IN THE MATTER OF THE APPLICATION FOR …06012016).pdfERC CASE NO. 2016-023 RC Notice ofPublic Hearing/ 18May2016 Page2of21 Cabong, Borongan City, Eastern Samar. It is authorized to

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~G\}\..ATORyco~Republic of the Philippines c}~"~p

ENERGY RE~ULATORY ~O~MISSION !A!,proved for \San MIguel Ave., PasIg CIty P[r~t1;',s),

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IN THE MATTER OF THEAPPLICATION FORAPPROVAL OF THE POWERSUPPLY AGREEMENT (PSA),AS AMENDED, BETWEENEASTERN SAMAR ELECTRICCOOPERATIVE INC. ANDGNPOWER LTD. CO., WITHPRAYER FOR CONFIDENTIALTREATMENT OFINFORMATION AND. THEISSUANCE OF PROVISIONALAUTHORITY

ERCCase No. 2016-023 RC

EASTERN SAMAR ELECTRICCOOPERATIVE, INC.(ESAMELCO) AND GNPOWERLTD. CO. (GNPOWER),

Applicants."--------------------------------~-~-----,,

D C1 0 It E T E II ..klate: ~.~~.,!j.~tJl16,.13:1": •••••• -l/JL ..._._...-

NOTICE OF PUBLIC HEARING

TOALL INTERESTED PARTIES:

On 15 March 2016, Eastern Samar Electric Cooperative, Inc.(ESAMELCO) and GNPower Ltd. Co. (GNPower) filed'their jointApplication for approval of their Power Supply Agreement (PSA),with prayer for confidential treatment of information and issuance ofprovisional authority.

In support of said Application, ESAMELCO and GNPoweralleged, among others, the following:

1. Applicant ESAMELCO is a non-stock, non-profitelectric cooperative existing under the laws of thePhilippines, with principal office address at Brgy.

ERC CASE NO. 2016-023 RCNotice of Public Hearing/ 18May 2016Page 2of21

Cabong, Borongan City, Eastern Samar. It isauthorized to distribute and provide electricityservices to its member-consumers in the City ofBorongan and the Municipalities of Jipapad,Arteche, San Policarpo, Oras, Dolores, Maslog, Can-avid, Taft, Sulat, San Julian, MaydolongBalangkayan, Llorente, Hernani, GeneralMacArthur, Quinapondan, Giporlos, Balangiga,Lawaan, Salcedo, Mercedes, and Guiuan, all in theProvince of Eastern Samar (collectively, the"Franchise Area");

2. Copies of ESAMELCO's Articles of Incorporation,By-Laws, Certificate of Registration, and Certificateof Franchise are attached to the Application asfollows:

.... _- .. ._- - .

Annex Document"A" ESAMELCO's Articles of Incorporation"B" ESAMELCO's By-laws

"C" Certificate of Registration with the NationalElectrification Administration (NEA)

"D" Certificate of Franchise

3. Applicant GNPOWER is a duly registered limitedpartnership existing under Philippine laws, engagedin the business of developing, constructing,operating, and owning power generation facilitiesand in the sale and trade of electric power. Itsprincipal office is at 28th Floor, Orient SquareBuilding, Don Francisco Ortigas Jr. Road, OrtigasCenter, Pasig City;

4. GNPOWER's pertinent documents evidencing itsdue registration as a limited partnership areappended to the Application, as follows:

. - . _. - - - .-

Annex Document"E" Certificate of Registration issued by the

Securities and Exchange Commission (SEC)

"F" GNPOWER's Amended Articles ofPartnership

ERC CASE NO. 2016-023 RCNotice of Public Hearing/ 18 May 2016Page 3Of21

5. Applicants may be served with orders, notices, andother legal processes of the Commission through itscounsels of record;

6. The instant Application is filed pursuant to Sections23,25, 43 (u), and 45 (b) of Republic Act No. 9136,otherwise known as the Electric Power IndustryReform Act of 2001 (EPlRA Law), its ImplementingRules and Regulations, and other pertinent rulesand regulations. A copy of the PSA signed byApplicants on 18 September 2015, as amended by aletter of agreement dated 16 December 2015(Amendment Letter), are attached as Annex "G"and "G-1", respectively, and forms an integral partof the Application;

STATEMENT OF FACTS

7. The aggregated uncontracted baseload demand ofRegion 8 for years 2015 to 2018 is continuallyincreasing as shown in the table below:

Contract Contract Duration AggregatedYear Baseload2015 Dec. 26, 2014 - Dec. 25, 2015 65MW2016 Dec. 26, 2015 - Dec. 25, 2016 78MW2017 Dec. 26, 2016 - Dec. 25, 2017 83MW2018 Dec. 26, 2017 - Dec. 25, 2018 93MW

8. The contracts of most of the Electric Cooperatives(ECs) in Region 8 with the National PowerCorporation - Power Sector Assets and LiabilitiesManagement Corporation (NPC-PSALM) expired on25 December 2014;

9. On 07 November 2013, the eleven (n) ECs of Region8 participated in the bidding for PSALM's 200 stripsof energy from the Unified Leyte Geothermal PowerPlant, but lost;

10. Typhoon Yolanda hit the region on 08 November2013 stalling any efforts to contract additionalpower supply and shifting the focus instead on themassive restoration efforts in the area;

ERC CASE NO. 2016-023 RCNotice of Public Hearing/ 18May 2016Page 4 Of21

11. Thus, the Region 8 ECs decided to bid out theirpower supply requirements for the period 2015 -2018. In the middle of 2014, the Region 8 ECsconducted a Joint Power Supply Planning. Later,the Region 8 ECs decided, through a Memorandumof Agreement (MOA), to conduct a jointprocurement of their short-term aggregatedbaseload requirement, specifically, their powersupply needs beginning 26 December 2015 until 25December 2016. From September to December2014, the competitive bidding for the region's powerrequirements was held;

12. For such purpose, a Bids and Awards Committeewas created to conduct the Region 8 JointCompetitive Power Supply Procurement ("R8JCPSP") as follows:

12.1. The Region 8 ECs initially prepared theirrespective least-cost power supply plans andsubsequently their aggregated baseload demandfor competitive bidding;

12.2. The competitive tender was published andannounced in the coverage areas of the Region 8ECs. In addition, prospective bidders(Generation Companies, IPP Administrators andWholesale Aggregators whose names are listedon the Department of Energy [DOE] website)were invited;

12.3. The capacity offered by the winning bidder/s wasallocated among the eleven (11) Region 8 ECs inproportion to their declared demand. A bidderwas allowed to offer to supply capacity that is lessthan or equal to the aggregated baseloadrequirement in any or all of the contract years inincrements of 1MW. In the event that somewinning bidders offered less than 11 MW, theloads were optimally allocated in such a way thatthe blended price of generation resulting fromthe R8 JCPSP transaction is almost the same forall ECs. In the event multiple bidders whocollectively satisfy the total baseload demand ofR8 ECs are declared winners for any contractyear, all winning bidders entered into individualPSAswith each of the 11ECs;

ERC CASE NO. 2016-023 RCNotice of Public Hearing/ 18May 2016Page 5 of21

12.4. Bidders who signified their intention to join bybuying the bid documents, attended pre-bidconferences where they gave their comments andsought clarification on the bidding requirementsand process. The BAC issued bid bulletins andthe Final Instruction to Bidders;

12.5. The process followed the 2-envelope system - thelegal requirements and proof of financial andtechnical capability in the first, and thecommercial offer in the second. Bids wereevaluated based on an Evaluation Frameworkand Evaluation Methodology released to theBidders;

12.6. After evaluating the bids of each supplier, on 14November 2014, the BAC declared ApplicantGNPOWER as a winning bidder of a total of 43MW for Contract Year 2016, with a LowestCalculated Responsive Bid with a Base Price offerof PhP5.0481/kWh and an evaluated EffectivePrice ofPhP6.6658/kWh;

12.7. On 14 September 2015, GNPOWER and theRegion 8 ECs commenced the final negotiationsfor the other commercial and technical terms andconditions of the PSA and negotiated the furtherreduction of the Contract Price fromPhP5.0481/kWh to PhP4.9653/kWh and for theincrease in capacity to 52MW;

Attached to the Application are copies of therelevant documents issued relative to the JointCompetitive Selection Process undertaken by theRegion 8 ECs for the supply of their aggregated baseload demand:

'Annex"H""H-1"

"H-1-a""H-2""H-3"

"H-4"

