Republic of the Philippines ENERGY REGULATORY COMMISSION San Miguel Avenue, Pasig City INTHE MATTER OF THE JOINT APPLICATION FOR THE APPROVAL OF THE POWER PURCHASE AND SALE AGREEMENT (PPSA) ENTERED INTO BY AND BETWEEN BATANGAS 1 ELECTRIC COOPERATIVE, INC. (BATELEC 1), CAGAYAN | ELECTRIC COOPERATIVE, INC. (CAGELCO 1), CAGAYAN Il ELECTRIC COOPERATIVE, INC. (CAGELCO IN), ILOCOS SUR ELECTRIC COOPERATIVE, INC. (ISECO), LA UNION ELECTRIC COOPERATIVE, Inc, (LUELCO), PANGASINAN Ill ELECTRIC COOPERATIVE, INC. (PANELCO Ill), PENINSULA ELECTRIC COOPERATIVE, ING. (PENELCO), TARLAC | ELECTRIC COOPERATIVE, INC. (TARELCO 1), TARLAC Il ELECTRIC COOPERATIVE, INC. (TARELCO Ii), TARLAC ELECTRIC INCORPORATION (TEl) AND GNPOWER LIMITED COMPANY (GNPOWER), WITH PRAYER FOR PROVISIONAL AUTHORITY ERC CASE NO. 2007-121 RC BATANGAS | ELECTRIC COOPERATIVE, INC. (BATELEC 1), CAGAYAN | ELECTRIC COOPERATIVE, INC. (CAGELCO_ }), CAGAYAN Il ELECTRIC COOPERATIVE, INC. (CAGELCO It), ILOCOS SUR ELECTRIC COOPERATIVE, INC. (ISECO), LA UNION ELECTRIC COOPERATIVE, INC. (LUELCO), PANGASINAN Ill ELECTRIC COOPERATIVE, INC. (PANELCO Ii), PENINSULA ELECTRIC. COOPERATIVE, INC. (PENELCO), TARLAC | ELECTRIC COOPERATIVE, INC. (TARELCO ), TARLAG Il ELECTRIC COOPERATIVE, INC. (TARELCO Il), TARLAC ELECTRIC INC. (TEI) AND GNPOWER LIMITED COMPANY (GNPOWER), Applicants. X vec eee e eee e cece eee ee een en eree x DECISION Before the Commission for resolution is the joint application filed on May — 23, 2007 by the GNPOWER Limited Company (GNPOWER) and Batangas | {< Electric Cooperative, Inc. (BATELEC }), Cagayan | Electric Cooperative, Inc.ERC CASE NO. 2007-121 RC DECISION/October 3, 2007 Page 2 of 31 (CAGELCO 1), Cagayan Il Electric Cooperative, Inc. (CAGELCO It), llocos Sur Electric Cooperative, Inc. (ISECO), La Union Electric Cooperative, Inc. (LUELCO), Pangasinan Ili Electric Cooperative, Inc. (PANELCO III), Peninsula Electric Cooperative, Inc. (PENELCO), Tarlac | Electric Cooperative, Inc. (TARELCO 1), Tarlac II Electric Cooperative, Inc. (TARELCO II) and Tarlac Electric Inc. (TEI) for the approval of their Power Purchase and Sale Agreement (PPSA), with prayer for provisional authority, In the said application, GNPOWER and the applicant distribution utilities (DUs) alleged, among others, that: 1. GNPOWER will build, own and operate a 2 x 300 MW clean pulverized coal-fired electric power generation to be located near Mariveles, Bataan, for the purpose of supplying its customers with environmentally clean electric power commencing in tate 2010; 2. In view of the anticipated insufficient supply of power in 2010 as projected by the Department of Energy (DOE) and the expiration of the Transition Supply Contract (TSC) that was entered into by applicant DUs with the National Power Corporation (NPC), the DUs placed their respective advertisements to bid for their power supply requirements, as follows: a. BATELEC | on January 22 and 23, 2007 issues of Manila Bulletin; b. CAGELCO | on August 30, 2006 and September 6, 2006 issues of the Philippine Daily Inquirer, c. CAGELCO Il on August 30, 2006 and September 6, 2006 issues of the Philippine Daily Inquirer, d. _ ISECO on June 28 and 29, 2006 issues of the Philippine Daily Inquirer; e. LUELCO on March 15 and 22, 2007 issues of the Malaya Publication; {, PANELCO Ill on June 21 and 22, 2006 issues of the Philippine Daily Inquirer; g. PENELCO on September 4 and 6, 2006 issues of the Philippine Star and Manila Bulletin; h. TARELCO Ion July 17 and 18, 2006 issues of the Philippine Daily Inquirer, TARELCO Il on March 5 and 8, 2006 issues of the Philippine Daily Inquirer; and j. TE on April 4 and 11, 2006 issues of the Malaya Publication. aa,ERC CASE NO. 2007-121 RC DECISION/October 3, 2007 Page 3 of 31 3. After careful evaluation of the proposals, the respective Bids and Awards Committees (BAC) of applicant DUs deciared the proposal of GNPOWER acceptable and recommended the awarding of the Power Purchase and Sale Agreement (PPSA) to GNPOWER; 4. As a result, the applicant DUs entered into PPSA on the following dates whereby GNPOWER agreed to provide the power requirements of applicant DUs commencing in 2010: BATELEC | on March 2, 2007; CAGELCO | on October 27, 2006; CAGELCO Il on January 18, 2007; ISECO on October 20, 2006; LUELCO on April 25, 2007; PANELCO Ill on December 14, 2006; TARELCO | on September 26, 2006; TARELCO II on July 20, 2006; and TEI on September 15, 2006, -se-paegp 5. Under the said PPSA, GNPOWER's Purchased Power Rate (Contract Price) is the price in US Dollars to be paid by the applicant DUs for the purchase of the electric capacity. The said Contract Price comprised of relevant Capacity Fee and Energy Fee that may be paid in Philippine Peso (PhP). Any foreign exchange risk is, however, borne by individual applicant DUs; 6. The Capacity Fee is the component of the Contract Price allocated to pay for the cost, including the cost of operations and maintenance, of the power plant and may be adjusted from time to time based on each applicant DUs' Capacity Factor. 7. The Energy Fee is also a component of the Contract Fee allocated to pay for the cost of the coal, including government charges, and may be adjusted from time to time due to changes in the delivered price of Coal; 8. Shown below is the calculation of the GNPOWER Contract Price: Contract Price = Capacity Fee + Energy Fee 9. The determination and rate impact of the individual PPSA to applicant DUs' consumers are as follows: “In order to determine the impact of GNPOWER's and Applicant DUs’ PPSA to Applicant DUs' over-all generation rate, Applicant DUs projected 2011 load profiles were simulated using the Applicant DUs Distribution Development Plan (DDP). Shown in Table | is the projected energy requirement of all the Applicant DUs. Except for TEI, all the Applicant DUs' current sole supplier is NPC; and in order to proportionate what will be reallocated to GNPOWER once the PPSA takes into effect, NPC was grouped into two (Supplier 1 and Supplier 2). On the other hand, for TEl, Supplier 1 represents NPC while Supplier 2 represents Tarlac Power Corporation (TPC). The combined generation sy the said allocation is snown. A 2, |!