Republic of the Philippines ENERGY REGULATORY COMMISSION San Miguel Avenue, Pasig City IN THE MATTER OF THE APPLICATION FOR APPROVAL OF THE POWER SUPPLY AGREEMENT (PSA) BETWEEN LEYTE IV ELECTRIC COOPERATIVE INC. AND GNPOWER LTD. CO. WITH PRAYER FOR CONFIDENTIAL TREATMENT OF INFORMATION ERC CASE NO. 2016-021RC AND THE ISSUANCE OF PROVISIONAL AUTHORITY LEYTE IV ELECTRIC COOPERATIVE, INC. (LEYECO IV) AND GNPOWER LTD. CO. (GNPOWER) Applicants. x---------------------------------------------x NOTICE OF PUBLIC HEARING TO ALL INTERESTED PARTIES: On 15 March 2016, Leyte IV Electric Cooperative,Inc. (LEYECO IV) and GNPower Ltd.Co. (GNPower) filed their joint Application for approval of their Power Supply Agreement (PSA), with prayer for confidential treatment of information and issuance of provisional authority. In support of said Application, LEYECO IV and GNPower alleged,among others, the following: 1. Applicant LEYECO IV is a non-stock, non-profit electric cooperative existing under the laws of the Philippines,with principal office address at Brgy. Lamak, Hilongos, Leyte. It is authorized to distribute and provide electricity services to its member-consumers in the Municipalities of Inopacan, Hindang,Hilongos,Bato,.Matalom,and the City of Baybay,allin the Province of Leyte (collectively,the “Franchise Area”); 2. Copies of LEYECO IV’s Articles of Incorporation, By-Laws, Certificate of Registration and Certificate of Franchise are attached to the Application as follows: Annex “A” “B” “C” “D”
Document LEYECO IV’s Articles of Incorporation LEYECO IV’s By-laws Certificate of Registration with the National Electrification Administration (NEA) Certificate of Franchise
3. Applicant GNPOWER is a duly registered limited partnership organized and existing under Philippine laws, engaged in the business of developing, constructing, operating and owning power generation facilities and in the sale and trade of electric power. Its principal office is at 28th Floor, Orient Square Building, Don Francisco Ortigas Jr. Road, Ortigas Center, Pasig City; 4. GNPOWER’s pertinent documents evidencing its due registration as a limited partnership are appended to the Application, as follows: Annex “E” “F”
Document Certificate of Registration issued by the Securities and Exchange Commission (SEC) GNPOWER’s Amended Articles of Partnership
that is less than or equal to the aggregated baseload requirement in any or all of the contract years in increments of 1 MW. In the event that some winning bidders offered less than 11 MW, the loads were optimally allocated in such a way that the blended price of generation resulting from the R8 JCPSP transaction is almost the same for all ECs. In the event multiple bidders who collectively satisfy the total baseload demand of R8 ECs are declared winners for any contract year, all winning bidders entered in to individual PSAs with each of the 11 ECs; 12.4.
Bidders who signified their intention to join by buying the bid documents, attended pre-bid conferences where they gave their comments and sought clarification on the bidding requirements and process. The BAC issued bid bulletins and the Final Instruction to Bidders; 12.5. The process followed the 2-envelope system – the legal requirements and proof of financial and technical capability in the first, and the commercial offer in the second. Bids were evaluated based on an Evaluation Framework and Evaluation Methodology released to the Bidders; 12.6. After evaluating the bids of each supplier, on 14 November 2014, the BAC declared Applicant GNPOWER as a winning bidder of a total of 43 MW for Contract Year 2016, with a Lowest Calculated Responsive Bid with a Base Price offer of PhP5.0481/kWh and an evaluated Effective Price of PhP6.6658/kWh; 12.7. On 14 September 2015,GNPOWER and the Region 8 ECs commenced the final negotiations for the other commercial and technical terms and conditions of the PSA and negotiated the further reduction of the Contract Price from PhP5.0481/ kWh to PhP4.9653/kWh and for the increase in capacity to 52MW; Attached to the Application are copies of the relevant documents issued relative to the Joint Competitive Selection Process undertaken by the Region 8 ECs for the supply of their aggregated base load demand: Annex “H” “H-1” “H-1-a” “H-2” “H-3” “H-4” “H-5” “H-6” “H-7” “H-8”
13. On 18 September 2015, LEYECO IV and GNPOWER executed the subject PSA, providing the terms and conditions for the supply of 1MW baseload power to LEYECO IV, to assure the adequate and reliable supply of power to LEYECO IV’s franchise area ABSTRACT OF THE PSA AND OTHER RELATED INFORMATION
