Republic of the Philippines ENERGY REGULATORY COMMISSION San Miguel Avenue, Pasig City IN THE MATTER OF THE APPLICATION FOR APPROVAL OF THE AUTHORITY TO DEVELOP, OWN AND OPERATE POINT TO POINT LIMITED TRANSMISSION FACILITIES, WITH PRAYER FOR PROVISIONAL AUTHORITY ERC CASE NO. 2014-109 MC. SOUTHWEST LUZON POWER GENERATION CORPORATION (SLPGO), ‘Applicant. Dare AER EE ae, x Br: x: DECISION Before the Commission for resolution is the application filed on September 3, 2014 by the Southwest Luzon Power Generation Corporation (SLPGC) for authority to develop and own a dedicated poin- to-point transmission facilities to connect SLPGC’s 2 x 150 MW coal-fired thermal power plant project to the Calaca Substation of the National Grid Corporation of the Philippines (NGCP), with prayer for provisional authority. Having found said application sufficient in form and in substance with the required fees having been paid, an Order and a Notice of Public Hearing, both dated November 10, 2014, were issued setting the case for initial hearing on December 9, 2014 at two o'clock in the afternoon (2:00 P.M.) at the ERC Hearing Room. On December 5, 2014, the Manila Electric Company (MERALCO) filed a Petition for Intervention (with Entry of Appearance) with a corresponding prayer that it be furnished with all notices, orders, resolutions, decision and pleadings in the instant case.ERC Case No. 2014-109MC Decision / 1 December 2015 Page 2 of 16 On December 9, 2014, the initial hearing of the instant case was conducted. At the same date, MERALCO’s Petition for Intervention was denied by the Commission. On December 29, 2014, SLPGC filed its Formal Offer of Evidence, and on October 12, 2015, SLPGC submitted additional documents as required by the Commission. After admitting the evidence submitted by SLPGC, the Commission declared the case submitted for resolution. RESOLUTION SLPGC is a generation company duly organized and existing under and by virtue of the laws of the Republic of the Philippines, with principal address at Barangay Baclaran, Balayan, Batangas. As proof thereof, SLPGC submitted copies of its Certificate of Filing Amended Articles of Incorporation (AOI) with attached Amended AOI, By-Laws, latest General Information Sheet, and latest Audited Financial Statements to the Commission. Records likewise show that SLPGC is an affiliate of another wholly-owned subsidiary of Semirara Mining and Power Corporation (SMPC), the Sem-Calaca Power Corporation (SCPC) which owns and operates the 2 x 300 MW Coal-fired Power Plant, adjacent to the SLPGC Power Plant in Calaca, Batangas. The SLPGC Power Plant will use as fuel locally sourced coal supplied by its parent company, the SMPC. The SLPGC has undertaken to construct a 2 x 150 MW coal- fired thermal power plant in Calaca, Batangas, in order to help address the country’s need for additional supply of electricity. The SLPGC has been included in the NGCP Transmission Development Plan (TDP): as of March 2013, and the DOE’s List of Power Projects? as of February 2014. The SLPGC Power Plant’s full commercial operations is scheduled to commence by early 2016. \ Please see TDP, Vol. 1, page 15, at NGCP website, http://www.ngcp.ph/tdp.asp (last aovessed 13 July 2014), Please see DOE, List of Committed Power Projects, page 1, at DOE. website, Fone Pou Tvonboconmlledclaat a Gas accessed July 2018)ERC Case No. 2014-109MC. Decision / 1 December 2015 Page 3 of 16 It shall be connected directly to the Luzon Grid through dedicated point-to-point transmission facilities developed, owned and operated by SLPGC. Hence, the instant application for authority to develop, own, and/or operate point-to-point transmission facilities connecting SLPGC’s power generation facilities to the Calaca Substation of the NGCP filed pursuant to Section 9 of Republic Act (R.A.) No. 9136, otherwise known as the “Electric Power Industry Reform Act,” and Section 5, Rule 5 of its Implementing Rules and Regulations (IRR), which provides: Section 9 of R.A. 0. 