T MAY O 2 NuIL TIME 2 iP P EXCHANGE CONTROL 440 93 I … · Republic of the Philippines ... Infrastructure Fees for Bakun Hydroelectric Power Plant and San Roque Multipurpose Project

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Republic of the PhilippinesENERGY REGULATORY COMMISSION

San Miguel Avenue Pasig CityF n

OFFICE rc CIt h Ufa

IN THE MATTER OF THE 15TH 6y J21cOnAAPPLICATION FOR THE RECOVERY OFTHE INCREMENTAL COSTS ON T MAY O 2 NuILFOREIGN CURRENCY EXCHANGE RATE TIME 2 iP PFLUCTUATIONS UNDER THE

0INCREMENTAL CURRENCY EXCHANGE CONTROL 440 z 93 IRATE ADJUSTMENT 15 ICERA WITHPRAYER FOR PROVISIONAL

AUTHORITYERC CASE NO 2010067 RC

IN THE MATTER OF THE 16d APPLICATION FOR THE RECOVERY OF

THE INCREMENTAL COSTS ON

FOREIGN CURRENCY EXCHANGE RATEFLUCTUATIONS UNDER THE D O C K E T E D

INCREMENTAL CURRENCY EXCHANGE Date DE2RATE ADJUSTMENT 16 ICERA WITH Cv

PRAYER FOR PROVISIONAL

AUTHORITY

ERC CASE NO 2010073 RC

NATIONAL POWER CORPORATION

NPC AND POWER SECTOR ASSETSAND LIABILITIES MANAGEMENT

CORPORATION PSALMApplicants

x x

DECISION

Before the Commission for resolution are the applications filed by the

National Power Corporation NPC and the Power Sector Assets and Liabilities

Management Corporation PSALM for the recovery of their incremental costs on

foreign currency exchange rate fluctuations under the Incremental Currency

Exchange Rate Adjustment 15 and 16 ICERA with prayer for provisional

authority

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ERC CASE NOS 2010 067 RC and 2010073 RC

DECISION March 26 2012Page 2 of 24

In the said applications NPC and PSALM alleged among others the

following

1 NPC filed the instant applications in its capacity as theimplementing agency for the unbundled generation rates as statedin the Orders of the Commission dated September 6 and 20 2002in ERC Case No 2001 901 revised generation charges in theOrders dated September 3 2004 and April 13 2005 in ERC CaseNo 2004178 provisionally approved generation charges in theOrders dated February 16 2009 and March 23 2009 for theLuzonMindanao and Visayas Grids respectively under ERC CaseNo 2009004 RC and the provisionally approved deferred chargesin ERC Order dated December 15 2008 under ERC Case Nos

2008 043 RC and 2008054 RC and the Order dated January 192009 under ERC Case No 2008064 RC PSALM filed the same inits capacity as transferee owner and administrator of the

generating assets of NPC pursuant to Section 49 of Republic ActNo 9136 RA 9136 otherwise known as the Electric PowerIndustry Reform Act or EPIRA

2 In its Order dated February 24 2003 in ERC Case No 200344 theCommission issued and adopted the Implementing Rules for theICERA providing among others the required mechanisms for therecoveryrefund of the deferred incremental costssavings onforeign currency exchange rate fluctuations and carrying charges

3 The instant applications cover the billing period July 2009 toDecember 2009 and January 2010 to April 2010 They have fullycomplied with the ICERAs monthly reportorial requirements tosupport the calculated allowable costs covering the billing periodas evidenced by the submitted reportscompliances duly received

4 by the Commission

4 They propose to recoverrefund the Deferred AccountingAdjustments DAAs corresponding to additional costs or savingsfrom foreign exchange fluctuations in the settlement of DebtService principal repayment portion and Operating ExpenseOPEX and pertaining to the difference between actual andallowable Capacity and Infrastructure Fees for BuildOperateTransfer BOT plants and the billed amounts under the basicgeneration charge as well as the corresponding carrying chargesfor the billing periods July 2009 to December 2009 and January2010 to April 2010 for the Luzon Visayas and Mindanao Grids

5 Pursuant to the Commissions directive in its Order datedNovember 23 2005 approval of 4 ICERA DAA the proposedICERA DAA charges are calculated on a per Grid basis

