ENERGY REGULATORY COMMISSION IN THE … ERC Case No...It has been granted a franchise by the National Electrification Administration (NEA) to distribute electric service in the following

Republic of the PhilippinesENERGY REGULATORY COMMISSION

San Miguel Avenue, Pasig City

IN THE MATTER OF THEAPPLICATION FOR APPROVALOF THE AMENDMENT TO THEPOWER SALES CONTRACT(APSC) BETWEEN KEPCO SPCPOWER CORPORATION (KSPC)AND CEBU I ELECTRICCOOPERATIVE, INCORPORATED(CEBECO I), WITH MOTION FORTHE ISSUANCE OFPROVISIONAL AUTHORITY

ERC CASE NO. 2014-116 RC

KEPCO SPC POWERCORPORATION (KSPC), ANDCEBU I ELECTRICCOOPERATIVE, INCORPORATED(CEBECO I),

Applicants.)( - - - -,- - - - - - - - - - - - - - - - - - - - )(

D 0 CJb • X 1111'1'\ ' t"'. " V 0, 3 ?I1H,vii ,OJ. • ••••• 'i..:;7•..~'!ftit; ,-,.----.v:~_.- -

NOTICE OF PUBLIC HEARING

TO ALL INTERESTED PARTIES:

Notice is hereby given that on August 12, 2014, KEPCO SPCPower Corporation (KSPC) and Cebu I Electric Cooperative,Incorporated (CEBECO I) filed a joint application for approval oftheir Amendment to the Power Sales Contract (APSC), with motionfor the issuance of provisional authority.

In the said application, KSPC and CEBECO I alleged, amongothers, that:

1. KSPC' is a duly authorized generation company andexisting under and by virtue of the laws of the Republicof the Philippines, with principal address at ih Floor,Cebu Holdi,ngs Center, Cebu Business Park, Cebu City;

J.

ERC Case No. 2014-116 RCNOTICE/October 22, 2014Page 2 of 22

2. CEBECO I is a franchised electric cooperative organizedand existing under the laws of the Republic of thePhilippines with principal office at Bitoon, Dumanjug,Cebu. It has been granted a franchise by the NationalElectrification Administration (NEA) to distribute electricservice in the following city and municipalities: CarcarCity, Sibonga, Argao, Dalaguete, Alcoy, Boljoon, Oslob,Santander, Samboan, Ginatilan, Malabuyoc, Alegria,Badian, Moalboal, Alcantara, Ronda, Dumanjug andBarili, all in the province of Cebu (the Franchise Area);

Nature of the Application

3. Pursuant to Rule 20 (B) of the Commission's Rules ofPractice and Procedure, approved on June 22, 2006 inResolution No. 38, Series of 2006, the instant applicationis submitted to the Commission for approval of theirAPSC dated April 26, 2014. A copy of the said APSC isattached to the instant application.

Moreover, their "Motion for the Issuance of ProvisionalAuthority" is made pursuant to Rule 14 of the said Rules;

Compliance with Pre-Filing Requirements

4. In compliance with Rule 6 of the Commission's Rules ofPractice and Procedure, they have furnished therespective legislative bodies of the Local GovernmentUnits of the municipality where CEBECO I principallyoperates as well as the Province of Cebu. Copies of theCertificates from the legislative bodies are attached tothe instant application;

5. They have caused the publication of the presentapplication in its entirety in a newspaper of generalcirculation within the franchise area of CEBECO I.Copies of the corresponding Affidavit of Publication andissue of the said newspaper are, likewise, attached tothe application;


Background and Statement of Facts

6. KSPC entered into a Power Sales Contracts (PSC) withCEBECO I on July 5, 2007. The parties subsequentlyamended their PSC (first amendment) through an APSCdated March 29, 2008 and further amended the same bythe Implementing Agreement to the Power SalesContract dated September 21, 2009 and finallysupplemented by the Supplemental Agreement (SA)dated January 27, 2014, a copy of the SA is attached tothe instant application;

7. The parties applied for the approval of their PSC with theCommission (ERC Case No. 2007-141 RC) which itapproved the same in a Decision dated December 8,2008 with a KSPC rate of PhP4.2511/kWh. They adoptall documentary evidence submitted to the Commissionin support of the previous application and the approvedPSC to form part of the instant application in so far asthe documents relates to them. They, likewise, submitthat the Commission may take judicial notice of alldocuments submitted in the previous application toprevent unnecessary duplications of documentaryevidence;

Amendments to the PSC on the Fuel Factor of theKSPC Price Adjustment Formula

8. In September 2010, the Minister of Energy & MineralResources (MEMR) of Indonesia passed MEMR No. 17,Series of 2010, regulating coal exportations fromIndonesia. The law requires that the coal price in acontract must be equal to or higher than the CoalReference Price (CRP) to be issued by the MEMR.The basic tenets of the CRP affecting KSPC's coalcontracts are as follows:

8.1 The CRP applies to all long-term contracts (contractslasting for more than 3 years) for the exportation ofcoal;

ERC Case No. 2014-116 RCNOTICE/October 22,2014Page 4 of 22

8.2 The CRP of a particular contract is the average CRPfor the three (3) months immediately preceding theexecution of the relevant contract;