9136 Section 9. xxx A generation company may develop and own or operate dedicated point-to-point limited transmission facilities that are consistent with the TDP: Provided, That such facilities are required only for the purpose of connecting to the transmission system, and are used solely by the generating facility, subject to prior authorization by the ERC: xxx. Section 5, Rule 5 of the IRR of R.A. No. 9136 SECTION 5. Dedicated Point-to-Point Limited Transmission Facility of a Generation Company. — (a) Subject to prior authorization from ERC, TRANSCO or its Buyer or Concessionaire may allow a Generation Company to develop, own and/or operate dedicated point-to-point limited transmission facilities: Provided, That: @) Such dedicated point-to-point limited transmission facilities are required only for the purpose of connecting to the Grid which will be used solely by the Generation Facility, and are not used to serve End-users or Suppliers directly; (i) The facilities are included and consistent with the TDP as certified by TRANSCO or its Buyer or Concessionaire; andERC Case No. 2014-109MC. Decision / 1 December 2015 Page 4 of 16 Gii) Any other documents that may be required by the ERC, XXXXK I, ABSTRACT OF THE DEDICATED POINT-TO-POINT TRANSMISSION FACILITIES AND RELATED INFORMATION a, The dedicated point-to-point transmission facilities The SLPGC Power Plant shall be connected to the Luzon Grid through the NGCP’s 230 kV Calaca Substation. The connection involves a double circuit line approximately 0.92 km in length. The new lines will terminate to existing bays 85 and 86 at the substation. ‘The subject assets of SLPGC are considered dedicated point-to- point limited transmission facilities within the purview of R.A. No. 9136. They are required only for the purpose of connecting the SLPGC Power Plant to the Luzon Grid, and will be used solely by the SLPGC Power Plant. They are not intended to serve end-users or suppliers directly. Considering that the SLPGC Power Plant is scheduled to commence commercial operations by early 2016, and in order to complete the construction of the SLPGC Power Plant and conduct the necessary testing and commissioning activities, the connection facilities of SLPGC should be completed immediately. Below is the Gantt Chart and Project Schedule of the proposed connection facilities: 1 f aaa RTT mora nern Here [ Meme os one None [wea ew wee eg a oN oT "SAN SPE POW ERMC ROTTS 57s "siaoc cuca 27 W Tiansron Ge ai Se Dre s aa © — tg 5, = {coomartnglementaton 2 eres a se aR se Morey Dak ERED opr avenue esr Oca Fa og DOSE Sci gp fer] ~|~ este ee IF Cte Igeg eme| este 1 iERC Case No. 2014-109MC Decision / 1 December 2015 Page 5 of 16 b. Grid Impact Study and Interconnection Facility Study A third-party Grid Impact Study (GIS) was conducted to determine the technical feasibility of connecting the SLPGC Power Plant to the Calaca Substation. The GIS was approved by the NGCP in its Letter dated August 22, 2012. An interconnection facility study was likewise conducted to determine the technical specifications, the design and operational criteria, the cost of equipment, engineering, procurement and construction, and the time required for the proposed connection. The study was also approved by NGCP in its Letter dated January 22, 2013. c. Selection of the proposed connection configuration SLPGC had conducted a transmission installation workshop to assess the possible routes from its Power Plant to the substation of the Luzon Grid, as well as the possible methods of installation. It had determined that the most feasible option for its connection to the Luzon Grid is to connect its Power Plant to the Calaca Substation. Considering that the SLPGC Power Plant is located close to the Calaca Substation, this proposed connection is indeed the most viable connection point to the Luzon Grid. d, Rate Impact The SLPGC Power Plant is scheduled to commence full commercial operations in early 2016. SLPGC intends to supply power to the Wholesale Electricity Spot Market (WESM) and to the distribution utilities through bilateral supply contracts. Hence, the financial aspects of the connection and the rate impact to the consumers can be determined only after the SLPGC Power Plant has become operational and supply contracts have been executed. e. Estimated Project Cost The total cost of SLPGC’s dedicated point-to-point transmission facilities is estimated at Php357.73 Million.ERC Case No. 2014-109MC. Decision / 1 December 2015 Page 6 of 16 f. Technical Capability SLPGC alleged that it has expertise and