Republic of the Philippines

ENERGY REGULATORY COMMISSIO

San Miguel Avenue, Pasig City

IN THE · MATTER OF THE

APPLICATION FOR APPROVAL
OF RATE ADJUSTMENT IN
ACCORDANCE WITH REPUBLIC
ACT NO. 9136, WITH PRAYER
FOR PROVISIONAL AUTHORITY

ERC CASE NO. 2015-017 RC

BUSUANGA iSLAND ELECTRIC

COOPERATIVE, INC. (BISELCO),
Applicant.
)(-------------------- -.--- )(

ORDER

On February 12, 2015, Busuanga Island Electric Cooperative,

Inc. (BISELCO) filed an application for the approval .of rate
adjustment in accordance with Republic Act No. 9136 (R.A. 9136),
with prayer for ·provisional authority.

In the said application, BISELCO alleged, among others, the

following: · ·

1. It is a non-stock, non-profit electric cooperative duly

organized and existing under and by virtue of the laws of
the Republic of the· Philippines, with principal office at
Barangay 1, Coren, Palawan;

2. It holds an exclusive franchise from the National

Electrification Commission (NEC) to operate an. electric
.light and power distribution service in the Municipalities of
Coren, Busuanga, Culion and Linapacan, all in the
Province of Palawan;
ERC CASE NO. 2015-017 RC
ORDER/March 9, 2015
Page 2 of 14

CAUSE OF ACTION

3. On December 21, 2001, it filed an application with the

Commission for approval of its unbundled rates pursuant
to the provisions of Republic Act No. 9136 (R.A. 9136},
docketed as ERC Case No. 2001-922;

4. On July 25, 2003, the Commission rendered its Decision

on the said application authorizing it to implement its
unbundled rates;

5. Upon thorough review of the Decision, it filed a "Motion

for Reconsideration/Clarification";

6. On April 28, 2004, the Commission issued an Order

modifying its Decision and authorizing it to implement a
revised unbundled rates, as follows:

ERC Approved Unbundled Rate

ERC Case No. 2001-922

Small Large Large Public Street

Residential Commercial Commercial Load .Industrial Building lights

Generation Charges:
Generation System Charge PhP/kWh 3.7064 3.7064 3.7064 3.7064 3.7064 3.7064 3.7064
Power Act Reduction 0.3000
System Loss Charge PhP/kWh 0.6337 0.6337 0.6337 0.6337 0.6337 0.6337 0.6337
Distribution Charges
Demand Charge
Distribution System Charge PhP/kWh 2.2526 1.6187 1.1246 3.6178 0.5736 1.5653 5.5539
Supply Charges:
Retail Customer Charge PhP/Cust./Mo 23.6400 39.5716 167.4281 89.1043 26.2489 15.7048
Supply System Charge PhP/kWh 0.4219
Metering Charges:
Retail Customer Charge PhP/Cust./Mo 5.0000 58.6100 237.2508 641.9547 89.1043 26.2489 15.7048
Metering System Charge PhP/kWh 0.3799
Inter Class Cross Subsidy PhP/kWh (0.4979) 0.4123 0.9649 (1.1458) 1.9241 0.7288 (3.2010)
Universal Charge:
Missionary Electrification PhP/kWh 0.0373 0.0373 0.0373 0.0373 0.0373 0.0373 0.0373
Environmental Charges PhP/kWh 0.0025 0.0025 0.0025 0.0025 0.0025 0.0025 0.0025
Lifeline Rate (Discount/Subsidy) PhP/kWh 0.0960 0.0960 0.0960 0.0960 0.0960 0.0960 0.0960
Rate Reduction due to
Condonation Loan PhP/kWh (0.3376) (0.3376) (0.3376) (0.3376) (0.3376) (0.3376) (0.3376)
ERC CASE NO. 2015-017 RC
ORDER/March 9, 2015
Page 3 of 14

7. After the lapse of almost ten (1 0) years from the approval

of its unbundled rates, it made a thorough review of its
operations, more particularly, concerning its viability to
meet current obligations as well as compliance with
required service standards, and has determined that its
existing rates are no longer responsive to the demands of
its current operations;

8. The insufficiency of its existing rates is attributable to the

following circumstances:

B. a Increase in the cost of operations over the past ten

(10) years due to the expansion of its distribution
system as well as the effects of inflation and other
governmental requirements which were not
provided for in .its current unbundled rates;