DocumentInvitation to BidCopy of the page of the newspaper where theInvitation was ublishedAffidavit of Publication of the Invitation to BidMemorandum of reement amon Re ion 8 ECsEmails confirming participation of interestedsu liers in the biddinFinal Instruction to Bidders


"H-S" Bid Forms"H-6" Bid Evaluation Slips"H-7" Comparison of Bids"H-8" Notice of Award

13. On 18 September 2015, ESAMELCO andGNPOWER executed the subject PSA, providing theterms and conditions for the supply of five (5) MWbaseload power to ESAMELCO, to assure theadequate and reliable supply of power toESAMELCO's franchise area;

14. Subsequently, through the Amendment Letter,ESAMELCO requested for a two (2) MW increase inContracted Capacity, which GNPOWER acceptedand conformed to on 14 January 2016;

ABSTRACT OF THE PSA AND OTHER RELATEDINFORMATION

15. The following are the salient features of the PSA:

A. Term

The Agreement shall be effective from 18 September2015, the date of the execution of the PSA.

For the delivery of the contracted capacity, it shallhave a term of one (1) year, starting on 26 December2015 (12:00 A.M.) to 25 December 2016 (12:00 M.N.)

B. Contracted Capacity

GNPOWER shall sell and deliver, or cause to deliver toESAMELCO a contracted capacity of seven (7) MWatthe delivery point of the facility.

Unutilized Capacity. The unutilized capacity of theBuyer may be made available for utilization of otherRegion 8 ECs or sold to the WESM.

Exchange of Contracted Capacities. To maxImIzecapacity utilization, Region 8 ECs may exchangequantities of their Contracted Capacities. (Exchange inMW Capacity Protocol annexed to the PSA)

ERC CASE NO. 2016-023 RCNotice of Public Hearing/ 18May 2016Page 70f21

C. Contract Price

Under Schedule 1 of the PSA, the Total MonthlyCharge, before taxes, for a Billing Period shall becomputed according to the following:

Total Monthly Charge = Capacity Charge + Energy Charge

C. 1.Capacity Fee and Capacity Charge

The Capacity Fee is the component of the ContractPrice allocated to pay for the cost, as well as, theoperations and maintenance of the Facility and isdesignated as the Capacity Fee in Schedule 1 of thePSA, as amended, as such may be adjusted from timeto time based on ESAMELCO's Capacity UtilizationFactor.

Capacity Charge =max {QACTUAL ,0.7 * CC * [H T - EH TO ]}* CFCUF

PHCPln-1CFCUF = LCRcUF + LFOMcUF * PHCPl

o

VVhere:

QACTUAL = the actual energy delivered, in kWh,to the Buyer at the Delivery Pointfor the Billing Period.

CC = is the Contracted Capacity in kW.

HT = is the total number of hours in theBilling Period.

EHTo = the sum of the duration, III

Equivalent Hours, of ScheduledOutages and Unscheduled Outagesin such Billing Period

CFCUF = the Capacity Fee in PhP/kWh for agiven CUF in a Billing month.

LCRcuF = the local component of the CapitalRecovery Fee in PhP/kWh at thegiven CUF.

ERC CASENO. 2016-023 RCNotice of Public Hearing/ 18May 2016Page 8 Of21

LFOMcUF = the local component of the FixedO&M fee in PhP /kWh at the givenCUF.

PHCPln-1 = Philippine Consumer Price Index ofthe calendar month prior to themonth corresponding to the BillingPeriod, for All Income Households

All Items (2006=100), aspublished by the PhilippineNational Statistics CoordinationBoard (or its substitute orreplacement agency, as the case maybe).

PHCPlo = the base Philippine Consumer PriceIndex for the month of December2014. PHCPIo = 140.5.

CUF = the Capacity Utilization Factorbetween 70% and 100%, providedthat if the actual CUF is below 70%(the "Minimum Capacity UtilizationFactor"), the Capacity Price shall becalculated based on the CapacityFee and quantity associated with theMinimum Capacity UtilizationFactor.