8.3 The coal price must be equal to or higher than theCRP (the CRP itself being based on FOB);

8.4 KSPC's contract price of coal is Cost and Freight(CFR), so the delivered price of coal is coal price(FOB) plus transportation price;

8.5 The CRP must be applied for one (1) year (i.e., theCRP at the time of execution of the contract, e.g.IPC contract (July 2011) is USD 56.15/ton whileJSKM contract (October 2011) is USD 54.49/ton,Quarterly adjustments under the CSC must be equalto or higher than blended CRP of both contracts atUSD 55.47;

8.6 If quarterly adjustments is lower than the CRP, thenthe price to be used for that quarter will be the CRP;

8.7 A new CRP will be computed at each anniversarydate of each contract and used until the end of thatanniversary year; and

8.8 To export coal properly from Indonesia, a suppliermust have an IUP license and must comply with theCRP.

A copy of the said MEMR No. 17, Series of 2010 isattached to the application;

9. To secure the coal requirements for the next ten (10)years and assure the customers of supply of electricity,KSPC entered into coal supply contracts with PT InkorPrima Coal (PT IPC) on July 18, 2011 and PT JayaSamudra Karunia Mining (PT JSKM) on October 13,2011. Copies of KSPC's coal supply contracts are,likewise, attached to the application;


10. KSPC procures its coal requirements from Indonesiasince: (1) it is the cheapest and their specifications arethe most compatible with its requirement for a CFBCcoal plant; (2) China does not export coal anymore andprefers to use their own coal for their own consumption;(3) Australian coal is expensive and its calorific value istoo high for a CFBC type plant; and (4) Philippine coalcalorific value is still higher than that is required by it andthe cost is higher than Indonesia;

11. To reflect the changes in the coal (fuel) base price,KSPC has to add the fuel factor affected by theIndonesian CRP so that the actual cost of fuel will bepassed through to the distribution utilities, pursuant tothe Decisions of the Commission on the "pass through"nature of fuel in the previous applications of KSPC: "theactual fuel cost utilized in generating electricityshould be passed on to the customers [of the DUZ.There should be no cap on the fuel cost to bepassed on to the customers as long as within theefficiency set by the Commission. 11 (Emphasissupplied.) Accordingly, KSPC incorporated in the priceadjustment formula in the PSC in the instant applicationthe Fuel Base Price Factor (f.t), thus:

Old KSPC Price Adjustment Formula:

{ [FCP CF ] FX} [ LCP ]K Ad) = 0.540 + 0.065 x __ n + 0.305 x _n _n + 0.090 x __ nFCPo CFo FX 0 LCPo

New KSPC Price Adjustment Formula:

{ [FCPn CFn] FX n} [ LCPn ]K Ad" = 0.540 + 0.065 x -- + 0.305 x - x Ff - + 0.090 x --

Y FCPo CFo FX 0 LCPo

KAdj = Adjustment factor of KSPC during the Billing Month

" ERC Case No. 2014-116 RCNOTICE/October 22, 2014Page 6 of 22

FCPn = The Arithmetic average of the values of the UnitedStates Producers' Price Index for all items and theUnited States Consumer Price Index (CPI) for all items,both as last published on or before the Adjustment Date(the last day of the billing month) by InternationalMonetary Fund; provided that if the InternationalMonetary Fund ceases to publish such' indices, therelevant indices published by the U.S. Department ofLabor Bureau of Labor Statistics shall apply

FCPa = The Arithmetic average of the values as of January2008 of the United States Producers' Price Index forall items and the United States CPI for all items, bothas published on by International Monetary Fund;provided that if the International Monetary Fund ceasesto publish such indices, the relevant indices published bythe U.S. Department of Labor Bureau of Labor Statisticsshall apply

CFn = BPn + TBPn

CFa = BPa + TBPa

Where:

BPa = shall be the blended rate (FOB + insurance) of thenew Coal Supply Contracts 1

TBP a = shall be the blended transportation rate(transportation + wharfage) of the new Coal SupplyContracts2

Ff = Fuel Base Price Factor = (FBPrlFBPaJ

Where:

FBPn = New Fuel Base Price3

1 Current BPo rate as of 4th Q 2011: USD42.382 Current TBPo rate as of 4th Q 2011: USD21.143 Current New Fuel Base Price of 4th Q 2011: USD63.52


FBPo = Old Fuel Base Price4

FXn = Philippines Peso vs. US Dollar exchange rate aspublished by the Bangko Sentral ng Pilipinas at thelast working day of the Billing Month

FXo = An exchange rate of 40.65 Philippine Peso vs. 1.00US Dollar

LCPn = The Arithmetic average of the values of the CPI inPhilippines for all items and General Wholesale PriceIndex in Metro Manila for Mineral fuels, lubricant andrelated materials, both as last published on or beforethe Adjustment Date (the last day of the billing month)by the National Statistics Office (NSO)