8.b Its present five percent (5°/o} Reinvestment Fund is

no longer sufficient to cover its Capital Expenditure
(CAPEX) requirement and loan amortizations with
the National Electrification Administration (NEA)
after the year 2000. Additionally, it has a pending
application with the Commission for the approval of
its CAPEX projects for the years 2012 to 2016,
docketed as ERC Case No. 2012-091 RC; and

B.c On October 25, 2012, NEA approved its adoption of

a new ranking for permanent employees based on
2Q1 0 approved salary scale;

LEGAL BASIS

9. It is filing the instant application for rate adjustment

pursuant to the pertinent provisions of R.A. 9136, to wit:

Sec. 24. Distribution Wheeling Charge. - The

distribution wheeling charges of distribution
utilities shall be filed with and approved by the
ERG pursuant to Paragraph (f) of Section 43
hereof.
 I

ERC CASE NO. 2015-017 RC

ORDER/March 9, 2015
Page 4 of 14

Sec.· 25. Retail Rate. - The retail rates

charged by distribution utilities for the supply
of electricity in their captive market shall be
subject to regulation by the ERG based on the
principle of full recovery of prudent and
reasonable economic costs incurred, or such
other principles that will promote efficiency as
may be determined by the ERG.

THEPROPOSEDRATEADJUSTMENT

10. In preparing the instant application, it used the year 2011

as test year and adopted the model computation
commonly used by electric distribution utilities and found
to be acceptable by the Commission;

11. The proposed rate adjustment follows its existing

customer classification to avoid cost relative to re-
programming of existing software used in its operation;

12. The proposed rates are designed after the existing

presentation of rates, except for the five percent (5o/o)
Reinvestment Fund and Debt Service, which shall be
presented as a separate line item in the electric bill;

13. The Distribution, Supply and Metering (DSM) rates are

purely the cost of Payroll and Operations and
Maintenance (O&M) less the Other Revenue Items (ORI).
Presented below are the proposed rates and revenue:

TABLE 1. PROPOSED RATE AND REVENUE

I UNIT
I Rate
Proposal
I Proposed
Revenue
Residential
kWh 3,716,700
Customers 6,061
Distribution Charge PhP/kWh 1.5385 5,718,276
Supply Charge PhP/kWh 0.9438 3,507,718
Metering Charge
PhP/customer/month PhP/meter/mo 5.0000 363,660
PhP/kWh PhP/kWh 0.6817 2,533,601
Reinvestment Fund PhP/kWh 0.9084 3,376,311
15,499,567
ERC CASE NO. 2015-017 RC
ORDER/March 9, 2015
Page 5 of 14

Commercial-Small
kWh 1,086,078
Customers 725
Distribution Charge PhP/kWh 0.7679 834,037
Supply Charge PhP/cusVmo 48.2280 419,584
Metering Charge PhP/meter/mo 39.8348 346,562
Reinvestment Fund PhP/kWh 0.9084 986,611
2,586,793
Commercial-Large
kWh 2,782,987
Customers 290
Distribution Charge PhP/kW
Distribution Charge PhP/kWh 0.2975 827,830
Supply Charge PhP/cusVmo 48.2280 167,833
Metering Charge PhP/meter/mo 39.8348 138,625
Reinvestment Fund PhP/kWh 0.9084 2,528,111
3,662,399
Industrial
kWh 442,198
Customers 5
Distribution Charge PhP/kWh 0.2327 102,898
Supply Charge PhP/cusVmo 48.2280 2,894
Metering Charge PhP/meter/mo 39.8348 2,390
Reinvestment Fund PhP/kWh 0.9084 401,700
509,882
P.Buildings
kWh 738,164
Customers 234
Distribution Charge PhP/kWh 0.4826 356,242
metered 234 Supply Charge PhP/cusVmo 48.2280 135,424
Metering Charge PhP/meter/mo 39.8348 111,856
Reinvestment Fund PhP/kWh 0.9084 670,560
1,274,083
St. Light
kWh 65,569
Customers 204
Distribution Charge PhP/kWh 8.2729 542,440
Supply Charge PhP/cusVmo 48.2280 118,062
Metering Charge PhP/meter/mo 39.8348 97,515
Reinvestment Fund PhP/kWh 0.9084 59,564
817,582
8,831,696
7,519 TOTAL PhP24,350,306.00

14. Based on the foregoing proposed revenue and rates, it

seeks approval of its revenue requirement for its
unbundled rates based on the cost components
presented below, to wit:

TABLE 2. SUMMARY OF PROPOSED REVENUE

REQUIREMENT PER COST COMPONENT

Payroll 7,344,061.00
Operations & Maintenance (Less Payroll) 9,832,667.00
Total O&M 17,176,728.00
Debt Service 4,181,416.00
5% Reinvestment Fund 3,841 ,441.00
Total 25,199,585.00
Less: Other Revenue Items (ORI) 849,280.00
Total Revenue Requirement (PhP) 24,350,305.00
ERC CASE NO. 2015-017 RC
ORDER/March 9, 2015
Page 6 of 14

14.a Payroll

The payroll represents the basic salary of existing

employees, including the employer's share in the SSS,
PhiiHealth and PAG-IBIG contributions as well as 13th
Month Pay. The adjustment represents the normalization
of the salary increase that was implemented in January
2013 as well as the salaries of additional employees
which were hired after the 2011 test year. The positions
filled out are part of the 2010 approved plantilla/positions.

14.b Operations and Maintenance

The operations and maintenance cost represents

cost incurred in the ordinary repairs and maintenance of
distribution lines, equipment, general plant and other
administrative- related expenses that are necessary in its
normal operation.

14.c Debt Service

Details of the loans acquired from NEA are as

follows:

TABLE 3. SUMMARY OF NEA LOANS

Outstanding
Balance
as of December
Ty()e of Loan/Particulars .31,2011
Loan D-Construction of Double Circuit 873,642.00
Loan E- Purchase of Meter, Quplex and HW
Mat. 535,804.00
Loan F- Purchase of Poles 3,233,959.00
Loan G- Construction of Headquarters (1 51 ) 2,095,304.00
Loan H- Construction of Headquarters (2no) 3,076,546.00
SDSL Loan- Rehabilitation of Lines 7,575,923.00
Total (PhP) 17,395,185.00
ERC CASE NO. 201S-017 RC
ORDER/March 9, 201S
Page 7 of 14

14.d S 0lo Reinvestment Fund

The 5°lo Reinvestment Fund is intended to finance line

expansion as well as rehabilitation and upgrading of its existing
electric distribution system in accordance with the
Commission's Guidelines. It proposes to charge the
Reinvestment Fund and Debt Service at a uniform rate per
customer segment, to be presented as a separate line item in
the power bill as "REINVESTMENT FUND" for transparency of
the rate presentation and to delineate the DSM rate from the
rate appropriated for Debt Service and CAPEX. The table
below shows the computation of the proposed 5o/o
Reinvestment Fund Rate of PhP0.9084/kWh, to wit:

TABLE 4.COMPUTATION OF S0lo REINVESTMENT

FUND (PhP)

Actual Sales 8,565,245

Annualized Sales 8,831,696
Ave. Generation Rate/kWh 5.1178
Ave. System Loss Rate/kWh 0.6676
Payroll 7,344,061 0.8574
O&M 9,832,667 1.1480
Debt Services 4,181,416 0.473S
Total 8.2643
Divided by 95°lo
Gross of Reinvestment 8.6992
Reinvestment Rate 0.4349
Reinvestment Fund 3,841,441
Reinvestment Rate and Debt
Service Rate 0.9084

14.e Other Revenue Items (ORI)

The ORI at the end of Year · 2011 totaling

PhP1 ,698,560.92 represents reconnection fees, penalties on
late payment of power bills, penalties on illegal reconnection
and other electric-related revenues. Fifty percent (50o/o) of the
ORI was deducted in computing the total revenue requirement
following previous treatments of said account.
ERC CASE NO. 2015-017 RC
ORDER/March 9, 2015
Page 8 of 14

15. Lifeline Rate and Level. It shall maintain the current

graduated scale for marginalized Residential consumers
to be applied to Generation, Systems Loss, Distribution,
Supply and Metering Charges, as follows:

TABLE 5. LIFELINE DISCOUNT RATE

kWh Discount Rate (%)

15 and below 25
16 20
17 15
18 15
19 10
20 5

Following the prescribed formula in computing Lifeline

Subsidy Rate to be charged to Non-lifeline customers, the
average Lifeline Subsidy rate as of December 31, 2011 is
PhP0.0594;

16. Other Charges. It shall continue to implement the

existing Other Charges per approved Unbundled Rates.
Further, it shall adopt the charges imposed under
Republic Act No. 7832, otherwise known as the "Anti-
Pilferage Act";