6 On February ie 2009 and March 23 2009 the Commission issuedan Order grantin I provisional authority PA to

11141implement new is generation rates of PhP43648kWh for

V

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ERC CASE NOS 2010067 RC and 2010073 RCDECISIONMarch 26 2012

Page 3 of 24

Luzon PhP37255kWh for Visayas and PhP28177kWh forMindanao The PA authorized NPC PSALM to implement the newbase rates corresponding to the revised revenue requirementstarting the billing month of March 2009

7 Based on the components of the new revenue requirement andenergy sales in the February 16 2009 Order the new base ratesfor capacity fees were deduced which then served as the basis inthe DAA calculations for the Luzon and Mindanao grids

As established in the CommissionsOrder in ERC Case No 20084 019 RM dated December 14 2009 and to be consistent with the

approval of their previous ICERA applications in their debt serviceDAA calculation they used the BSP FOREX Rate ofPhP440494US100while the Yen to Peso rate was pegged atPhP04096JPY100

8 For foreigndominated operating expenses the DAA calculationsconsidered a new base rate on Calendar Year CY 2007 weightedaverage foreign exchange rate PhP417430US100consistentwith the CommissionsOrder in ERC Case No 2008019 RM

9 They used a base foreign exchange rate of PhP440494 for the USdollar and PhP04096 for the Japan Yen in the calculation of thedebt service DAA

10 The calculation for the recoveryrefund of Capacity andInfrastructure Fees for Bakun Hydroelectric Power Plant and SanRoque Multipurpose Project was pegged at PhP38299kWh asfollows

101 Bakun Hydro Electric Power Plant

The capacity fee was calculated based on the CommissionsDecision in ERC Case No 2001 813 dated August 24 2006which provides that any amount in excess of thePhP38299kWh the rate considered by NPC as capacity fee forBakun in ERC Case No 2004178 shall be part of the energycharge and shall be considered as allowable cost under theGeneration Rate Adjustment Mechanism GRAM

It should be noted that the capacity fee component of Bakun inthe provisionally approved basic generation charge under ERCCase No 2009004 excludes the 0 M costs Any amount inexcess of the PhP38299 plus the 0 M costs were recoveredunder the GRAM

102 San Roque Multipurpose Project

The capacity fee for San Roque was calculated based on ERCCase No 2001 816 which pegged the power purchase powercost of San Roque Multipurpose Project at the effective rate ofthe Luzon Grid or the purchased power cost under the

4agreement hichever is lower Any amount in excess of thePhP38299 h which is the rate considered by NPC as

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ERC CASE NOS 2010067 RC and 2010073 RC

DECISIONMarch 26 2012Page 4 of 24

capacity fee for the San Roque Power Plant in ERC Case No2004178 shall be part of the energy charge which shall beconsidered as allowable cost under the GRAM

11 The instant applications likewise include the recoveryrefund ofthe allowable capacity costs of Kalayaan Unit Nos 3 and 4 andMindanao Coal STEAG based on the CommissionsDecision inERC Case No 2007159 dated November 17 2008 and ERC Case

No 2001 811 dated February 2 2009 respectively

12 On the calculation of the DAA for capacity fees for the test periodJuly 2009 to December 2009 and covering the billing period May2009 to October 2009 the DAA refers to the difference between theallowable capacity fees and the amounts recovered through thebasic generation rates per ERC Case No 2009004

13 The instant applications do not include any unrecovered or unrefunded balance from the previous ICERA applicationsconsidering that the same are still pending resolution by theCommission and Capacity Fee and Infrastructure Fee after theeffective date of transfer of the contracted capacities under thefollowing IPP contracts to its IPP Administrator IPPA

IPP Effective Date

Pagbilao October 1 2009Sual November62009

San Roque HEP January 26 2010Bakun Luzon Hydro February 23 2010

14 Considering the foregoing and pursuant to all the relevantDecisions and Orders issued by the Commission they havecalculated the total deferred costs for recovery under the instantapplications comprising of deferred debt service OPEX andcapacity fees for BOT plants and the corresponding carryingcharges for the Luzon Visayas and Mindanao grids covering thetest period July 2009 to December 2009 and January 2010 to April2010 Shown below is the summary of the total deferred FOREXcosts