LCPo = The Arithmetic average of the values as of January2008 of the CPI in Philippines for all items andGeneral Wholesale Price Index in Metro Manila forMineral fuels, lubricant and related materials, both aspublished by the NSO

Where:

Adjustments to Base Price (BPn)

BPn = shall be adjusted quarterly to reflect the increase ordecrease of the price of Global Coal FOB Newcastleas of the first day of loading as per the formula statedbelow:

BPn = BP x (BIPn_1 J or BP ~ CRPn-l BIJD n

n-2

Where:

BPn = Base Price as of current quarter; computed as performula above, or the current CRP, whichever ishigher

4 Old Fuel Base Price as of 4th Q 2007: USD52.57


BPn-1 = Base Price as of preceding quarters. In case of a newCoal Supply Contract, the initial BPn-1 shall be theblended rate (FOB + insurance) of the new CSC

BIPn-1= Base Index Price as of preceding quarter

BIPn-2= Base Index Price as of preceding quarter to BIPn-1

CRP = the CRP provided by the MEMR as determinedannually per CSC anniversary date, which is FOBonly

• The quarter shall refer to a calendar quarter

• Base Index Price shall be the quarterly average of theGlobal coal physical index, FOB Newcastle. For thereference, the initial BIPn-2 shall be USD83.23 per ton

• The initial price adjustment shall be made on the FirstDelivery Date and which shall be effective until the end ofthe quarter of the First Delivery Date

• The next price adjustment after the First Delivery Date willbe on the next calendar quarter and the price shall beadjusted on the first day of every quarter thereafter

• Any applicable and export-related taxes, duties, and othercharges imposed by the respective governments of theexporters shall be added to the coal Base Price of eachsupplier/exporter under the CSC's while any applicable andrelated taxes, duties, and other charges imposed by anyGovernment Authority having jurisdiction over either of theparties shall be added to the blended Base Price as ofcurrent quarter (BPn)

• The coal Base Price for each shipment of coal suppliedby the supplier CFR hereunder to the Seller's deliverypoint at the Cebu Power Plant shall be the Base Price,as applicable to that shipment and adjusted in

5 Initial BPn-1 for the current esc as of 4th Q 2011: USD42.38


accordance with the immediately preceding formulaunder this Annex F of the PSC (Base Price); provided,however, that if such coal Base Price is less than theapplicable Coal Reference Price, the coal Base Priceshall be equivalent to the applicable Coal ReferencePrice

Adjustment of Transportation Base Price (TBPn)

TBPn = shall be adjusted quarterly to reflect the increaseor decrease of the price of Marine Diesel Oil as of thefirst day of loading as per the formula stated below:

Where:

TBPn

TBPn-1

BBPn-1

BBPn-2

750/0

250/0

=

=

=

=

=

=

TBP as of current quarter

TBP as of preceding quarter6. In caseof a new Coal Supply Contract, theinitial TBPn-1 shall be the blendedtransportation rate (transportation +wharfage) of the new Coal SupplyContracts

Bunker Basis Price in US cents as ofpreceding quarter

Bunker Basis Price in US cents as ofpreceding quarter to BBPn-1

Fixed Cost

Variable Cost

6 Initial TBPn_tfor the current esc as of 4th Q 2011: USD21.14

c' ERC Case No. 2014-116 RCNOTICE/October 22,2014Page 10 of 22

• The quarter shall refer to a calendar quarter

• Bunker Basis Price shall be the quarterly average of thePertamina Publicly Listed Price Index for Marine Diesel Oilposted in PI. Pertamina. website (www. pertamina-bunker.com). For the reference, the initial BBPn-2 shall beUS 0.8018 per liter

• The initial price adjustment shall be made on the FirstDelivery Date and which shall be effective until the end ofthe quarter on the First Delivery Date

• The next price adjustment after the First Delivery Date willbe on the next calendar quarter and the price shall beadjusted on the first day of every quarter thereafter

• The Transportation Base Price for coal shall include thecost of wharfage

12. Below is a comparison of the change in the Fuel andTransport Prices brought about by the change in theIndonesian CRP:

Fuel Base and Transport Price, $/IVITPrevious Contract New Contract

Q4,2007 Q4,2011

Coal + Transport +Wtd.

Coal Transportation Total Avg.Insurance Wharfage Cost27.72 24.85 52.57 42.38 21.14 63.52

13. Further, below is a summary of the details of theIndonesian coal contracts, with a comparison betweenthe old and new suppliers:

.' ERC Case No. 2014-116 RCNOTICE/October 22, 2014Page 11 of 22

Suppliers

ContractedQuantities

DeliveryVessels

Price

Kcal

Unloadingrare

Old CSCPT Kasih(Indonesian), PTIPC (Indonesian)and MGMec(Filipino)

PT Kasih 320,000;PT IPC 180,000;MGMec 300,000Barges only at5,500 to 8,000DWT capacity

PT Kasih USD25for base price,USD25 fortransportation baseprice; PT IPCUSD32.26 for baseprice, USD20.50 fortransportation baseprice; MGMECUSD30.50 for baseprice, USD22.07 fortransportation basepricePT Kasih 4100, PTIPC 4375, MGMec4300PT Kasih 6,000metric tons/day, PTIPC 7,000 metrictons/day, MGMec7,000 metrictons/day