5. Applicants may be served with orders, notices and other legal processes of the Commission through its counsels of record; 6. The instant Application is filed pursuant to Sections 23, 25, 43 (u), and 45 (b) of Republic Act No. 9136, otherwise known as the Electric Power Industry Reform Act of 2001 (EPIRA Law), its Implementing Rules and Regulations, and other pertinent rules and regulations.A copy of the PSA signed by Applicants on 18 September 2015 is attached as Annex “G“ and forms an integral part of the Application;
Contract Duration Dec. 26, 2014 – Dec. 25, 2015 Dec. 26, 2015 – Dec. 25, 2016 Dec. 26, 2016 – Dec. 25, 2017 Dec. 26, 2017 – Dec. 25, 2018
Aggregated Baseload 65 MW 78 MW 83 MW 93 MW
8. The contracts of most of the Electric Cooperatives (ECs)in Region 8 with the National Power Corporation-Power Sector Assets and Liabilities Management Corporation (NPCPSALM) expired on 25 December 2014 9. On 07 November 2013, the eleven (11) ECs of Region 8 participated in the bidding for PSALM’s 200 strips of energy from the Unified Leyte Geothermal Power Plant, but lost; 10. Typhoon Yolanda hit the region on 08 November 2013 stalling any efforts to contract additional power supply and shifting the focus instead on the massive restoration efforts in the area; 11. Thus, the Region 8 ECs decided to bid out their power supply requirements for the period 2015-201. In the middle of 2014, the Region 8 ECs conducted a Joint Power Supply Planning.Later, the Region 8 ECs decided,through a Memorandum ofAgreement(MOA),to conduct a joint procurement of their short-term aggregated baseload requirement, specifically, their power supply needs beginning 26 December 2015 until 25 December 2016. From September to December 2014, the competitive bidding for the region’s power requirements was held; 12. For such purpose, a Bids and Awards Committee was created to conduct the Region 8 Joint Competitive Power Supply Procurement (“R8 JCPSP”) as follows: 12.1.
12.2.
12.3.
The Region 8 ECs initially prepared their respective least-cost power supply plans and subsequently their aggregated baseload demand for competitive bidding; The competitive tender was published and announced in the coverage areas of the Region 8 ECs. In addition, prospective bidders (Generation Companies, IPP Administrators and Wholesale Aggregators whose names are listed on the Department of Energy (DOE) website) were invited; The capacity offered by the winning bidder/s was allocated among the eleven (11) Region 8 ECs in proportion to their declared demand. A bidder was allowed to offer to supply capacity
14.
The following are the salient features of the PSA:
A.
Term The Agreement shall be effective from 18 September 2015, the date of the execution of the PSA. For the delivery of the contracted capacity, it shall have a term of one (1) year, starting on 26 December 2015 (12:00 A.M.) to 25 December 2016 (12:00 M.N.)
B.
STATEMENT OF FACTS 7. The aggregated uncontracted base load demand of Region 8 for years 2015 to 2018 is continually increasing as shown in the table below: Contract Year 2015 2016 2017 2018
Document Invitation to Bid Copy of the page of the newspaper where the Invitation was published Affidavit of Publication of the Invitation to Bid Memorandum of Agreement among Region 8 ECs Emails confirming participation of interested suppliers in the bidding Final Instruction to Bidders Bid Forms Bid Evaluation Slips Comparison of Bids Notice of Award
Contracted Capacity GNPOWER shall sell and deliver, or cause to deliver to LEYECO IV a contracted capacity of 1MW at the delivery point of the facility. Unutilized Capacity. The unutilized capacity of the Buyer may be made available for utilization of other Region 8 ECs or sold to the WESM. Exchange of Contracted Capacities. To maximize capacity utilization, Region 8 ECs may exchange quantities of their Contracted Capacities. (Exchange in MW Capacity Protocol annexed to the PSA)
C.
Contract Price Under Schedule 1 of the PSA, the Total Monthly Charge, before taxes, for a Billing Period shall be computed 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 Contract Price allocated to pay for the cost, as well as, the operations and maintenance of the Facility and is designated as the Capacity Fee in Schedule 1 of the PSA as such may be adjusted from time to time based on LEYECO IV’s Capacity Utilization Factor.