Total Deferred FOREX Costs in Pesos

Test Period July 2009 to December 2009in Pesos LUZON VISAYAS MINDANAO

TOTAL DAA 8098211049 211823633 180766622

Test Period January 2010 to April 2010In PhP LUZON VISAYAS MINDANAO

TOTAL DAA 39019888Q 65608722 117277643l

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ERC CASE NOS 2010067 RC and 2010 073 RC

DECISIONMarch 26 2012

Page 5 of 24

15 The applications seek the Commissions approval for therecoveryrefund of the above stated total current deferred FOREXcosts for the test period July 2009 to December 2009 and January42010 to April 2010 through the imposition of the following proposedDAA charges

Proposed 15 ICERA DAA Charges P kWh

in PhPkWh LUZON VISAYAS MINDANAO

TOTAL DAA 06361 00704 00399

Proposed 16 ICERA DAA Charges PkWh

In PhPkWh LUZON VISAYAS MINDANAO

TOTAL DAA 00461 00326 00383

16 In accordance with ERC Resolution No 20 Series of 2005 theValue Added Tax VAT to be imposed on the consumers will bebased on gross receipts or the total amount paid for electricity soldfrom non renewable energy portion of the generation mixcorresponding to the billing period under recoveryrefund

17 They likewise seek the approval of the Commission to recover theabove stated deferred costs over the following recovery periods

Proposed Spread No of Months 15 ICERALuzon Visayas Mindanao

6 6 6

Proposed Spread No of Months 16 ICERALuzon Visayas Mindanao

4 4 4

18 As authorized under the Implementing Rules of the ICERA theyutilized the carrying charge interest rates as shown below

I

ERC CASE NOS 2010 067 RC and 2010 073 RCDECISION March 26 2012Page 6 of 24

Allowable Carrying Charge Interest Rates

Prevailing 91 Authorized AllowableBilling Period

day TBill Ratett Allowance

12 Rate

July 2009 41730 300 71730

August 2009 39480 300 69480

September 2009 39920 300 69920

October 2009 38730 300 68730

November 2009 38090 300 68090

December 2009 38870 300 68870

January 2010 39060 300 69060

February 2010 39280 300 69280

March 2010 38800 300 68800

April 2010 38430 300 68430

1 Source Bangko Sentra ng Pilipinas2 As authorized in the ICERA Implementing Rules

t 19 The proposed ICERA DAA is fair and reasonable as it allows therecovery of deferred costs consistent with the principles of a freeand competitive electricity market as provided under R A No9136

20 They pray for the issuance of a provisional authority to implementrates for the recoveryrefund of the following

a DAA under these applications and

b The estimated DAA balances under the 12 to 15 ICERA forLuzon and the 9 to 15th ICERA for the Visayas andMindanao grids in order to mitigate the accumulated DAA tocustomers and improve NPCs financial standing

21 They further pray for the early resolution of the ICERA applicationsfiled before the Commission in view of the required Final Filingunder GRAMICERA and Article VI of ERC Resolution No 19 asamended by ERC Resolution No 25 Series of 2009 The saidResolution requires that an application for recovery of all unfiledand unverified DAAs shall be submitted within one hundred twenty120 days from effectivity of the Rules or on or before June 272010

22 To date they are implementing the 11 ICERA charges in Luzonpending resolution of the 12th to 14th ICERA applications For theVisayas they are implementing the 8 ICERA charges pendingresolution by the Commission of the 9 to 15 ICERA applicationsThe 8 ICERA DAA for the Mindanao grid was fullyrecovered refunded hence starting the billing month July 262009 to August 25 2009 no ICERA charge was imposed on theelectricity consum r in the Mindanao grid

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ERC CASE NOS 2010067 RC and 2010073 RCDECISION March 26 2012

Page 7 of 24

23 Consistent with ERC Case No 200344 adopting the ImplementingRules for the Recovery of Incremental Currency ExchangeRecovery Adjustments ICERA and Section 4e Rule 3 of the IRRof the EPIRA the following deferred costs refund recovery periodand proposed Deferred Accounting Adjustment DAA chargescovering the current DM be approved