The corresponding Capacity Fee price componentfor a given Capacity Utilization Factor is set forth inthe Table below:

Capacity Fees for Specific CapacityUtilization Factors

CAPACITY FEE LOCAL PRICECOMPONENTS (PHP/kWh)

C.U.F. Capital Recovery Fixed O&M(LCRcuF) (LFOMcuF)

100% 2.2944 0.6204

99% 2.3176 0.6267

98% 2.3412 0.6331

97% 2.3654 0.6396


96% 2.3900 0.6463

95% 2.4152 0.6531

94% 2.4409 0.6600

93% 2.4671 0.6671

92% 2.4939 0.6743

91% 2.5213 0.6818

90% 2.5493 0.6893

89% 2.5780 0.6971

88% 2.6073 0.7050

87% 2.6372 0.7131

86% 2.6679 0.7214

85% 2.6993 0.7299

84% 2.7314 0.7386

83% 2.7643 0.7475

82% 2.7980 0.7566

81% 2.8326 0.7659

80% 2.8680 0.7755

79% 2.9043 0.7853

78% 2.9415 0.7954

77% 2.9797 0.8057

76% 3.0189 0.8163

75% 3.0592 0.8272

74% 3.1005 0.8384

73% 3.1430 0.8499

72% 3.1867 0.8617

71% 3.2315 0.8738

70% 3.2777 0.8863


For the resulting CUF which is not a whole number,the corresponding Capacity Fee Price Componentshall be computed using the formula below:

LCR@IOO%LCRcup=--

CUF

LFOM@IOO%LFOMCUF =---

CUF

Where:

LCRcUF - is the local component of the Capital Recoveryfee in PHP/k Wh at the given CUF.

[email protected]% - is the local component of the CapitalRecoveryfee in PHP/kWh at 100% CUF.

LFOMcUF - is the local component of the Fixed O&Mfeein PHP/k Wh at the given CUF.

[email protected]% - is the local component of the Fixed O&Mfee in PHP/kWh at 100% CUF.

CUF - is the Capacity Utilization Factor between 70%and 100%, provided that if the actualCUF is below 70% (the "MinimumCapacity Utilization Factor''), theCapacity Price shall be calculated basedon the Capacity Fee and quantityassociated with the Minimum CapacityUtilization Factor.

The Capacity Utilization Factor (CUF) shall becomputed as follows:

CUF - f % QACTUAL}- max eo 0, ccx [HrEHTO]

Where:

QACTUAL = the actual quantity of energy, in kWh,delivered to ESAMELCO at the DeliveryPoint in the Billing Period

CC = the Contracted Capacity, in kWh, as setforth in Schedule 1

ERC CASENO. 2016-023 RCNotice of Public Hearing/ 18May 2016Page 11Of21

HT =

=

the total number of hours in such BillingPeriod

the sum of the duration, in EquivalentHours, of Scheduled Outages andUnscheduled Outages in such BillingPeriod

C. 2. Energy Fee and Energy Charge

The Energy Fee is the component of the Contract Priceallocated to pay for the coal, including GovernmentCharges, designated as the Energy Fee in Schedule 1ofthe PSA, as amended, as adjusted from time to timedue to changes in the delivered price of coal andGovernmental Charges. The Energy Fee shall becomputed in accordance with the following formula:

Energy Charge = QACTUAL x EF

PHCPI ICI PHCPIEF = 0.2874 X PHCp;~l + 1.5256 x IC;~l + 0.2375 PHCp;~l

Where:

QACTUAL = Actual energy delivered by GNPOWERto ESAMELCO, in kWh, for the BillingPeriod

EF = Energy Fee in PhP /kWh

PHCPIn-1 =

PHCPIo =

Philippine Consumer Price Index of thecalendar month prior to the monthcorresponding to the Billing Period, forAll Income Households - All Items(2006 = 100), as published by thePhilippine National StatisticsCoordination Board (or as substitute orreplacement agency, as the case may be)

base Philippine Consumer Price Indexfor the month of December 2014 forAll Income Households - All Items(2006 = 100), as published by thePhilippine National Statistics

ERC CASE NO. 2016-023 RCNotice of Public Hearing/ 18 May 2016Page 12 Of21

Coordination Board (or its substitute orreplacement agency, as the case may be)

ICln-1

IClo

=

=

Indonesian Coal Price Index of thecalendar month prior to the monthcorresponding to the Billing Period, inUS$/Mton

Base Indonesian Coal Price Index for themonth of December 2014 =US$67.28/Mton

D.Currency of Payment

The Contract Price shall be paid by ESAMELCO inPhilippine Peso only.

E. Scheduled and Unscheduled Outages

Under the PSA, GNPOWER shall be allowedScheduled and Unscheduled Outages not to exceedforty-five (45) days per Contract Year, during whichtime reduced or no delivery will be available toESAMELCO.