capability to own, operate and maintain the connection facilities. To support such allegation, the list of names and addresses of its personnel proving SLPGC’s technical capability, were attached in the application as Annex “H.” g. Environmental Compliance Certificate The Department of Environment and Natural Resources (DENR) has issued Environmental Compliance Certificate (ECC) Ref. No. 1108-0011 to SLPGC for its Power Plant. h. DOE Certification On December 19, 2013, the Department of Energy (DOE) has issued Certificate of Endorsement No. 2013-11-001, certifying that the SLPGC Power Plant is consistent with the Power Development Plan of the Government. i. Certificate of Compliance Since the SLPGC Power Plant is still at the construction phase, it is not yet covered by a Certificate of Compliance (COC). ERC Resolution No. 9, Series of 2010, mandates SLPGC to file the necessary application for a COC not later than three months before the commencement of its commercial operations. Il, PROJECT OVERVIEW a. Project Description The components of the SLPGC’s Dedicated Point-to-Point Limited Transmission Facility are as follows:ERC Case No, 2014-109MC Decision / 1 December 2015 Page 7 of 16 ITEM COST in PhP Equipment/Materials Supplied and Engineering 228,363,466.50 Design, Construction and Installation Electrical Works 49.153,524-17 EPC Charges including Engineering Design, Project Management and 80,217,098.37 Supervision TOTAL 357;734,089.04 b. Project Cost The capital investment for the proposed project and activity to be implemented amounts to Three Hundred Fifty-Seven Million Seven Hundred Thirty-Four Eighty-Nine Pesos and four centavos (PhP357,734,089.04) as detailed above. ¢. Project Rationale The proposed development, construction, ownership and/or operation of the point-to-point transmission facilities by SLPGC is intended to cater to the direct delivery of the full 2 x 150 MW capacity of SLPGC Power Plant to the Luzon Grid in Calaca, Batangas. (left intentionally blank)ERC Case No, 2014-109MC Decision / 1 December 2015 Page 8 of 16 da, Diagram tion Fietnrs_comectng ‘Siting NOCP icy ‘Arough aay and SLPGC Coal Fired Power Plant | viz: Result of System Impact Study (SIS) conducted by NGCP ‘The excerpts from the SIS submitted by SLPGC are noteworthy, SEM-Calaca Power Corporation (SCPC) has an existing 600MW connected to CALACA Substation. It is proposing to build additional two (2) units of 150ERC Case No. 2014-109MC. Decision / 1 December 2015 Page 9 of 16 megawatts (MW) generating plants, herein referred to as “Sem-Calaca Expansion I project” with target commissioning in the second (2"4) quarter of 2015, to expand the capacity generation of Calaca coal-fired power plant (CCFPP). The study presents the results of the grid impact study in evaluating and assessing the impact of the Sem- Calaca expansion I project (now SLPGC) on the Luzon power grid. The study was conducted based on the scenarios with and without the proposed projects. The technical analyses include load flow analysis for thermal and voltage, contingency analysis, short circuit analysis and transient stability simulations. The analyses of the study were performed in accordance with the criteria and requirements of the Philippine Grid Code (PGC) and National Grid Corporation of the Philippines (NGCP) current system planning practices. The results of the study show that the thermal capability and voltage profile of the Luzon grid will not be degraded under steady state condition upon connection of the Plant. However, contingency analysis (N-1) condition results indicate violations on line loadings as shown in the Tables below. There were overloaded lines connected to Calaca 230 kV substation during single outage (N-1) scenario, especially during outages of one of each, Calaca- Sta. Rosa 230 kV line, Calaca-Bifian 230 kV line, Calaca- Amadeo 230kV line 1 and Calaca-Dasmarifias 230 kV line 1. The Power flow shows that the entry of 300 MW SLPGC. and 135 MW Puting Bato phase I, including the power from 1000 MW Sta. Rita power plant will flow to Calaca Substation leading to transmission constraints in the vicinity while the tie-line between Sta. Rita and 500 MW San Lorenzo power plant is open. The line overloading identified during single outage (N-1) scenario