NewCSCPT IPC, PTJSKM (bothIndonesians)

PT IPC 500,000;PT JSKM350,000Mother vesselwith 45,000 DWTcapacity; lighterbarges will beused to transferfrom mothervessel to jettyPT IPCUSD40.72 forbase price,USD20.72 fortransportationbase price; PTJSKM USD42.00for base price,USD 19.93 fortransportationbase price

PT IPC 4100, PTJSKM 4050

PT IPC 6,000metric tons/day,PT JSKM 6,000metric tons/day

RemarksTermination of CSCwith PT Kasih due topassage of MEMRregulations and non-compliance;termination ofMGMEC CSC dueto inability ofMGMEC to deliverbecause ofproblems with theirmine operations

Base Price for nowis now required tobe equal to or higherthan the coalreference priceissued by the MEMRof Indonesia as ofthe execution dateof the coal supplycontract and everyanniversary thereof


DeliveryTerms

Laycan days nowallowed (numberof days when thevessel is allowedto arrive beforeBuyer has theoption ofcancelling aparticulardelivery)

14. The new base coal price under the new coal supplycontracts are as follows:

New Coal ContractCoal Fuel Price Heat Contract

Supplier FOB Transpo. Total Rate QuantityPT. IPC 40.72 20.72 61.44 4,100.00 500,000.00PT. JSKM 42 19.93 61.93 4,050.00 350,000.00Total 850,000.00

Weighted AverageNew Contract Heat Rate

FOB Trans o. Total41.25 20.39 61.64 4,079

As referred PSC Heat Rate of 4,165kcal/kWei hted Avera e New Contract

FOB42.12

Heat RateTotal62.51 4,165

FOB + Insurance; Trans 0 + wharfa eFOB Trans o. Fuel Total42.38 21.14 63.52

15. Details of the procurement process of fuel. KSPCprocured its supply contracts through international publicbidding. Its procurement process is attached to theapplication;


Abstract of the APSC and Related Information

16. Executive Summary. The Executive Summary of theAPSC is, likewise, attached to the application.

Additional terms in the APSC:

"CFR" means, with respect to a destination port, "Costand Freight" as defined under INCOTERMS 2010.

"Coal Reference Price" or "CRP" means a coal price.including any and/or all price changes. imposable taxes,fees, imposts, charges. others associated costs, asrequired by the MEMR of Indonesia or any otherGovernment Authority of any country affecting theSeller's coal supply contracts.

"First Delivery Date" has the meaning given to that termin the coal supply contracts entered into by the Sellerwith its coal suppliers; provided, that where there aredifferent First Delivery Dates under such coal supplycontracts, the latest of such dates shall be the FirstDelivery Date for purposes of the PSC.

"Governmental Authority" means the Republic of thePhilippines, any province, city, municipality or otherpolitical subdivision, agency, authority, board, bureau,commission, court, department, instrumentality of anycountry or any other foreign Governmental Authorityhaving jurisdiction or relation over either of the Parties,their respective property and assets, the performance ofobligations under the PSC or having the power orauthority to affect any aspect of the PSC.

"Ministry of Energy and Mineral Resources" or"MEMR" means the political subdivision, agency, board,bureau, commission, department, instrumentality orGovernmental Authority in Indonesia, having jurisdictionover the coal supply arrangements between the Sellerand its coal suppliers and the performance of theirrespective obligations under said coal supplyarrangements, or any other successor Governmental

" ERC Case No. 2014-116 RCNOTICE/October 22,2014Page 14 of 22

Authority having the same jurisdiction or exercising thesame powers.

New Paragraph in the "Monthly Payment" Provision:

A new paragraph in the Amendment to the PSC isadded to Article 7.2, as Article 7.2((i)] as follows:

"The Monthly Payment shall be subject to any and/orall adjustment on the Base Price for coal. In case anyprice changes, taxes, fees, imposts, charges or otherassociated costs is implemented under any newcontract, or under any other law, ordinance or regulationby any Government Authority or any agency orinstrumentality of any country affecting the Seller's coalsupply contracts or the application of and computationapplicable to the coal price, such price changes, taxes,fees, imposts, charges, and other associated costs shall,upon the giving of notice by the Seller to the Buyer, bedeemed incorporated to this Power Sales Contract andshall entitle the Seller, without need of any further noticeor action to, or any approval or consent by, the Buyer toadjust the Monthly Payment in accordance with thisparagraph and under Annex F (r) based on suchchanges; provided further, that the Base Price for coalshall include the shipment's insurance cost while theTransportation Base Price for coal shall include the costof wharfage."

New Annex F (Annex F[r]) on the KSPC PriceAdjustment Formula. Annex F of the PSC and thePSC IA in each case hereby replaced in whole by AnnexF (r) as attached to the APSC.