15 ICERA

Particulars Luzon Visayas Mindanao

Total DAA for Recovery in PhP 8098211049 211823633 180766622

Total DAA Charge in PhPkWh 06361 00704 00399

Proposed Recovery Period Months 6 6 6

16 ICERA

Particulars Luzon Visayas Mindanao

Total DAA for Recovery in PhP 390198880 65608722 117277643

Total DAA Charge On PhPkWh 00461 00326 00383

Proposed Recovery Period Months 4 4 4

24 The instant applications seek to obtain the approval for therecoveryrefund of the total deferred FOREX fluctuation costs andthe balance of previously approved ICERA DAAs through theimposition of the proposed ICERA DM charges in PhPkWh and

25 They pray that the proposed DAA charges for Luzon Visayas andMindanao Grids be approved by the Commission

Having found the said applications sufficient in form and in substance with

the required fees having been paid several Orders and Notices of Public

Hearings were issued setting the instant applications for jurisdictional hearings

expository presentations pretrial conferences and evidentiary hearings

4

The Office of the Solicitor General OSG the Commission on Audit

COA and the Committees on Energy of both Houses of Congress were

furnished with copies of the Orders and the Notice of Public Hearings and were

requested to have their respective duly authorized representatives present at the

aforesaid initial hearings

ERC CASE NOS 2010 067 RC and 2010073 RCDECISION March 26 2012Page 8 of 24

Likewise the Offices of the Mayors of Quezon City Cebu City Davao

City and the Provincial Governors in Luzon Visayas and Mindanao where NPC

principally operates were furnished with copies of the Orders and Notices of

Public Hearings for the appropriate posting thereof on their respective bulletin

boards

PROCEEDINGS

A ERC Case No 2010067 RC

The Commission noted the following submissions made by the parties

1 The The Petition for Intervention filed on June 22 2010 by the4 National Association of Electricity Consumers for Reforms Inc

NASECORE

2 The Petition for Intervention filed on July 8 2010 by the Federationof Village Association FOVA

3 The Motion for Leave to Intervene Petition for Intervention and

Opposition filed on July 16 2010 by the Philippine AssociatedSmelting and Refining Corporation PASAR

4 The PreTrial Brief filed on December 2 2010 by NPC and PSALM

5 The Petition for Intervention with Entry of Appearance and PreTrial Brief filed on December 2 2010 by Manila Electric CompanyMERALCO

6 The Petition for Intervention and Pre Trial Brief filed on December

2 2010 by Masinloc Power Partners Company Limited MPPCL

7 The Petition for Intervention and Pre Trial Brief filed on December

2 2010 by AP Renewables Inc APRI and

8 The PreTrial Brief filed on December 28 2010 by PASAR

1

ERC CASE NOS 2010 067 RC and 2010073 RCDECISIONMarch 26 2012

Page 9 of 24

Luzon Hearing

During the December 8 2010 initial hearing NPC PSALM MERALCO

MPPCL and APRI appeared NASECORE and FOVA failed to appear despite

due notice

At the said hearing NPC and PSALM presented their proofs of

compliance with the Commissionsposting and publication of notice requirements

which were duly marked as Exhibits A to F1 inclusive

PSALM moved that an Order of general default be issued against all

intervenors who failed to appear at the said hearing Said motion was granted

Thereafter NPC and PSALM made an expository presentation of their

application In the course thereof the intervenors propounded clarificatory

questions NPC and PSALM were directed to submit various documents

At the continuation of the hearing on December 152010 the Commission

conducted a pretrial conference where the parties stipulated on facts and issues

relative to the instant application

NPC and PSALM presented their only witness Mr Ferdinand A Florendo

Manager of the Liability Management Department of PSALM who testified on the

following matters a debt service and operating expense b Capacity andd

Infrastructure Fees for BOT plants and c calculation of the corresponding

carrying charges In the course of his direct examination several documents

were presented and marked as hibits

1

ERC CASE NOS 2010067 RC and 2010073 RCDECISIONMarch 26 2012Page 10 of 24

The direct examination having been terminated the intervenors

manifested that they would just submit their respective written interrogatories in