SUPPORTING DATA AND DOCUMENTS

17. In support of all the foregoing allegations, it submitted the

following data and documents, which are being made
integral parts hereof, as follows:

Annex Nature of Document

Book 1:

Supporting Documents consisting of NEA Loan Profile

E with Detailed Loans with Amortization Schedules; ERC
Decision on Unbundled Rates; Auditor's Report;
Statement of Operation and Statistical Data; Approved
ERC CASE NO. 2015-017 RC
ORDER/March 9, 2015
Page 9 of 14

Cash Operating Budget (2007-2013); Approved Salaries

and Allowances; 2006 to 2011 Payroll Sheet; Latest NEA
Memo for Allowances and Benefits; 2011 Allowances and
Benefits; Computation of AGRA, SLR, Lifeline Subsidy,
and Discount (for December 2011 and 2012; Sample Bills
(December 2011 and 2012 and June 2013) and
Application for Approval of CAPEX Projects (ERC Case
No. 2012-091 RC)

Book II:

Rate Computation Using the Original UFR Model

F to F-1
Book Ill:

Rate Computation Using the UFR Model- Reinvestment

and Debt Service as Separate Line Item

Book IV:
G
Detailed Breakdown of All Expenses

MOTION FOR PROVISIONAL AUTHORITY

18. Its rates which have never been adjusted for the past ten
(1 0) years are no longer responsive to the demands of its
operations. The insufficiency has been attributed mainly
to the following circumstances:

18. a Increase in the cost of operations over the past ten

(1 0) years due to the expansion of its distribution
system as well as the effects of inflation and other
government requirements which w~re ·not provided
for in its current unbundled rates;

18.b Its present five percent (5°/o) Reinvestment Fund is

no longer sufficient to cover its CAPEX requirement
as well as loan amortizations with NEA after the
year 2000. Additionally, it has a pending application
with the Commission for the approval of its CAPEX
projects for the years 2012 to 2016; and
 1

ERC CASE NO. 2015-017 RC

ORDER/March 9, 2015
Page 10 of 14

18.c In 2012, NEA approved its adoption of a new

ranking for permanent employees based on 2010
approved salary scale;

19. In view thereof, it prays for issuance of a provisional

authority allowing it to implement the rates proposed in
the instant application immediately upon filing and initial
evaluation thereof and while the case is pending, to
enable it to viably pursue and sustain its operations;

COMPLIANCE WITH PRE-FILING REQUIREMENTS

20. In compliance with the pre-filing requirements for the

instant application, it submitted the following documents
which are being made· integral parts of the application:

Annex Nature of Document

A Judicial Affidavit in Support of the Prayer for Provisional

Authority

B Proof of furnishing copies of the application to the

Sangguniang Sayan of Caron and Sangguniang
Panlalawigan of Palawan

C Publication of the Application in a newspaper of general

circulation in the Philippines, with Affidavit of Publication

21. It prays that upon initial review or pending evaluation of

the instant application, it be allowed to implement the
proposed DSM Charges presented in the table below as
well as Reinvestment Fund Rate of PhP0.9084 per
kilowatt hour for all types of consumers, and after due
notice and hearing, said rates be approved accordingly
 ERC CASE NO. 2015-017 RC
ORDER/March 9, 2015
Page 11 of 14

CUSTOMER CLASSES
PROPOSED CHARGES Small Large Public Street
Residential Industrial
Commercial Commercial Building Lights

Distribution Charges:
Demand Charge
Distribution System Charge PhP/kWh 1.5385 0.7679 0.2975 0.2327 0.4826 8.2729
Supply Charges:
Retail Customer Charge PhP/Cust./Mo 48.23 48.23 48.23 48.23 48.23
Supply System Charge PhP/kWh 0.9438
Metering Charges:
Retail Customer Charge PhP/Cust./Mo 5.00 39.83 39.83 39.83 39.83 39.83
Meter System Charge PhP/kWh 0.6817

Finding the said application to be sufficient in form and in

substance with the required fees having been paid, the same is
hereby set for jurisdictional hearing, pre-trial conference, expository
presentation and evidentiary hearing on May 13, 2015 (Wednesday)
at nine o' clock in the morning (9:00 A.M.) at BISELCO's
Principal Office, Barangay 1, Co ron, Palawan.

