Republic of the Philippines ENERGY REGULATORY COMMISSION San Miguel Avenue, Pasig City IN THE MATTER OF THE APPLICATION FOR AUTHORITY TO RETIRE THE MORONG SUBSTATION LOCATED AT MORONG, PROVINCE OF RIZAL, THE GAYA-GAYA SUBSTATION LOCATED AT SAN JOSE DEL MONTE, PROVINCE OF BULACAN AND THE MAUBAN SUBSTATION LOCATED AT MAUBAN, PROVINCE OF QUEZON, AND TO WITHDRAW FROM THE SERVICE CERTAIN EQUIPMENT AND MACHINERY E INSTALLED IN THE SAID SUBSTATIONS, WITH PRAYER FOR PROVISIONAL AUTHORITY ERC CASE NO. 2009-118 MC MANILA ELECTRIC COMPANY (MERALCO), Applicant. POC RATED coos i, DECISION Before this Commission for resolution is the application filed on December 22, 2009 by Manila Electric Company (MERALCO) for approval to retire the Morong Substation located at Morong, Province of Rizal, the Gaya-Gaya Substation located at San Jose De! Monte, Province of Bulacan and the Mauban Substation located at Mauban, Province of Quezon, and to withdraw from the service certain equipment and machinery installed in the said substations, 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 February 15, 2010, were issued, setting the case for initial hearing on , March 16, 2010. Ye Wy wtERC Case No. 2009-118 MC DECISION/December 1, 2010 Page 2 of 14 In the same Order, MERALCO was directed to cause the publication of the Notice of Public Hearing, at its own expense, once (1x) in a newspaper of general circulation in the Philippines, not later than ten (10) days before the scheduled date of initial hearing. It was 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. 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 Order and the Notice of Public Hearing and were requested to have their respective duly authorized representatives present at the initial hearing. Likewise, the Offices of the Mayors of the Cities/Municipalities within MERALCO's franchise area were furnished with copies of the Order and Notice of Public Hearing for the appropriate posting thereof on their respective bulletin boards. On March 11, 2010, MERALCO filed its “Pre-Trial Brief’ During the March 16, 2010 initial hearing of this case, only MERALCO. appeared. No intervenor/oppositor appeared nor was there any intervention/opposition registered. 4ERC Case No. 2009-118 MC DECISION/December 1, 2010 Page 3 of 14 At the said hearing, MERALCO presented its proofs of compliance with the Commission's posting and publication of the notice requirements which were duly marked as Exhibits “A” to "0-1", inclusive. Thereafter, MERALCO presented its lone witness, Engr. Gerardo V, Lozada, its Senior Manager and Team Leader for Network Asset Planning — Substation Asset Planning, who testified in support Of the application. In the course of his testimony, various documents were presented and duly marked as exhibits. The direct examination having been terminated, the Commission propounded clarificatory questions on the said witness. On March 30, 2010, MERALCO filed its “Formal Offer of Evidence” which is hereby admitted for being relevant and material in the final resolution of this case. On April 15 to 16, 2010, the Commission conducted an ocular inspection on MERALCO's assets subject of the instant application. On various dates, MERALCO filed its “Compliance with Motion” and “Compliance” respectively. DISCUSSION MERALCO is a corporation organized and existing under the laws of the Republic of the Philippines. It was granted a legislative franchise and has a valid and existing Certificate of Public Convenience and Necessity (CPCN) to construct, operate and maintain a distribution system for the conveyance of electric power to the end-users, among others, in the Municipality of Morong, Province of Rizal, Municipality of San Jose Del Monte, Province of Bulacan and dyERC Case No. 2009-118 MC DECISION/December 1, 2010 Page 4 of 14 Municipality of Mauban, Province of Quezon, where the substations sought to be retired, including equipment and machineries, are installed. MERALCO implemented a “Conversion Program” for the gradual conversion of odd voltage system (distribution system with voltages other than 4.8 kV and 13.8 KV) to the standardized 20 kV/34.5 KV distribution voltage system within its franchise area. The objectives of voltage standardization are to minimize equipment inventory types, reduce technical system loss, and improve the flexibility and reliability of electric service by phasing out isolated odd-voltage system. Thus, the retirement of the following substations and withdrawal of equipment and machinery 1) Morong Substation is located at Barangay Maybangcal, Morong, Rizal The substation has an installed capacity of one (1) 1.75 MVA, 34.5 kV- 4.8 kV power transformer serving portion of Morong, Rizal. The power source of Morong Substation is the 34.5 kV New Teresa distribution line; 2) Gaya-Gaya Substation is located at Barangay Gaya-Gaya, San Jose Del Monte, Bulacan. The substation has an installed capacity of one (1) 12.5 MVA, 34.5 kV-13.8 kV power transformer serving portion of San Jose Del Monte. The power source of Gaya-Gaya Substation is the 34.5 kV Camarin 432 TC distribution line; 3) Mauban Substation is located at Mauban, Quezon. The substation has an installed capacity of one (1) 7 MVA, 34.5 kV-13.2 kV power transformer serving portion of Tayabas, Quezon, The power source of Mauban Substation is the 34.5 kv Tayabas 42 ZY distribution line; and 4fERC Case No. 2009-118 MC DECISION/December 1, 2010 Page 5 of 14 4) Machineries and equipment installed in the Morong, Gaya-Gaya and Mauban Substations. TECHNICAL ANALYSIS Morong Substation The de-energization of the power transformer and the conversion of the Morong 11XK to 34.5 kV circuit will result in the reduction of technical system loss at approximately 40,333 kWh annually due to less voltage transformation and shifting/utilizing of higher distribution voltage from 4.8 kV to 34.5 kV. Shown below is the load analysis of the Morong Substation: Bank/Feeder Cap. fs resent | % % aaa) | iva”? | Loading Loading MVA Morong Bank #1 1.75 0.57 | 33% - i Morong 11XK 3.99 0.57 14% is = Malaya Bank #1 33.00_| 17.95 54% 18.10 55% Malaya 44MM 28.68 | 12.01 42% 12.19 43% New Teresa Bank #1 83.30 [53.47 64% 53.26 64% [New Teresa 43xP | 28.68 | 10.34 36% 10.16 35% Gaya-Gaya Substation The de-energization of the power transformer and the conversion of the Gaya-Gaya 32YS to 34.5 kV circuit will result in the reduction of technical system loss equivalent to approximately 147,000 kWh annually due to less voltage transformation and shi utilizing higher distribution voltage from 13.8KV to 34.5 kV. Show below is the load analysis of the Gaya-Gaya Substation: (hy wERC Case No. 2009-118 MC. DECISION/December 1, 2010 Page 6 of 14 With Bank/Feeder Cap. Ppl % Project % (ava) | “Siyaw |Loading| Loading, | Loading MVA. Gaya-Gaya Bank 1 | 12.50 260! 22% - - [Gaya:Gaya 32S 11.47 2.60] 24% : > ‘Sapang Palay Bank1 | 12.50 | _5.13| 41%. 690 55% ‘Sapang Palay 32Y0 _|_11.47 2.37| 21% 414 | 36% Camarin Bank 1 83.30_| 53.25| 64% 1.48 62% Camarin 432TC 31.67 | 19.06] 60% 20.09 63% [Camarin 4357C 31.67 9.68 | 31% 6.88 22% Mauban Substation The de-energization of the power transformer, installation of a 3-333 kVA, 20kV-7.62 kV Special Voltage Transformer (SVT) bank and partial conversion to 34.5 kV circuit Mauban 31XR will result in the reduction of technical system loss at approximately 109,407 kWh annually due to less voltage transformation and partial shifting/utilizing higher distribution voltage from 13.2 kV to 34.5 KV. Impact of the Substations’ Retirement on System Loss The total technical system loss reduction that would result from the retirement of Morong, Gaya-Gaya, and Mauban Substations is approximately 296,740 kWh annually. This has a minimal effect (reduction) on MERALCO's total system loss equivalent to 0.0010% reduction, computed as follows: a. Loss if the projects are not implemented Energy Purchased (kWh) 29,921,963,592 Energy Sales (kWh) 27,274,572,102 Total Loss (kWh) 2,647,391,490 In% 8.8477% 4ERC Case No. 2009-118 MC DECISION/December 1, 2010 Page 7 of 14 b. Loss if the projects are implemented Net Loss (kWh) 647,09. 50 8.8467% System Loss 0.0010% Impact of the Substations’ Retirement on MERALCO’s Service It should be noted that the retirement of the substations and conversion of odd voltage circuits (4.8kV, 13.2 kV, and 13.8 KV) to the standard 34.5 KV will have no adverse effect in terms of unserved loads. This is because the loads being served by the odd voltages will merely be transferred to the standard voltage of 34.5 kV and to SVT. MERALCO has submitted in its application a list of equipment and machineries for retirement and not for re-use. Shown below is the summary of all the properties for the three substations with their Net Present Value (NPV) and the equivalent ODRC: Gaya-Gaya Substation Facilities for Retirement and Not for | Net Present | Equivalent Re-use Value (PhP) | _ODRC (PhP) Standard Cable Trench and Manholes 53,284.70 61,822.04 ‘Standard Concrete Pedestal 34,117.97 39,584.59 Underground Power Cable 27,388.04 31,330.50 Control Cable 9,021.48 14,073.68 Control Conduits 23,298.84 36,346.70 Metalclad Switchgear Indoor type 22 kV | 1000MVA Type ZG3 141,224.00| _ 1,796,696.03 | Power Cables 247 612.13 333,709.29 