Unutilized Equivalent Hours for Scheduled Outagesand Unscheduled Outages in the Contract Year cannotbe carried forward to subsequent Contract Year.

F. Replacement Power

During any Scheduled or Unscheduled Outages,GNPOWER and ESAMELCO shall cooperate toarrange for Replacement Power from, including butnot limited to, other facilities of GNPOWER, thirdparties and the WESM. GNPOWER, at its own costand in consultation with ESAMELCO, shall negotiateon behalf of ESAMELCO for the supply and delivery ofcapacity and energy from third parties for a price asclose as possible to the Contract Price.


G.Prompt Payment Discount

Provided ESAMELCO has no arrears from previousbillings, including the Security Deposit or any unpaidcharges or penalties, if ESAMELCO pays the invoiceamount in full within 10 days from its receipt of theinvoice, ESAMELCO shall be credited on the nextsubsequent bill a PPD equivalent to eight centavos perkilowatt-hour (PhPo.08/kWh).

H.Security Deposit

In the event of ESAMELCO's failure to pay on DueDate, GNPOWER shall draw, at its option, from theSecurity Deposit on the working day immediatelyfollowing the Due Date. Within thirty (30) BusinessDays from the Start of Delivery Date, ESAMELCOshall establish the Security Deposit and submit toGNPOWER documentary proof sufficient to allowGNPOWER to draw therefrom. The Security Depositshall be in the form of cash and or irrevocable letter ofcredit and shall be equivalent to ESAMELCO'sprojected maximum electricity bill, to be determinednot later than sixty (60) calendar days prior to Start ofDelivery.

COMMERCIAL ADVANTAGE OF THE GENERATION RATEAND IMPACT ON ESAMELCO'S RETAIL RATES

16. ESAMELCO, together with the other Region 8 ECs,needs to address the insufficiency of its powersupply due to the increasing demand within itsfranchise area and the expiration of its contract withNPC-PSALM;

17. Currently, ESAMELCO receives a total of 8MW fromits existing suppliers, out of its peak requirement of13MW. With an annual average growth rate of7.73%, ESAMELCO forecasts that its peak demandfrom 26 December 2015 to 25 December 2016 willbe 14MW;

18. The additional supply from GNPOWER willsignificantly augment the supply deficiency ofESAMELCO and will decrease the adverse effects


thereof by providing a stable and adequate source ofelectricity;

19. Among alternative suppliers capable of providingadditional energy to ESAMELCO and the rest of theRegion 8 ECs, GNPOWER's rates proved to be morereasonable and competitive. While GNPOWER'soffer is primarily intended for its base loadq . erne t th C 'ty F t P" d thre mr n s, e apacl ac or flcmg un er e

PSA, as amended, provides flexibility in the DUs'utilization of the Contracted Capacity;

20. ESAMELCO simulated a rate impact analysis whichresulted m a Phpo.2167/kWh decrease with theexecution of the PSA, as amended, with GNPOWER,to wit:1

SimulationofGenerationMixRatewithGNPowerfor theYear2016Forecasted Percent Resulting 2015

PowerSupplier 2016 Amount(PhP) Share Capacity Average WeightedAverageQuantity Factor Rate Rate(PhpfkWh)(kWh) (%) (%) (P/kWh)FDCUI 17,568,000.00 101,490,336.00 21.00% 100% 5.7770

TRANS-ASIA 17,568,000.00 93,117,427.20 21.00% 100% 5.3004GNPOWER 45,493,600.00 272,479,367.84 54.37% 74% 5.9894 5.7558WESM 3,044,532.94 14,527,566.46 3.64% 4.7717

TOTAL 83,674,132.94 481,614,697.50 100%

SimulationofGenerationMixRatewithoutGNPowerfor the Year2016i;

2015 Weighted :1Forecasted Percent Resulting Average AverageII

PowerSupplier 2016 Quantity Amount(PhP) Share Capacity Rate Rate(kWh) (%) Factor(%) (PfkWh) (Php/kWh) IFDCUI 17,568,000.00 101,490,336.00 21.00% 100% 5.7770 ITRANS-ASIA 17,558,000.00 93,117,427.20 21.00% 100% 5.3004 ,

I

GNPOWER 0.00 0.00 0.00% 0% 0.0000 5.9725 I

WESM 48,538,132.94 305,139,799.01 58.01% 5.2855

TOTAL 83,574,132.94 499,747,552.21 100%

Assumption:Analysis and simulations is based on ESAMELCOs forecasted 2016 hourly load profileTRANS-ASiA's contract to ESAMELCO 100% Load Factor - 2MWFDCUi's contract to ESAMELCO 100% Load Factor- 2MWGNPOWER's proposal to ESAMELCO, with 100%-70% CUF-7MWWESM Prices is based on 2013, 2014 and 2015 prices of Nodal Points of ESAMELCO


21.