lieu of their cross examinations NPC and PSALM were directed to file their

answers thereon All intervenors were directed to file their respective

manifestations informing the Commission of their intentions to conduct further

cross examinations on the said witness for purposes of clarifying his answers on

the written interrogatories

Visayas Hearing

During the January 12 2011 hearing only NPC PSALM and PASAR

appeared



which were duly marked as Exhibits A to F1 inclusive PASAR interposed no

objection to the said submissions The Commission provisionally accepted the

compliance submitted by NPC and PSALM subject to the submission of the

original copies of the Certificates of Posting issued by several local government

units LGUs Thereafter they made an expository presentation of their

application and moved that an Order of general default be issued against all


The Commission conducted a pre trial conference where the parties

stipulated on facts and issues r ative to the instant application

9


DECISION March 26 2012

Page 11 of 24

After the pre trial hearing NPC and PSALM presented their only witness

Mr Florendo who testified in support of the instant application In the course of

d his direct examination several documents were presented and marked as

exhibits

The direct examination of the said witness having been terminated

PASAR moved that it be allowed to file its written interrogatories in lieu of its

cross examination Said motion was granted NPC and PSALM were directed to

file their answers thereon All intervenors were directed to file their respective

manifestations informing the Commission of their intention to conduct cross

examinations on the said witness and to present their evidenceinchief

Mindanao Hearing

During the January 19 2011 hearing only NPC and PSALM appeared

and presented their proofs of compliance with the Commissionsposting and

publication of notice requirements which were duly marked as Exhibits A to F

1 inclusive The Commission dispensed with the conduct of a pretrial

conference and expository presentation in the absence of intervenors and

oppositors

NPC and PSALM presented their only witness Mr Florendo who testified

in support of the instant application In the course of his direct examination

several documents were presented and marked as exhibits4

611

ERC CASE NOS 2010067 RC and 2010073 RCDECISIONMarch 26 2012Page 12 of 24

The direct examination of the said witness having been terminated NPC

and PSALM were directed to file their formal offer of evidence

Meantime the Commission noted the following submissions made by the

parties

1 The Compliance with Request for Marking of AdditionalDocumentary Evidence filed on December 30 2010 by NPC andPSALM

2 The Motion for Extension of Time filed on December 30 2010 byMERALCO

3 The Interrogatories to Applicant filed on December 30 2010 byAPRI

4 The Compliance filed on January 7 2011 by NPC and PSALM

5 The Second Motion for Extension of Time and WrittenInterrogatories filed on January 7 and 14 2011 respectively byMERALCO

6 The Reply Re Written Cross Examination Questions withAffidavit Compliance and Motion for Extension of Time filed onJanuary 18 and 24 2010 respectively by NPC and PSALM

7 The Written Interrogatories filed on February 3 2011 by PASAR

8 The Reply Re MERALCOsWritten Interrogatories with AffidavitCompliance Reply Re MERALCOsWritten Interrogatories withAffidavit Reply Re Written Interrogatories of AP RenewablesInc with Affidavit In Response to Written Interrogatories of APRenewables Inc and Formal Offer of Evidence filed on February4 11 and 16 2011 and September 22 2011 respectively by NPCand PSALM and

9 The Opposition filed on August 31 2011 by Apila ng Bayan AB

B ERC Casa No 2010073 RC

The Commission noted the following submissions made by the parties

1 The PreTrial Brief filed on December 2 2010 by NPC and PSALM

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ERC CASE NOS 2010067 RC and 2010 073 RCDECISIONMarch 26 2012Page 13 of 24

2 The Petition for Intervention and PreTrial Brief filed on December2 2010 by APRI

3 The Petition for Intervention with Entry of Appearance and PreTrialBrief filed on December 2 2010 by MERALCO

4 The Petition for Intervention and PreTrial Brief filed on December7 2010 by MPPCL and

a

5 The Petition for Intervention and PreTrial Brief filed on December 7and 14 2010 respectively by San Miguel Energy CorporationSMEC