Effect of Amendment

"Except as specifically modified by this Amendment, allterms and provisions of the Power Sales Contract, aspreviously amended and supplemented, shall remain infull force and effect. From and after the date hereof, allreferences in the Power Sales Contract to "thisContract," "hereof," "herein," and other words of similarimport shall be deemed to refer to the Power Sales


Contract, as previously amended and supplemented,and as modified by this Amendment, and the PowerSales Contract with all its subsequent amendments andsupplements shall be read and construed with thisAmendment as one integrated document incorporatingthe amendments effected hereby."

Change in Circumstance. The Parties hereto agreethat "Except as specifically provided in Section 2(b)hereof (APSC), if, as a result of any Applicable Lawcoming into effect after the signing of this Amendment,or as a result of any such Applicable Law (including anyofficial interpretation thereof which the Seller has reliedupon in entering into this amendment) in force at thedate hereof being amended, modified or repealed, theinterest of the Seller in the Site, the Project or the CebuPower Plant or the Seller's economic return on itsinvestment is materially reduced, prejudiced or otherwisematerially affected, or when the amended contractmaterially affects the interest of the Buyer due to greateffect of the fuel base factor, the Parties hereto shallmeet and endeavor to agree on the necessaryamendments to the PSC, and if after 60 days no suchagreement has been reached then either Party may,upon giving to the other not less than 30 days' notice,terminate the PSC".

17. Adoption of the PSC and the Decision of theCommission.

All terms and conditions in the PSC between the partiesand as approved by the Commission, shall be in fullforce and effect except as specifically modified by theAPSC;

Rate Implications of the PSC

18. The following table shows the impact of the new FuelBase Price on the generation rates paid by thedistribution utilities in the Visayas:

.' " ERC Case No. 2014-116 RCNOTICE/October 22, 2014Page 16 of 22

Current NPC

Generating Company Charges Rate Proposed(as of June KSPC Rate

2012)Billing Particulars PhP/kWh PhP/kWh

I. Generation CharQe1, Generation

3.7255 4.2511CharQe/Base Price2. Franchise & Benefits to Host 0.0177Communities Taxes (FBHC) -3. Market Fee 0,011 0.0110(WESM)

Total Amount Before VAT 3.7542 4.2621

II. Rate Adjustments RateAdjustment

1. DeferredAccounting -Adjustments (OM)

1a. GRAM OM 0.4847 -1b. ICERA OM 0.1213 -

Total Amount Before VAT 0.6060 -

2. Automatic CostAdjustments (ACA)

2a. FPPCA 0.2162 -2b. FxA 0.0069 -

Total Amount Before VAT 0.2231 -12% VAT

(applied only

III. 12% VAT on Non-Renewable Energy Generation Charge 0.1102 to GenerationCharge andRateAdjustment)

Renewable Energy Mix - 76.81 %Non-Renewable EnerQY Mix - 23.19%

IV. DOE ER1-94 I - 0.01004.2511 +Rate

Total Monthly Power Rate (P/kWh) 4.6935 Adjustment+ Market Fee+ VAT + 0.01

19. CEBECO 1'5 Rate Impact. Below is the Rate Impact ofCEBECO I on the APSC:

-. ERC Case No. 2014-116 RCNOTICE/October 22,2014Page 17 of 22

OverallGen Mix Trans, Rate / OtherCostsI Effective Say Resl Say Resl SayResl

Month (with OLD kwh KWHIUC;Rate Customer: Customer: Customer:

VAT,Sljetc,) 50 KWH 70 KWH 100 KWHKSPCRate)1an.13 5,0732 1.1130 2,8445 9,0307 451.53 632.15 903.07feb.13 4.8554 1.1870 3.0357 9.0781 453.91 635,47 907,81Mar.13 5,0587 1.1599 3.0617 9,2803 464.01 649.62 928.03Apr.13 5.4138 1.0006 3.0474 9.4617 473.09 662.32 946,17May.13 5,1328 1.0062 3,0863 9,2253 461.26 645.77 922.531un.13 4.8871 1.0441 3.0662 8,9974 449,87 629,82 899.74Jul.13 5,6819 1.1125 3.1298 9.9243 496,21 694,70 992.43Aug.13 5,6006 1.0705 3.1418 9,8129 490.65 686.91 981.295ep.13 5.3788 1.0407 3.1183 9,5378 476.89 661.65 953.18Oct-!3 4.9115 1.0653 3.1025 9,0853 454,26 635.91 9OS.53Nov.13 5,0638 1.0102 3,1561 9.2908 464,54 650.35 929.08Dec.13 5.5035 1.0338 3.1361 9.6740 483.10 611.18 961,40Jan.14 5,6594 1.0140 3.2516 9.9250 496.25 694.15 992,50feb-14 6,1170 1.0270 3,2447 10,3888 519.44 727.22 l038.88Mar.14 6,0187 1.1429 3,3254 10.5470 527.35 138,29 1/054.10Apr.14 6.1689 0,9598 3,2680 10,3968 519,84 727,78 1/039.68

.1

7,0000 ,..-----------

6,0000 +--------~••5.0000 ,...... ,j

4,0000

3,0000

1.0000

• OverallGen Mixlwith OLDKSPCRate)