will be resolved by constructing 230 kV reinforcement line from Calaca Substation to Dasmarifias Substation. In the 2010 Transmission Development Plan as, under the indicative projects (2016 and beyond) a transmission reinforcement project in southern Luzon, the new Calaca — Dasmarifias 230 kV transmission line is proposed to be implemented in the 4tk Regulatory Reset of NGCP. This proposed reinforcement line can be implemented upon entry of the expansion of Sem-CalacaERC Case No. 2014-109MC Decision / 1 December 2015, Page 10 of 16 plants and Puting Bato plant phase I proposed to be in service by 2" quarter of 2015. The resulting fault current upon connection of the Plant are below than the existing power circuit breakers fault rating of Calaca substation and adjacent 230 kV stations in 2013, but in other monitored 230 kV substations, fault current is already near its breaker fault current rating. This result considers the Sta. Rita - San Lorenzo tie-line is open. The stability performance of the Luzon Grid will not be degraded by the interconnection of the Plant. The stability tests that were carried out on the Luzon system with the SLPGC in operation indicate that the system will remain stable even during severe disturbances in the vicinity of the Plant.3 I. NECESSITY OF THE PROJECT As stated in SLPGC’s application, the point-to-point transmission facility will be composed of two segments totaling approximately 900 meters in length, consisting of overhead lines and above-ground lines encased in a box-culvert. The proposed facility is capable of accommodating the 300 MW total generation output of the SLPGC Power Plant. Without this facility, the SLPGC will not be able to inject electricity to the Luzon Grid. IV. TECHNICAL CONFIGURATION Based on the presentation made by SLPGC during the hearing as well as on the documents presented, the line will be composed of two segments totaling approximately 900 meters in length, consisting of: (a) overhead lines with a length of 720 meters (410mm? TACSR, 230kV double-circuit); and (b) above-ground lines which are 165 meters in length encased in a box-culvert (2500mm? XLPE, 230kV double-circuit). 1-410mm: TACSR has an ampacity of 1300 Amps or a total of 2600 Amps for double circuit, which is equivalent to 1000 MW. The a Emphasis ours.ERC Case No. 2014-109MC Decision / 1 December 2015 Page t1 of 16 2500mm! XLPE has a double-circuit ampacity of 2156 Amps, which is equivalent to 860 MW. The SLPGC Power Plant’s generating units are rated at 150 MW each, 0.85 power factor, for a total of 300 MW. Based on the submitted SIS of SLPGC, the new power plant is just an expansion of the existing 2 x 300 MW SCPC. However, it turned out that the new plant is not an expansion of the SCPC’s plant. Records show that SLPGC and SCPC are two different entities. Likewise, the Single Line Diagram submitted by SLPGC evidences that it has separate dedicated point-to-point transmission facilities from SCPC. This appears to be proper in the event that the two entities would compete in the market. Further, the same Single Line Diagram shows that the proposed project is to be used solely by SLPGC and no other user is connected thereto, which is compliant with Section 5(a)(i), Rule 5 of the Implementing Rules and Regulations of R.A. No. 9136, to wit: xxx Such dedicated point-to-point _ limited transmission facilities are required only for the purpose of connecting to the Grid which will be used solely by the Generation Facility, and are not used to serve End-users or Suppliers directly. V. TECHNICAL AND FINANCIAL CAPABILITY OF SLPGC SLPGC is affiliated with several companies that are also in the energy industry and have considerable financial and technical resources, SLPGC is a wholly-owned subsidiary of SMPC,! the only large- scale coal mining company in the Philippines which accounts for about ninety-six percent (96%) of the total coal produced domestically. SMPC is a majority-owned subsidiary of DMCI Holdings, Inc., one of the largest conglomerates in the country. SLPGC is an affiliate of another wholly-owned subsidiary of SMPC, the SCPC: which owns and operates the 2 x 300 MW Coal- Fired Power Plant, adjacent to the SLPGC Power Plant in Calaca, Batangas. Like the SCPC Power Plant, the fuel that will