Luzon Hearing

During the December 8 2010 initial hearing NPC PSALM MERALCO

MPPCL APRI and SMEC appeared



which were duly marked as Exhibits A to F1 inclusive

PSALM moved that an Order of general default be issued against all


Thereafter NPC and PSALM made an expository presentation of their

application In the course thereof the intervenors propounded clarificatory

questions NPC and PSALM were directed to submit various documents

At the continuation of the hearing on December 15 2010 the Commission

conducted a pre trial conference where the parties stipulated on facts and issues

relative to the instant application

i

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ERC CASE NOS 2010 067 RC and 2010073 RCDECISIONMarch 26 2012Page 14 of 24


on the following matters a debt service and operating expense b Capacity and

Infrastructure Fees for BOT plants and c calculation of the corresponding

carrying charges In the course of his direct examination several documents

were presented and marked as exhibits

The direct examination having been terminated the intervenors

manifested that they would just submit their respective written interrogatories in

lieu of their cross examinations NPC and PSALM were directed to file their

answers thereon All intervenors were directed to file their respective

manifestations informing the Commission of their intentions to conduct further

cross examinations on the said witness for purposes of clarifying his answers on

the written interrogatories and to present their evidence

Visayas Hearing

d


No intervenor or oppositor appeared



which were duly marked as Exhibits A to F1 inclusive The Commission

provisionally accepted the submissions made by NPC and PSALM subject to the

submission of the original copies of the Certificates of Posting issued by several

local government units LGUs The Commission dispensed with the conduct of a

pre trial conference and expository presentation in the absence of intervenors

and oppositors

ERC CASE NOS 2010067 RC and 2010 073 RCDECISION March 26 2012

Page 15 of 24



several documents were presented and marked as exhibits

Mindanao Hearing


and presented their proofs of compliance with the Commissions posting and

publication of notice requirements which were duly marked as Exhibits A to F

1 inclusive The Commission dispensed with the conduct of a pre trial hearing

and expository presentation in the absence of intervenors and oppositors



several documents were presented and marked as exhibits

The direct examination of the said witness having been terminated NPC

and PSALM were directed to file their formal offer of evidence

Meantime the Commission noted the following submissions made by the

parties

1 The Compliance with Motion for Extension filed on December 212010 by NPC and PSALM

2 The Compliance Written Cross Examination Questions filed onDecember 30 2010 by MPPCL

3 The Motion for Extension of Time filed on December 30 2010 by

4 MERALCO

I


Page 16 of 24

4 The Compliance filed on January 7 2011 by NPC and PSALM

5 The Second Motion for Extension of Time and WrittenInterrogatories filed on January 7 and 14 2011 respectively byMERALCO

6 The Second Motion for Extension of Time Reply Re WrittenCross Examination Questions with Affidavit Motion forExtension of Time Compliance Compliance with Motion forExtension Manifestation and Reply Re Written Interrogatoriesof AP Renewables Inc APRI filed on January 17 18 and 242011 February 4 7 and 23 2011 and March 17 2011respectively by NPC and PSALM

7 The Opposition filed on August 31 2011 by Apila ng Bayan ABand

8 The Compliance with Request for Marking of Additional Evidenceand Formal Offer of Evidence filed on September 23 2011 byNPC and PSALM

Upon review of the formal offers of evidence filed by NPC and PSALM in

the instant applications the Commission found that the same are material and

relevant in the final resolution of the cases

f DISCUSSION

Considering that the applications of NPC and PSALM invoke the same

issues and based substantially on the same transactions the Commission

deems it appropriate to consolidate its resolution thereon pursuant to Section 1

Rule 31 of the Rules of Court to wit

Section 1 Consolidation When actions involving acommon question of law or fact are pending before the court it mayorder a joint hearing or trial of any or all matters in issue in theactions it may order all the actions consolidated and it may makesuch orders concerning proceedings therein as may tend to avoidunnecessary costs or delay


DECISION March 26 2012

Page 17 of 24

In the case of Jaime S Domdom vs Sandiganbayan the Supreme Court

held that

It need not be underscored that consolidation of cases

when proper results in the simplification of proceedings whichsaves time the resources of the parties and the courts and apossible major abbreviation of trial It contributes to the swift

dispensation of justice and is in accord with the aim of affording theparties a just speedy and inexpensive determination of their cases

4 before the courts Above all consolidation avoids the possibility ofrendering conflicting decisions in two or more cases which wouldotherwise require a single judgment

In the said applications NPC and PSALM proposed the following DAA

and the corresponding DAA rate

GridICERA DAA ICERA Rate

PhP PhPkWh15 ICERA

Luzon 8098211049 06361Visayas 211823633 00704Mindanao 180766622 0039916 ICERALuzon 390198880 00461Visayas 65608722 00326Mindanao 117277643 00383