-Overall Gen Mix(withNEWKSPCRatej

OverallGenMix Difference of Say Resl SayResl Say Resl

(with Trans. OtherCostsI EffectiveNEW Rate/kwh

KWH(UC;Rate

Price Customer: Customer: Customer:VAT, Sl; etc,1 (P/KWH) 50 KWH 70 KWH 100 KWH

KSPCRatel5,2165 1.1130 2,8445 9,1740 0.1433 458,70 642,18 917.405,0050 1.1870 3,0351 9,2276 0,1495 461.38 645,94 922.765,2092 1.1599 3.0611 9,4308 0,1505 471.54 660.16 943.OS5,5599 1.0006 3,0474 9,6078 0.1461 480.39 672.55 960.785,2832 1.0062 3.OS63 9.3757 0.1504 468.78 656,30 937,575,0596 1.0441 3,0662 9,1100 0.1726 458,50 641.90 917.005,1896 1.1125 3.1298 10,0320 0,1077 501.60 702,24 11003,205.1064 1.0705 3.1418 9,9187 0,1058 495,94 694,31 991.875,4800 1.0407 3,1183 9,6391 0,1012 481.95 674,73 963.914,9768 1.0653 3.1025 9,1446 0,0593 45W 640,12 914,465.1806 1.0702 3,1567 9,4075 0,1167 470,38 658,53 940.155,6282 1.0338 3,1367 9.7987 0,1247 489,94 685,91 979.875,7939 1.0140 3,2516 10,0594 0,1344 502.97 704,16 11005,946,3919 1.0270 3,2441 10.6697 0,2809 533.49 746,88 1,066,916,2230 1.1429 3.3254 10,6913 0,1444 534,51 748.39 1/069.136,3815 0,9598 . 3,2680 10,6094 0,2126 530,41 142,66 11060.94

Difference in Amount for a Residential

SayResl SayResl Say ReslCustomer: Customer: Customer:

50 KWH 70 KWH 100 KWH

1.1664 10,0329 14.33211,4773 10.4682 14,95467.5265 10,5371 15.05307,3061 10.2286 14,61231,5197 10,5276 15,03948,6289 12,OS05 17,25795,3863 7,5409 10,77275,2887 7,4042 10,57745,0613 7.0858 10,12262,9672 4,1541 5,93455,8368 8,1715 11.61366,2351 8.7291 12,47016,7218 9,4106 13.4437

14,0455 19,6637 28,09097,2184 10.1058 14,4369

10,6285 14,8799 21.2510

Difference in%for a Residential

SayRe~ Say Resl SayReslCustomer: Customer: Customer:

50 KWH 10 KWH 100 KWH

1.6% 1.6% 1.6%1.6% 1.6% 1.6%1.6% 16% 1.6%1.5% 1.5% 1.5%1.6% 1.6% 1.6%1.9% 1.9% 1.9%1.1% 1.1% 1.1%1.1% 1.1% 1.1%1.1% 1.1% 1.1%0.7% 0.7% 0,7%1.3% 1.3% 1.3%1.3% 1.3% 1.3%1.4% 1,4% 1.4%2.7% 2,7% 2,7%1.4% 1.4% 1.4%2,0% 2,0% 2,0%


20. CEBECO I's Load Forecast. CEBECO l's LoadForecast is indicated below:

CEBECO1.10 Year Forecast MWH SALES& PURCHASES

YearMWH

MWHSALESPURCHASES

2014 180,249 164,0272015 187)229 170,3782016 194,626 177Jl02017 202,443 184,2242018 210,681 191/7192019 219,339 199/5982020 22M18 207/8602021 237,918 216/5052022 247,840 225)5352023 258,185 234)948

300;000

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

.MWH SALES -MWH PURCHASES

21. Board Approval. APSC and the joint filing of the instantapplication have been approved by the board ofdirectors of applicant CEBECO I. A copy of CEBECO I'sResolution on the approval of the APSC and the jointfiling of this application is attached to the instantapplication;

Motion for the Issuance of Provisional Authority toAdopt the New Fuel Base Price and the Fuel Factor

in the KSPC Price Adjustment Formula

22. The APSC will not terminate, suspend or in any wayaffect their PSC as approved by the Commission and asimplemented and continue to be implemented by them,save for the new fuel base price and the fuel base pricefactor brought about by the Indonesian MEMR, which isthe subject matter of the instant application. It is in thisregard that, pending the final approval of the instantapplication, they request that they be allowed to adoptthe new fuel base price and the fuel base price factor inthe KSPC price adjustment formula;


23. Since the implementation of the Indonesian MEMR,KSPC has been incurring losses since September 2011.As of October 25, 2013, it already incurred a total loss ofPhPB42,362,546.51 and it will continue to incur morelosses without the proper intervention of theCommission. Below is the table showing the effect ofthe Indonesian MEMR on it without adopting the newfuel base price and the fuel base price factor for all beingcustomers;

KSPCLoss on the Fuel Costas of March 2014

Customer: CEBECO I

1) Fuel Costs/Expenses

BillingPeriod kWh SoldCoalConsumption Fuel Cost

FOREX(PHP=USD) Fuel Expenses (PHPI(a)(MT) (USD/MT)