be used by 4+ Semirara Mining and Power Corporation, 5 Seim-Calaca Power Corporation.ERC Case No. 2014-109MC Decision / 1 December 2015 Page 12 of 16 SLPGC Power Plant is locally sourced coal supplied by its parent company, SMPC. Aside from the grid-connected power facilities of SLPGC and SCPC, the DMCI Group is likewise involved in bringing power to the countryside to spur economic activities in island (off-grid) provinces. The DMCI Masbate Power Corporation owns and operates the 24.4 MW oil-based power generating facility in the island of Masbate. Similarly, DMCI Power Corporation (DPC) operates a total of 27 MW oil-based generating facilities located in various municipalities in Palawan as a Third Party Provider of Palawan Electrie Cooperative, Inc. (PALECO). Also, DPC is currently in the process of testing and commissioning its 15 MW oil-based power plant in Calapan, Occidental Mindoro. The construction of SLPGC’s 2 x 150 MW coal-fired power plant in Calaca, Batangas and dedicated point-to-point transmission facilities is governed by an Engineering, Procurement, and Construction (EPC) contract SLPGC entered into with D.M. Consunji, Inc. (DMC). DMCI is widely known for its technical capability in the construction and development of various real estate and infrastructure projects both in the Philippines and abroad. In the energy and industrial sector, DMCI's portfolio includes: the Narvacan Power Transmission Lines; five semiconductor facilities namely, Intel, NEC, Analog Device, Motorola and Philips; Enron’s 105 MW diesel power plant in Subic, Zambales and 105 MW diesel power plant in Pinamucan, Batangas; Mirant Corporation’s 100 MW diesel power plant in Panay; National Power Corporation's 110 MW diesel power plant in Dingle, Iloilo; and SCPC 300 MW coal-fired thermal power plant in Calaca, Batangas. The operation and maintenance of the dedicated point-to-point transmission facilities is proposed to be handled by SLPGC. SLPGC claimed that it is manned by a professional and dedicated team of engineers with years of training and experience in their field of expertise. It also claimed that it will ensure that the point-to-point transmission facility will be ran in compliance with the Philippine Grid Code and NGCP requirements as well as all other applicable standards. However, it did not submit how it will implement the said strategies.ERC Case No, 2014-109MC Decision / 1 December 2015 Page 13 of 16 In the absence of any assurance that the subject facilities will be operated without any adverse effect to the reliability of the grid, the Commission deems it appropriate that the operation and maintenance of said facilities should be undertaken by NGCP who has been granted the exclusive franchise to operate and maintain the transmission system. TransCo, now NGCP, is mandated in Section 9 of R.A. No. 9136 to: c) Ensure and maintain the reliability, adequacy, security, stability and integrity of the nationwide electrical grid xxx Section 8 of R.A. No. 9136 also provides that “no person, company or entity other than TransCo (now NGCP) shall own any transmission facilities.” The only exception is when it recognizes that a generation company may construct, own and operate a dedicated point-to-point limited transmission facilities pursuant to Section 9 of the same law. The authority being given to power generation companies to finance their dedicated point-to-point limited transmission facility projects, to be operated by the NGCP is consistent with Section B17.1 of the Open Access Transmission Service (OATS) Rules, which provides: Financing by the Transmission Provider. In cases where the Transmission Provider provides financing, the end-user shall pay a Connection Charge to the Transmission Provider based on the capital and financing cost associated with the Connection Assets, In addition, the operation and maintenance costs shall be reflected in such Connection Charge. These shall be treated as Excluded Services under the TWRG and the details in F(AIY) shall be applied to compute the charges. ‘A perusal of the evidence presented herein shows that the approval of SLPGC’s application for authority to develop and own dedicated point-to-point limited transmission facilities to connect to the Luzon Grid through the Calaca