In the evaluation of the instant applications the Commission considered

the following factors a Relevant Test Period b Base FOREX Rates for the

Debts Service and OPEX and c Calculation of the total ICERA DAA

GR Na 18238283 February 24 0

ERC CASE NOS 2010067 RC and 2010073 RCDECISION March 26 2012Page 18 of 24

A Relevant Test Period

In calculating the proposed ICERA DAA the Commission adopted July

2009 to April 2010 as the applicable test period

B Base FOREX Rates

In the calculation of the DAA for Debt Service the Commission used the

Base Exchange FOREX Rates of US Dollar to Peso rate at PhP440494US1

while the Yen to Peso rate was at PhP04096JPY1

On the other hand in the calculation of the DAA for OPEX the

Commission used the Base Exchange FOREX Rates of PhP516036US1 and

PhP04128JPY1

C Calculation of the Total ICERA DAA

DAA is a cost recovery mechanism that should have a zero impact on the

utilitys income and any under or over recovery on the actual deferred costs

should be carried forward in the next ICERA filing On the other hand the ICERA

is a component of the DAA which is intended to recoverrefund the deferred cost

from currency exchange adjustment

Shown below is the Commissions computation of ICERA DAA for the

relevant test period for Luzon Visayas and Mindanao Grids to wit


Page 19 of 24

A Luzon

Principal Amount Carrying Charge Total

Years PhP PhP PhP2009

July 115744452798 691862467 116436315264August 104554694355 605371680 105160066036

September 146469120569 853426743 147322547312October 157927693209 904530863 158832224072November 183991935105 1044000905 185035936010December 54680972813 313823216 54994796030

2010

January 9995285730 57522869 10052808599

February 8213229352 47417711 8260647063

4March 35190564377 201759236 35392323613April

Total DAA 746386819553 4316197218 750703016772

B Visayas

Principal Amount Carrying Charge Total

Years PhP PhP PhP2009

July 561286523 3355090 564641613August 2604395930 15079452 2619475382September 526104148 3065434 529169582October 10525280392 60283543 10585563935November 6455524456 36629722 6492154177December 148353761 851427 149205188

2010

January 622536870 3582700 626119570February 622536870 3582700 626119570March 5823816299 33622833 5857439132April 000

Total DAA 27889835249 160052900 28049888149

C Mindanao

Principal Amount Carrying Charge TotalYears PhP PhP PhP2009

July 3042571205 18186969 3060758175August 2112354586 12230533 2124585119September 2586158250 15068682 2601226932October 5344128430 30608496 5374736926November 3472007216 19700748 3491707963December 1155752143 6633054 1162385197

2010

January 622536870 3582700 626119570February 5823816299 33622833 5857439132March 000

April 000

Total DAA

241325000 139634014 24298959014

1


Page 20 of 24

The cumulative ICERA DAA balance for the test period July 2009 to April

2010 and the remaining balance of the 14 ICERA for Luzon Visayas and

Mindanao as of December 2011 are as follows

GridsPrincipal Amount Carrying Charge Total

PhP PhP PhPLuzon 878793836562 59464521567 819329314995Visayas 76239140190 15602964394 91842104584Mindanao 20158758477 2271291467 22430049943