BISELCO is hereby directed to cause the publication of the

attached Notice of Public Hearing, at its own expense, twice (2x) for
two (2) successive weeks in two (2) newspapers of general
circulation in the Philippines, with the date of the last publication to be
made not later than ten (10) days before the date of the scheduled
initial hearing. It is also directed to inform the consumers within its
franchise area, by any other means available and appropriate, of the
filing of the instant application, its reasons therefor, and of the
scheduled hearing thereon.

Let copies of the application, this Order and the attached Notice
of Public Hearing be furnished the Office of the Solicitor General
(OSG), the Commission on Audit (COA), and the Committees on
Energy of both Houses of Congress. They are hereby requested, if
they so desire, to send their duly authorized representatives at the
scheduled hearing.

Likewise, let copies of this Order and the attached Notice of

Public Hearing be furnished the Offices of the Governor of the
Province of Palawan and the Mayors of the Municipalities within the
franchise area of BISELCO for appropriate posting thereof on their
respective bulletin boards.
ERC CASE NO. 2015-017 RC
ORDER/March 9, 2015
Page 12 of 14

BISELCO is hereby directed to furnish all those making

requests therefor with copies of the application and its attachments,
subject to reimbursement of reasonable photocopying costs.

On the date of the initial hearing, BISELCO must submit to th~

Commission its written Compliance with the jurisdictional
requirements attaching therewith, methodically arranged and duly
marked, the evidences on the actual posting and publication of the
Notice of Public Hearing consisting of certifications issued to that
effect, signed by the aforementioned Governor and Mayors or their
duly authorized representatives, bearing the seals of their offices, and
the affidavits of the Editors or Business Managers of the newspapers
where the said Notice of Public Hearing were published together with
the complete issues of the said newspapers, and such other proofs of
compliance with the requirements of the Commission.

BISELCO and all other interested parties are directed to submit,

at least five (5) days before the date of initial hearing and pre-trial
conference, their respective Pre-trial Briefs containing, among others:

(a) a summary of admitted facts and proposed stipulation of

facts;

(b) the issues to be tried or resolved;

(c) the documents or exhibits to be presented, stating the

purposes thereof and proposed markings therefore; and

(d) the number and names of the witnesses, with their written
testimonies in an individual affidavit form, to be attached
to the Pre-trial Brief.

Failure of BISELCO to submit the required Pre-Trial Brief and

Judicial Affidavits of its witnesses within the prescribed period shall
be a ground for cancellation of the scheduled hearing, and the
resetting of which shall be six (6) months from said date of
cancellation.
ERC CASE NO. 2015-017 RC
ORDER/March 9, 2015
Page 13 of 14

As part of the pre-trial conference, BISELCO must also be

prepared to make an expository presentation of its application, aided
by whatever communication medium that it may deem appropriate for
the purpose, in order to put in plain words and explain, for the benefit
of the consumers and other concerned parties, what the application is
all about and the reasons and justifications being cited in support of
the rate adjustment prayed for.

SO ORDERED.

Pasig City, March 9, 2015.

FOR AND BY AUTHORITY

OF THE COMMISSION:

I~ ;1, (~
ENA-IDA G. CRUZ-DUCUT
Chairperson ~ ;.(
' .
ERC CASE NO. 2015-017 RC
ORDER/March 9, 2015
Page 14 of 14

Copy Furnished:

1. Atty. Romael Meng G. Binarao

Counsel for BISELCO
Units 1609-1610, Tycoon Centre,
Pearl Drive, Ortigas Center, Pasig City

2. Busuanga Island Electric Cooperative, Inc. (BISELCO)

Co ron, Palawan

3. Office of the Solicitor General

134 Amorsolo Street, Legaspi Village
Makati City, Metro Manila

4. Commission on Audit
Commonwealth Avenue
Quezon City, Metro Manila

5. Senate Committee on Energy

GSIS Bldg. Roxas Blvd., Pasay City
Metro Manila

6. House Committee on Energy

Batasan Hills, Quezon City, Metro Manila

7. Office of the Municipal Mayor

Caron, Palawan

8. Office of the Municipal Mayor

Busuanga, Palawan

9. Office of the Municipal Mayor

Culion, Palawan

10. Office of the Municipal Mayor

Linapacan, Palawan

11. Office of the Provincial Governor

Province of Palawan

12. President
Philippine Chamber of Commerce and Industry (PCCI)
3rd Floor, Chamber and Industry Plaza (CIP)
1030 Campus Avenue corner Park Avenue
McKinley Town Center, Fort Bonifacio, Taguig City