22.

, ANf..iEX"I""J""K"

"K-1""l""M""N""0"

"P""Q"

"R""S"

"T"

23.

In addition to the lower generation cost of the powersupply from GNPOWER, ESAMELCO is alsoentitled to a Prompt Payment Discount (PPD), ifconditions are met, equivalent to PhPo.08/kWh;

In compliance with Rule 20 of ERC Rules of Practiceand Procedure relative to the submission ofsupporting documents and information for theapproval of the PSA, as amended, and the ratestructure embodied therein, Applicants attached tothe Application the following documents to formintegral parts thereof:

DOCUMENT- -

Executive Summary of the PSA, as amendedRate Impact SimulationSources of Funds/Financial Plans with CostAssumptionsCompact Disc containinq a soft copy of Annex "K"Breakdown of the Contract PriceSample Computation of Power RatesGNPOWER's Audited Financial Statement for 2014GNPOWER's Certificate of Registration No. WA-13-01-001 valid until January 2018ESAMELCO's Distribution Development Plan (DDP)ESAMELCO's Actual and Forecasted Energy andDemandESAMELCO's Averaqe Daily Load CurveESAMELCO's Board Resolution No. 90 Series of 2015authorizing the filing of an application with the ERC forthe approval of the PSA, as amended, and designatingits General Manager as representative thereforGNPOWER's General Partner's Certificate attesting tothe resolution of the Board to execute the subject PSAwith ESAMELCO, as amended, designating signatoriesthereto

Applicants reserve their right to submit otherdocuments, either in the course of the hearing or asmay be required by the Commission;


COMPLIANCE WITH PRE-FILING REQUIREMENTS

24. Applicants manifest compliance 'with the pre-filingrequirements mandated under the ImplementingRules and Regulations of the EPIRA and Rule 6 ofthe ERC Rules of Practice and Procedure, to beestablished by the following:

23.1. Certifications acknowledging receipt of theApplication with annexes to be issued by theLegislative Bodies of Pasig City, Borongan. City, and the Province of Eastern Samar, to beappended as Annexes "V", "W" and "X",respectively;

23.2. Notarized Affidavit of Publication stating thatthe Application was published in a newspaperof general circulation within ESAMELCO'sFranchise Area, to be appended to theApplication as Annex "Y"; and

23.3. Complete newspaper issue where theApplication was published, to be appended tothe Application as Annex "Y-l", and therelevant page thereof where the Applicationappears, as Annex "Y-2";

MOTION FOR CONFIDENTIAL TREATMENT OFANNEXES "H-2" to "H-8", "K", and "K-l"

25. Under Rule 4 of the ERC Rules of Practice andProcedure, a party to any proceeding before theCommission may request that certain informationnot be disclosed and be treated as confidential, bydescribing with particularity the information to betreated as confidential, specifying the ground for theclaim of confidential treatment of the informationand, if applicable, specifying the period duringwhich the information must not be disclosed;

26. ESAMELCO requests for the confidential treatmentof Annexes "H-2" to "H-8" of the Application,consisting of the MOA among Region 8 ECs, e-mailsconfirming participation of interested suppliers inthe bidding, Final Instructions to Bidders, Bid

ERC CASE NO. 2016-023 RCNotice of Public Hearing/ 18May 2016Page 17 of21

Forms, Bid Evaluation Slips, Comparison of Bids,and Notice of Award, respectively. These annexesshow the individual offers of the bidders whichparticipated in the R8 JCPSP. The Region 8 ECs,ESAMELCO included, are bound by theirundertaking to secure and keep in confidence theoffers and the proposed terms of supply, so as not toprejudice or pre-empt any future CSPs in whichthese bidders will participate. Otherwise,ESAMELCOand the rest of the Region 8 ECs may beheld liable for damages for breach of confidentiality,and eventually, risk their good relations with thesuppliers concerned;

