January of the succeeding year for the

still to be implemented projects; and 5.2 Fifteen (15) days from receipt of the Decision for

implemented projects.

6. CEBECO III is hereby DIRECTED to submit annually the progress report of the RFSC collection and utilization, using the ERC-prescribed template (Annex “B”), containing the following:

6.1 Accumulated RFSC fund from previous year’s

collection;

6.2 Current collection from RFSC;



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6.3 Funds maintained in a separate account;

6.4 Other sources, such as subsidy;

6.5 Details of Fund Utilization for the year; and

6.6 Excess fund or shortfall.

7. CEBECO III is hereby DIRECTED to file an application for Authority to Secure Loan on projects necessitating funding through loans; and

8. FINALLY, CEBECO III is hereby DIRECTED to:

8.1 Show proof that it exercised due diligence in procuring equipment taking into consideration the quality and cost of the same; and

8.2 Ensure conduct of timely and appropriate maintenance procedure for the facility to achieve its optimal life and efficiency.

SO ORDERED.

AGNES VST DEVANADERA Chairperson and CEO

JOSEFINA PATRICIA M. ASIRIT ALEXIS M. LUMBATAN Commissioner Commissioner

CATHERINE P. MACEDA PAUL CHRISTIAN M. CERVANTES Commissioner Commissioner

LS: MFD/ARG/MCCG ROS: MMM/GDB/REM/LLG


Pasig City, 30 June 2020.


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COPY FURNISHED:

1. A.C. Gaviola Law Office Atty. Allan Byrne S. Gaviola Counsel for Applicant CEBECO III Rm. 203, 2/F Crown Port View Hotel, 3rd Ave., North Reclamation Area, Cebu City

2. Cebu III Electric Cooperative, Inc. (CEBECO III) Applicant Luray II, Toledo City, Cebu

3. Office of the Solicitor General (OSG) 134 Amorsolo Street, Legaspi Village, Makati City

4. Commission on Audit (COA) Commonwealth Avenue, Quezon City

5. Senate Committee on Energy GSIS Building, Roxas Boulevard, Pasay City

6. House Committee on Energy Batasan Hills, Quezon City

7. Office of the Governor Province of Cebu

8. Office of the Local Government Unit (LGU) legislative body Province of Cebu

9. Office of the City Mayor Toledo, Cebu

10. Office of the Local Government Unit (LGU) legislative body Toledo, Cebu

11. Office of the Mayor Aloguinsan, Cebu

12. Office of the Local Government Unit (LGU) legislative body Aloguinsan, Cebu

13. Office of the Mayor Pinamungajan, Cebu

14. Office of the Local Government Unit (LGU) legislative body Pinamungajan, Cebu

15. Office of the Mayor Balamban, Cebu

16. Office of the Local Government Unit (LGU) legislative body Balamban, Cebu



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17. Office of the Mayor

Asturias, Cebu

18. Office of the Local Government Unit (LGU) legislative body Asturias, Cebu

19. Regulatory Operations Service (ROS) Energy Regulatory Commission 17th Floor, Pacific Center Building, San Miguel Avenue, Pasig City


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