Substation of the NGCP with prayer for provisional authority is in accordance with the provisions of Section 9, paragraph 3 of R.A. No. 9136 and other issuances of the Commission and will redound to the benefit of the electricity consumers in terms of continuous, quality, reliable and efficient power supply.ERC Case No, 2014-109MC Decision / 1 December 2015 Page 14 of 16 As to the prescribed fees, the total estimated project cost of the 230 kV SLPGC's dedicated point-to-point transmission facility amounts to PHP357,734,089.04. The cost estimates are based on the EPC contract of SLPGC with DMCI. The EPC contract covers both the SLPGC Power Plant and the dedicated point-to-point transmission facilities. The suppliers of the materials for the dedicated point-to- point transmission facilities are NGCP-aceredited and qualified suppliers and contractors selected through a competitive bidding and selection process. The project is being financed through loans and equity. Significantly, the above-mentioned estimated project cost will be used for the purpose of computing the required permit fee. Permit fees for the construction of SLPGC’s dedicated point-to-point transmission facilities are prescribed under Commonwealth Act (C.A.) No. 146, as amended, and computed based on the existing ERC Schedule of Fees and Charges, as follows: Permit Fee = Total Project Cost X 0.75 100 357.734,089.04 X0.75 100 Permit Fee PhP 2,683,005.67 WHEREFORE, the foregoing premises considered, the application filed by SLPGC for authority to develop and own a dedicated point to point transmission facilities to connect SLPGC Coal Fired Power Plant to the Calaca Substation of the National Grid Corporation of the Philippines, with prayer for provisional authority, is hereby APPROVED subject to the following conditions: 1. the NGCP shall operate and maintain the subject dedicated point to point transmission facilities subject to applicable charges; 2. the subject facility shall be developed and constructed in accordance with the System Impact Study (SIS) and Facility Study (FS) requirements so as not to result in the degradation of NGCP’s transmission system; 3. the subject transmission facilities shall be used solely by the generating facility; andERC Case No. 2014-109MC Decision / 1 December 2015 Page 15 of 16 4. any portion thereof required for competitive purposes or connect any other user, ownership of the same shall be transferred to Transco/NGCP at a fair market price. Relative thereto, SLPGC is hereby directed to remit to the Commission, within fifteen (15) days from receipt hereof, the permit fee amounting to Two Million Six Hundred Kighty-Three Thousand and Five Pesos (PhP2,683,005.00), the computation of which is based on Section 40(g) of C.A. No. 146 and the Revised Schedule of ERC Fees and Charges. SO ORDERED. Pasig City, 1 December 2015. | ERC ain eee aire JOSE VICENTE B. Chairman and CEO y, ALF. Gu one ies Seite Vap-raruc Commissioner Commissioner JOSEFINA PA’ A. MAGPALE-ASIRIT -ERONIMO D. STA. ANA missioner Commissioner ROS/ECCA/LLG/EGRD oan =ERC Case No. 2014-109MC Decision / 1 December 2015 Page 16 of 16 Copy furnished: 1 3B 10. 1. 12. ATTYS. SUNDY LORENCE C. LACHICA and DONNA AMETYST R. BERNARDO LACHICA AND ASSOCIATE LAW OFFICES Counsels for Applicant SLPGC Suite 2304-B, West Tower, Philippine Stock Exchange Centre Exchange Road, Ortigas Center, Pasig City Metro Manila SOUTHWEST LUZON POWER GENERATION CORPORATION (SLPGC) Barangay Baclaran, Balayan, Batangas ‘THE OFFICE OF THE SOLICITOR GENERAL 134 Amorsolo Street, Legaspi Village Makati City, Metro Manila THE COMMISSION ON AUDIT Commonwealth Avenue Quezon City 1121 ‘THE SENATE COMMITTEE ON ENERGY GSIS Building, Roxas Boulevard Pasay City 1307 ‘THE HOUSE COMMITTEE ON ENERGY Batasan Hills, Quezon City 1126 OFFICE OF THE PRESIDENT OF PCCI Philippine Chamber of Commerce and Industry (PCCI) 3" Floor, ECC Building, Sen. Gil Puyat Avenue ‘Makati City OFFICE OF THE PROVINCIAL GOVERNOR Province of Batangas OFFICE OF THE MUNICIPAL MAYOR Balayan, Batangas OFFICE OF THE MUNICIPAL MAYOR Calaca, Batangas ‘THE NATIONAL GRID CORPORATION OF THE PHILIPPINES qxccr) NGCP Building, Quezon Avenue corner BIR Road Diliman, Quezon City MANILA ELECTRIC COMPANY (MERALCO) MERALCO Compound, Ortigas Avenue, Pasig City