27. Similarly, GNPOWER respectfully moves for theconfidential treatment ofAnnexes "K" and "K-1"hereof, consisting of GNPOWER's Sources of Fundsand Financial Plans with Cost Assumptions. Theseannexes, exclusively owned by GNPOWER, containinformation which are considered part of itsbusiness and trade secrets. As such, GNPOWER hasthe sole proprietary interest and will be undulyprejudiced should they be disclosed to the public;

28. These annexes contain numbers, data, formula,methodology, and calculations involving valuableand sensitive commercial, financial informationreflecting GNPOWER's business operations andfinancial trade secrets. Therefore, GNPOWER'sconfidential, proprietary, and private informationincluded in the aforesaid annexes should beprotected from public dissemination. Otherwise,such information can be illegally and unfairlyutilized by business competitors who may use thesame for their own private gain and to theirreparable prejudice of GNPOWER. Negotiationswith prospective customers may also be affected.

29. The information contained in Annexes "K" and"K-1", constitute "trade secrets", for whichGNPOWER has actual and valuable proprietaryinterest. As explained by the Supreme Court, a tradesecret may consist of any formula, pattern, device, orcompilation of information that is used in one'sbusiness and gives the employer an opportunity toobtain an advantage over competitors who do not


possess the information2• It is indubitable that tradesecrets constitute proprietary rights andjurisprudence has consistently acknowledged theprivate character of trade secrets3. Further, as ruledin Garcia vs. Board of Investments4, trade secretsand confidential, commercial and financialinformation are exempt from public scrutiny;

30. Accordingly, Annexes "H-2" to "H-8", "K" and"K-l" be accorded confidential treatment. As such,they are to be used exclusively by the Commissionand for the sole purpose of evaluating thisApplication, thereby protecting these data fromunnecessary public disclosure;

31. In accordance with Section l(b), Rule 4 of the ERCRules of Practice and Procedure, Applicants submitone (1) copy each of Annexes "H-2" to "H-8","K" and "K-1" in a sealed envelope, with theenvelope and each page of the documents stampedwith the word "Confidential";

PRAYER FOR PROVISIONAL AUTHORITY

32. All the foregoing allegations are re-pleaded byreference in support of their prayer for the issuanceof Provisional Authority (PA) to implement thesubject PSA;

33. ESAMELCO and GNPOWER pray for the issuance ofa PA or interim relief prior to final decision pursuantto Rule 14 of the ERC Rules of Practice andProcedure, to wit:

"Section 3. Action on the Motion. - Motions forprovisional authority or interim relief may be actedupon with or without hearing. The Commission shallact on the motion on the basis of the allegations of theApplication or petition and supporting documentsand other evidences that applicant or petitioner has

2 Air Philippines Corporation us. Pennswell Inc., G.R. No. 172835, December 13,2007.3 Ibid.,4177 SeRA 374 (1989).


submitted and the comments or opposition filed byany interested person, if there be any."

34. Considering that a substantial amount of time isneeded to evaluate the documents submitted tosupport the approval of herein Application,Applicants seek consideration of the Commission toapprove the instant Application, immediately, albeit,provisionally;

35. Owing to the short term of the contract, which isonly for a period of one (1) year, a PA is all the moreimperative to allow the timely delivery of energy byGNPOWER to ESAMELCO, which is set to start on26 December 2015 at 12:00 A.M.;

36. The Region 8 EC's, including ESAMELCO, aftercareful evaluation if they will defer thecommencement of the delivery due to delayed filing,decided and required GNPower to commence itsdelivery immediately after its previous power supplyagreement expired last 25 December 2015, thisbeing the reasonable plan to mitigate the risks ofWESM exposure, specially with the assumption thatthe 2015 occurrence of EI Nino has an adverseimpact on the supply of electricity and the WESMprice, particularly during the summer season.ESAMELCO, Moreover, it was projected, as shownin the table below,5 that the exposure to volatilemarket prices will cause significant increases inprudential guarantee payments which will constrainRegion 8 ECs to avail of high interest-bearing loansin order to comply with PEMC requirement;