It should be noted that some of NPCs generation assets were already

transferred to various successor generation companies SGCs Thus the SGCs

should be responsible for the recoveryrefund of the DAA incurred by NPC after

the Closing date of the Assets Purchase Agreements APAs Considering that

the APAs have different Closing Dates the Commission has already approved in

the previous applications the DAAs per NPCs privatized generation asset to be

charged to the TSC Customers

On the other hand NPC and PSALM shall be responsible for the recovery

refund of the aforesaid ICERA DAAs prior to the Closing Date of the APAs4

Relative thereto PSALM should submit a report containing the latest

balance of the DAA and the corresponding calculation applicable for each of the

SGCs and its proposed recoveryrefund scheme Pending submission of the

said documents the approved rate shall be under the account of NEC and

PSALM who shall collectrefund the approved ICERA through the SGCs or

transact directly with TSC customers The SGCs should provide assistance to

NPC and PSALM in implementing the recoveryrefund of the aforesaid DAAs

and act as billing agents fo 4fpC and PSALM


Page 21 of 24

In computing the balance of previous DAAs the Commission considered

several factors that affected the DAA balances including adjustments Said

adjustments are necessary to arrive at the updated balance of the DAA and the

actual amount that had been recovered or refunded by NPC and PSALM

It is significant to note that the calculation of the DAAs is on a roll forward

balance and the adjustments refer only to the updated balance which will not

affect the allowable costs that have already been granted by the Commission

4

WHEREFORE the foregoing premises considered the applications filed

by the National Power Corporation NPC and Power Sector Assets and

Liabilities Management Corporation PSALM for the recovery of their

incremental costs on foreign currency exchange rate fluctuations under the

Incremental Currency Exchange Rate Adjustment 15 and 16 ICERA are

hereby APPROVED with modifications

Accordingly NPC and PSALM are authorized to recover the following

Deferred Accounting Adjustments DAAs on ICERA for the Luzon Visayas and

Mindanao Grids effective their March 26 2012 to April 25 2012 billing period

until the end of the corresponding recovery periods or until such time that the full

amount shall have been recovered refunded whichever comes earlier

GridsRate Recovery Period

PhPkWh MonthsLuzon 03637 96

Visayas 01213 60

Mindanao 00094 36

kkoj

ERC CASE NOS 2010067 RC and 2010 073 RCDECISION March 26 2012

4 Page 22 of 24

NPC and PSALM are directed to a submit within thirty 30 days from

receipt hereof a report containing the latest balance of the DAA and the

corresponding calculations applicable for each of the SOCs and the

recoveryrefund scheme and b inform all concerned distribution utilities DUs

within five 5 days from the implementation of this Decision

SO ORDERED

Pasig City March 26 2012

ifAii G QRUDUCUTChairperson

1 nMARIA 3A 4IIt STAFIEDA JOIREYES

Cr missionr Cq missioner

GLORIA VICTORIA C YAP TARUC ALFREDO J NONCommissioner Commissioner

ii

G ld lidafed 15 16 ICERA Decision


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Copy furnished

1 Atty Melchor P RidulmeNational Power CorporationBIR Road cor Quezon AvenueDiliman Quezon City

2 The Office of the Solicitor General234 Amorsolo Street Legaspi Village Makati CityMetro Manila

3 The Commission On AuditDon Mariano Marcos Avenue

Diliman Quezon City Metro Manila

4 The Committee On EnergySenate of the PhilippinesGSIS Building Roxas Blvd Pasay City Metro Manila

5 The Committee On EnergyHouse of Representatives

d Batasan Hills Quezon City Metro Manila

6 Atty Maria Luz L CamineroCounsel for PSALM7 Floor Bankmer BuildingAyala Avenue Makati City

7 The General ManagerPhlippine Rural Electric Cooperatives Association PHILRECA4 Floor Casman Building372 Quezon Avenue Quezon CityMetro Manila

8 Ms Edith BuenoAdministrator

National Electrification AdministrationODFC Building 1050 Quezon AvenueQuezon City Metro Manila

9 All Distribution Utilities

10 Manila Electric Company MERALCOAttn Atty Hazel Rose See

Atty Angelica Diane B MontezaLopez Building MERALCO CompoundOrtigas Avenue Pasig City

11 Puyat Jacinto SantosAttn Atty Luther RamosCounsel of MPPCL and APRI

12F VGP Center Ayala AvenueMakati City

12 Mr Pete IlaganNational Association of Electricity Consumers for ReformsNo 10 Bayside Court Compound 680 Quirino Avenue1700 Tambo Paranaque City

ERC CASE NOS 2010 067 RC and 2010073 RCDECISION March 26 2012

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J13 Atty Danilo C Perolina

Counsel for Philippine Associated Smelting and Refining Corp37 Floor Philam Tower Paseo de RoxasMakati City

14 Engr Siegfriedo A VelosoFederation of Village AssociationDon Jesus Blvd Alabang Hills VillageMuntinlupa City

Documents

T MAY O 2 NuIL TIME 2 iP P EXCHANGE CONTROL 440 93 I … · Republic of the Philippines ... Infrastructure Fees for Bakun Hydroelectric Power Plant and San Roque Multipurpose Project