Where: Q ACTUAL CC HT EHTO CFCUF LCRCUF
as published by the Philippine National Statistics Coordination Board (or its substitute or replacement agency, as the case may be). PHCPI0
= the base Philippine Consumer Price Index for the month of December 2014. PHCPI0 = 140.5. CUF = the Capacity Utilization Factor between 70% and 100%, provided that if the actual CUF is below 70% (the “Minimum Capacity Utilization Factor”), the Capacity Price shall be calculated based on the Capacity Fee and quantity associated with the Minimum Capacity Utilization Factor. The corresponding Capacity Fee price component for given Capacity Utilization Factor is set forth in the Table below: Capacity Fees for Specific Capacity Utilization Factors CAPACITY FEE LOCAL PRICE COMPONENTS (PHP/kWh) C.U.F.
Capital Recovery (LCRCUF)
Fixed O&M (LFOMCUF)
100% 99% 98% 97% 96% 95% 94% 93% 92% 91% 90% 89% 88% 87% 86% 85% 84%
2.2944 2.3176 2.3412 2.3654 2.3900 2.4152 2.4409 2.4671 2.4939 2.5213 2.5493 2.5780 2.6073 2.6372 2.6679 2.6993 2.7314
0.6204 0.6267 0.6331 0.6396 0.6463 0.6531 0.6600 0.6671 0.6743 0.6818 0.6893 0.6971 0.7050 0.7131 0.7214 0.7299 0.7386
83%
2.7643
0.7475
82% 81% 80% 79% 78% 77% 76% 75% 74% 73% 72% 71% 70%
2.7980 2.8326 2.8680 2.9043 2.9415 2.9797 3.0189 3.0592 3.1005 3.1430 3.1867 3.2315 3.2777
0.7566 0.7659 0.7755 0.7853 0.7954 0.8057 0.8163 0.8272 0.8384 0.8499 0.8617 0.8738 0.8863
For the resulting CUF which is not a whole number, the corresponding Capacity Fee Price Component shall be computed using the formula below:
LCRCUF = LFOM CUF =
LFOMCUF = the local component of the Fixed O&M fee in PhP/ kWh at the given CUF. PHCPIn-1 = Philippine Consumer Price Index of the calendar month prior to the month corresponding to the Billing Period, for All Income Households – All Items (2006=100),
CUF
LFOM
LFOM @100%
Where,
CUF
LCRCUF
- is the local component of the Capital Recovery fee in PHP/kWh at the given CUF. LCR@100% – is the local component of the Capital Recovery fee in PHP/kWh at 100% CUF. LFOMCUF – is the local component of the Fixed O&M fee in PHP/kWh at the given CUF. LFOM @100% – is the local component of the Fixed O&M fee in PHP/kWh at 100% CUF. CUF – is the Capacity Utilization Factor between 70% and 100%, provided that if the actual CUF is below 70% (the “Minimum Capacity Utilization Factor”), the Capacity Price shall be calculated based on the Capacity Fee and quantity associated with the Minimum Capacity Utilization Factor. The Capacity Utilization Factor (CUF) shall be computed as follows: CUF = max Where: Q ACTUAL CC HT EHTO
= the actual quantity of energy, in kWh, delivered to LEYECO IV at the Delivery Point in the Billing Period = the Contracted Capacity, in kWh, as set forth in Schedule 1 = the total number of hours in such Billing Period = the sum of the duration, in Equivalent Hours, of Scheduled Outages and Unscheduled Outages in such Billing Period C. 2. Energy Fee and Energy Charge The Energy Fee is the component of the Contract Price allocated to pay for the coal, including Government Charges, designated as the Energy Fee in Schedule 1 of the PSA as adjusted from time to time due to changes in the delivered price of coal and Governmental Charges. The Energy Fee shall be computed in accordance with the following formula:
= the actual energy delivered, in kWh, to the Buyer at the Delivery Point for the Billing Period. = is the Contracted Capacity in kW. = is the total number of hours in the Billing Period. = the sum of the duration, in Equivalent Hours, of Scheduled Outages and Unscheduled Outages in such Billing Period = the CapacityFee in PhP/kWh for a given CUF in a Billing month. = the local component of the Capital Recovery Fee in PhP/kWh at the given CUF.
LCR@100%
Energy Charge = Q ACTUAL x EF EF = 0.2874 x Where: Q ACTUAL
+ 1.5256 x
+ 0.2375
= Actual energy delivered by GNPOWER to LEYECO IV, in kWh, for the Billing Period
EF
= Energy Fee in PhP/kWh
PHCPIn-1
= Philippine Consumer Price Index of the calendar month prior to the month