Sep 26"Oct 25, 2011 5,514,000.00 3,344.39 43.285 12,146,957.95Oct 26"Nov 25, 2011 4,896,000.00 2,969.55 83.91 43.629 10,871,263.25Nov 26"Dec 25, 2011 5,040,000.00 3,056.89 43.684 11,205,114.00

Dec 26, 2011"Jan 25, 2012 5,208,000.00 3,158.79 43.186 11,003,270.69Jan 26NFeb 25, 2012 5,269,000.00 3,195.79 80.66 42.768 11,024,400.47Feb 26"Mar 25, 2012 4,740,000.00 2,874.93 43.049 9,982,728.28Mar 26"Apr 25, 2012 5,186,000.00 3,145.45 42.718 10,774,900.31Apr 26"May 25, 2012 5,040,000.00 3,056.89 80.19 43.576 10,681,881.00May 26"Jun 25, 2012 5,061,000.00 3,069.63 42.492 10,459,558.35Jun 26"JuI25, 2012 2,694,000.00 1,633.98 42.037 5,019,009.72Jul26"Aug 25,2012 4,908,700.00 2,977.26 73.07 42.164 9,172,696.54Aug 26NSep25, 2012 5,173,000.00 3,137.56 41.741 9,569,606.02Sep 26NOct25, 2012 5,028,000.00 3,049.61 41.376 8,529,824.42Oct 26NNov25, 2012 4,056,000.00 2,460.07 67.60 41.085 6,832,467.22Nov 26NDec25, 2012 3,672,000.00 2,227.16 41.058 6,181,541.40

Dec 26, 2012NJan 25, 2013 5,187,000.00 3,146.05 40.637 8,523,500.00Jan 26NFeb 25, 2013 5,131,000.00 3,112.09 66.67 40.718 8,448,284.51Feb 26NMar 25, 2013 4,704,000.00 2,853.10 40.821 7,764,813.54Mar 26"Apr 25, 2013 4,128,000.00 2,503.74 41.307 7,183,692.69Apr 26"May 25, 2013 4,378,400.00 2,655.61 69.46 41.508 7,656,523.95May 26NJun 25, 2013 5,208,000.00 3,158.79 43.810 9,612,329.09Jun 26NJu125, 2013 4,970,000.00 3,014.44 43.250 8,527,785.60Jul26NAug 25, 2013 4,896,500.00 2,969.86 65.41 44.117 8,570,092.38Aug 26NSep 25, 2013 4,637,500.00 2,812.77 43.357 7,976,950.91Sep 26"Oct 25, 2013 2,688,000.00 1,630.34 43.110 4,340,744.24Oct 26NNov25, 2013 5,122,000.00 3,106.63 61.76 43.855 8,414,253.66Nov 26NDec25, 2013 6,828,000.00 4,141.36 44.493 11,379,996.09

Dec 26, 2013NJan 25, 2014 6,661,000.00 4,040.Q7 45.271 11,875,572.29Jan 26NFeb25, 2014 6,480,000.00 3,930.29 64.93 44.637 11,391,083.37Feb 26"Mar 25, 2014 6,560,000.00 3,978.81 45.212 11,680,262.00

TOTAL 149,065,100.00 90,411.90 71.37 42.798 276,801,103.93

.' •• ERC Case No. 2014-116 RCNOTICE/October 22, 2014Page 20 of 22

~ Existing Fuel Pass-Through

BillingPeriod kWh SoldExisting Fuel Pass. Revenue (P/kWhl

Fuel Expenses (PHPllb)% Pass-through

RemarksThrough (P/kWh) (a) (a/b)

Sep 26NOct 25, 2011 5,514,000.00 1.7469 9,632,406,60 12,146,957.95 79% LossOct 26NNov 25, 2011 4,896,000.00 1.7607 8,620,387,20 10,871,263.25 79% LossNov 26NDec 25, 2011 5,040,000,00 1.7630 8,885,520,00 11,205,114.00 79% Loss

Dec 26, 2011 NJan 25, 2012 5,208,000.00 1.6863 8,782,250,40 11,003,270.69 80% LossJan 26NFeb 25, 2012 5,269,000.00 1.6700 8,799,230,00 11,024,400.47 80% LossFeb 26NMar 25, 2012 4,740,000,00 1.6810 7,967,940,00 9,982,728,28 80% LossMar 26NApr 25, 2012 5,186,000.00 1.6630 8,624,318,00 10,774,900.31 80% LossApr 26NMay 25, 2012 5,040,000,00 1.6964 8,549,856.00 10,681,881.00 80% LossMay 26NJun 25, 2012 5,061,000,00 1.6542 8,371,906,20 10,459,558.35 80% LossJun 26NJu125, 2012 2,694,000,00 1.4881 4,008,941.40 5,019,009,72 80% LossJul26NAug 25, 2012 4,908,700,00 1.4926 7,326,725.62 9,172,69654 80% LossAug 26NSep 25, 2012 5,173,000,00 1.4776 7,643,624.80 9,569,606,02 80% Loss5ep 26NOct 25, 2012 5,028,000.00 1.4006 7,042,216,80 8,529,824,42 83% LossOct 26NNov 25, 2012 4,056,000.00 1.3907 5,640,679,20 6,832,467,22 83% LossNov 26NDec 25, 2012 3,672,000.00 1.3898 5,103,345,60 6,181,541.40 83% Loss