DORELCOLEYECO IILEYECO IIILEYECOIV

5 LEYECOV

6 SOLECO7 BILECOB SAMELCO I9 SAMELCO II10 ESAMELCO11 NORSAMELCO

'W'ithGNPo'\oVer

1,198,267.2615,600.000.004,249,01.5.391,110.915.2012.500.000.005.376.255.00

(1.999.261.22)2,400.000.006,000,000.00

4.750.000.0028,280,066.75

'W'ithou'tGNPovver

2,396.534.52'15,600,000.007.954,113.071,827.653.6352.000,000.0016,257.945.00

DiC'-erence

1.198,267.26

3.705,097.68716,738.43

39,500,000.00"10,881,690.00917.002.59

24.871.478.40B.800.000.0026,216,724.80

8.944.559.15

0.550.110.420.330.14-

0.620.330.560.190.36

5 Additional equivalent rate due to additional Prudential Guarantee required by PEMC (for theundelivered contracted capacity from GNPower) with a conservative loan interest of 6% per annum andbaseload loadfactor of81%.

ERCCASE NO. 2016-023 RCNotice of Public Hearing/ 18May 2016Page 20 of21

37. The additional power from GNPOWER is needed tocurtail any power interruptions that may beexperienced by ESAMELCO's member-consumersdue to inadequate power supply in the region;

38.. To further support the prayer for PA, an affidavitemphasizing the necessity thereof is attached to theApplication as Annex "Z", and form an integralpart thereof;

PRAYER

39. Applicants ESAMELCO and GNPower pray beforethe Commission that:

1. All information attached as Annexes "H-2" to"H-8", "K" and "K-l" to the Application betreated as confidential;

n. Pending hearing on the merits, a PA be issuedauthorizing the immediate implementation ofthe subject PSA including the rate structuretherein, as applied;

Ill. After due notice and hearing, the instantApplication, the PSA, and the rate structurecontained therein be duly approved; and

IV. In the event that a Final Authority shall beissued after GNPOWER starts actual delivery ofpower to ESAMELCOunder the terms of thesubject PSA, said Final Authority beretroactively applied to the date of such actualdelivery.

The Commission has set the Application for initial hearing,expository presentation, pre-trial conference, and presentation ofevidence on 25 August 2016 (Thursday) at ten o'clock in themorning (10:00 A.M.) at ESAMELCO's Main Office, Brgy.Cabong, Borongan City, Eastern Samar.

All persons who have an interest in the subject matter of theproceeding may become a party by filing, at least five (5) days prior tothe initial hearing and subject to the requirements in the ERC's Rules

ERC CASENO. 2016-023 RCNotice of Public Hearing/ 18May 2016Page 21 Of21

of Practice and Procedure, a verified petition with the Commissiongiving the docket number and title of the proceeding and stating: (1)the petitioner's name and address; (2) the nature of petitioner'sinterest in the subject matter of the proceeding, and the way andmanner in which such interest is affected by the issues involved in theproceeding; and (3) a statement of the relief desired.

All other persons who may want their views known to theCommission with respect to the subject matter of the proceeding mayfile their opposition to the Application or comment thereon at anystage of the proceeding before Applicants conclude the presentationof its evidence. No particular form of opposition or comment isrequired, but the document, letter or writing should contain the nameand address of such person and a concise statement of the oppositionor comment and the grounds relied upon.

All such persons who wish to have a copy of the Application mayrequest from the Applicants that they be furnished with the same,prior to the date of the initial hearing. Applicants are hereby directedto furnish all those making such request with copies of theApplication and its attachments, subject to the reimbursement ofreasonable photocopying costs. Any such person may likewiseexamine the Application and other pertinent records filed with theCommission during the standard office hours.

WITNESS, the Honorable Chairman, JOSE VICENTE B.SALAZAR, and the Honorable Commissioners, ALFREDO J.NON, GLORIA VICTORIA C. YAP-TARDC, JOSEFINAPATRICIA A. MAGPALE-ASIRIT, and GERONIMO D. STA.ANA, Energy Regulatory Commission, this 18th day of May 2016 inPasig City.

J. MARASIGANiefofStaff

Office of the Chairman and CEO

~LS: ema /apV.2016-023 RC ESAMELCO&GNPower.doc

Documents

IN THE MATTER OF THE APPLICATION FOR …06012016).pdfERC CASE NO. 2016-023 RC Notice ofPublic Hearing/ 18May2016 Page2of21 Cabong, Borongan City, Eastern Samar. It is authorized to