Dec 26, 2012NJan 25, 2013 5,187,000.00 1.3573 7,040,315,10 8,523,500.00 83% LossJan 26NFeb 25, 2013 5,131,000.00 1.3600 6,978,160,00 8,448,284.51 83% LossFeb 26NMar 25, 2013 4,704,000,00 1.3635 6,413,904,00 7,764,813.54 83% LossMar 26NApr 25, 2013 4,128,000,00 1.4311 5,907,580,80 7,183,692,69 82% LossApr 26NMay 25, 2013 4,378,400.00 1.4381 6,296,577.04 7,656,523.95 82% LossMay 26NJun 25, 2013 5,208,000.00 1.5178 7,904,702,40 9,612,329,09 82% LossJun 26NJu125, 2013 4,970,000,00 1,4239 7,076,783.00 8,527,785.60 83% LossJul26NAug 25,2013 4,896,500,00 1.4524 7,111,676,60 8,570,092.38 83% LossAug 26N5ep 25, 2013 4,637,500,00 1.4274 6,619,567,50 7,976,950,91 83% Loss5ep 26NOct 25, 2013 2,688,000,00 1.3621 3,661,324,80 4,340,744.24 84% LossOct 26NNov 25, 2013 5,122,000,00 1.3857 7,097,555,40 8,414,253.66 84% LossNov 26NDec 25, 2013 6,828,000,00 1.4058 9,598,802,40 11,379,996.09 84% Loss

Dec 26, 2013NJan 25, 2014 6,661,000,00 1.4894 9,920,893.40 11,875,572.29 84% LossJan 26NFeb 25, 2014 6,480,000,00 1.4686 9,516,528,00 11,391,083.37 84% LossFen 26NMar 25, 2014 6,560,000,00 1.4875 9,758,000,00 11,680,262,00 84% Loss

TOTAL 149,065,100,00 1.5111 225,901,718.26 276,801,103.93 82% Total Loss


24. Without provisional authority prayed for, KSPC willcontinue to incur losses. Thus, they are constrained torequest for a provisional authority to adopt andimplement the new fuel base price and the fuel baseprice factor in the KSPC price adjustment formula toavoid further losses detrimental to the continuedoperation of KSPC. Moreover, being a base-load energysupplier of CEBECO I, it would be in the best interest ofboth parties to acquire the requested provisionalauthority at the earliest possible time; and

25. Thus, they pray that:

a) Their motion for the issuance of provisionalauthority allowing KSPC to adopt and used thenew fuel base price and the fuel base price factorin its Price Adjustment Formula be approved priorhearing and issuance of final authority; and

b) Their APSC be approved by the Commission.

The Commission has set the application for jurisdictionalhearing, expository presentation, pre-trial conference andevidentiary hearing on November 21, 2014 (Friday) at nine-thirtyin the morning (9:30 A.M.) at the CEBECO I Multi-Purpose Hall,Main Office, Bito-on, Dumanjug, Cebu.

All persons who have an interest in the subject matter of theproceeding may become a party by filing, at least five (5) days priorto the initial hearing and subject to the requirements in the ERC'sRules of Practice and Procedure, a verified petition with theCommission giving the docket number and the title of theproceeding and stating: (1) the petitioner's name and address; (2)the nature of petitioner's interest in the subject matter of theproceeding, and the way and manner in which such interest isaffected by the issues involved in the proceeding; and (3) astatement of the relief desired.

• ERC Case No. 2014-116 RCNOTICE/October 22,2014Page 22 of 22

All other persons who may want their views known to theCommission with respect to the subject matter of the proceedingmay file their opposition to the application or comment thereon atany stage of the proceeding before the applicants conclude thepresentation of their evidence. No particular form of opposition orcomment is required, but the document, letter or writing shouldcontain the name and address of such person and a concisestatement of the opposition or comment and the grounds reliedupon.

All such persons who may wish to have a copy of theapplication may request the applicants, prior to the date of the initialhearing, that they be furnished with a copy of the application. Theapplicants are hereby directed to furnish all those making suchrequest with copies of the application and its attachments, subject toreimbursement of reasonable photocopying costs. Likewise, anysuch person may examine the application and other pertinentrecords filed with the Commission during the usual office hours.

WITNESS, the Honorable Chairperson, ZENAIDA G. CRUZ-DUCUT, and the Honorable Commissioners, ALFREDO J. NON,GLORIA VICTORIA C. YAP-TARUC, and JOSEFINA PATRICIA A.MAGPALE-ASIRIT, Energy Regulatory ommission, this 22nd dayof October, 2014 at Pasig City.

ATTY.~: .SALVANERADirector III, L gal Services

/"'iO/NJSlCEBECO 2-PCPC -NOPH IDESKTOPIPSA

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