Busses, Connectors 65,018.07 90,290.84 | Grounding System 34,772.96 46,863.86 Power Conduits 100,887.25 135,966.74 | Supporting Structure 21,920.21 25,624.64 Control Cable 89,034.70 119,992.94 Power Cable 33,432.87 44,169.33 Power Conduits a 70,489.80 93,100.10 Control Cable 23,999.64 31,706.76 GeeERC Case No. 2009-118 MC DECISION/December 1, 2010 Page 8 of 14 Grounding System 32,078.43 42,379.93, Connectors = 217,920.44 287,902.25 ‘Supporting Structure 82,794.77 94,878.28 Control Cablewire CU stranded Size #12 30,132.22 36,947.73 Cable,Control:CU AWG No. 12; 12-cond. 1,259.33 1,242.27 | Cable, Control: CU AWG No. 9; 4-cond. 824.10 812.93 Wire, CU, Bare; AWG No. 4/0; Medium or 9,602.13 Hard-Drawn 9,734.03| Wire, Switch Board: CU AWG No. 14; 41- strand: gray 13,808.83 aoeeee! Tel. Cable, 16 pairs #19AWG Fig. of 18 77,885.58 63,960.09 7#12 AWG Cable Stranded 15,734.40 1,971.11 12#12 AWG Cable Stranded 28,466.64 120.68 Cable Ties 880.38 633.57 [Terminal Block, Type URTKIS, Phoenix | 27,733.06 65,943.42 | Terminal Block, Ty UK-5, Phoenix 1,398.90 140.79 | Terminal StripMarker, Type UBE/D, | Phoenix 1,325.30, 955.39 Quick Stip Marker, — URTKIS- Blank,Phoenix : 2,511.28 2,061.74 End Cover, typr D-URTK, Phoenix 581.27 25.14 End Clamp, Type E/UK, Phoenix 372.25 50.28 TOTAL COST 1,520,924.75 3,524,558.28 Mauban Substation | Facilities for Retirement and not for Re-use Net Present | Equivalent [Power Transformer, 25 MVA, 3 Phase 34.5KV/19.92 KVY 123.8 kV Philec Value(PhP)_| ODRC (PhP) 831,242.03 | 423,665.17 Grounding Transformer 1 MVA 13.8 kV Pennsylvania 142,077.57 50,315.10 Conduits 95,365.83 33,772.69 Lightning Arrester 12.KV & 30 kV 306,767.85 |__ 108,638.24 Cable and Conductors 251,773.12 89,162.50 ‘Supporting Structures 34,238.36 6,772.99 | Cable and Conductors 9,898.81 1,958.17 Cable, Telephone; 16 Pairs; AWG No. 19. Fig. “3 24,118.00| 44,947.36 Total 1,695,481.57 | 759,232.22 Morong Substation Facilities for Retirement and not for Re-use Net Present | Equivalent Value(PhP) | ODRC (PhP) Disconnect Switch H.K. Type VPMB-40 34.5 kV | 800A TPST 0.00 352.62 ‘Supporting Structures. a 0.00 2,039.27 | Total [ 0.00 2,391.89 ayERC Case No. 2009-118 MC DECISION/December 1, 2010 Page 9 of 14 MERALCO did not include in its application the retired feeders caused by the retirement of the substation. These assets, amounting to PhP18,914,989.82, which were withdrawn from the service should also be removed from its Regulatory Asset Base (RAB), as follows: i ae Net Present Substation | Circuit | conductor | Value (PhP) as | ODRC (PhP) ember Length (km) | of Deceme Mauban 3iXR 106.43 3,074,866 | 4,401,850.62 Morong | 11XK 14.17 318,800 |__471.370.61 Gaya-Gaya_| 32YS 83.20 3,803,489 | _6,840,037.62 33Y5. 35.81 3,325,069 | 3.514,210.64 34S: "82.29 2,893,107 | 4,687,512.33 Total 13,412,931 | 18,914,989.82 The total amount corresponding to the assets for retirement which is based on ODRC is Twenty-Three Million Two Hundred One Thousand One Hundred Seventy-Two Pesos and Twenty-One Centavos (PhP23,201,172.21). It should be noted that the said substations are still part of MERALCO’s approved RAB as of March 31, 2009. The equipment and machinery to withdrawn from service, including retired feeders amounting to a total of PhP23,201,172.21, should be removed from its RAB upon approval. A perusal of the evidence presented herein showed that the retirement of the Morong, Gaya-Gaya and Mauban Substations and the withdrawal of the ‘equipment and machineries installed therein in accordance with MERALCO’s Conversion Program will redound to the benefit of its consumers in terms of continuous, reliable and efficient power supply as mandated by Republic Act No. 9136, or the Electric Power Industry Reform Act of 2001 (Section 2. Declaration of Policy — (b) “to ensure the quality, reliability, security and affordability of the supply of electric power’). yyERC Case No. 2009-118 MC DECISION/December 1, 2010 Page 10 of 14 WHEREFORE, the foregoing premises considered, the application for authority to retire the Morong Substation at Morong, Rizal, Gaya-Gaya Substation at San Jose Del Monte, Bulacan and the Mauban Substation at Mauban, Quezon, and to withdraw from the service certain equipment and machinery installed in the said substations and retired feeders, with prayer for provisional authority, filed by Manila Electric Company (MERALCO) is hereby APPROVED. Further, the total cost of the retired assets amounting to Twenty Three Million Two Hundred One Thousand One Hundred Seventy Two Pesos and Twenty One Centavos (PhP23,201,172,21) shall be removed from its Regulatory Asset Base (RAB) and subject to adjustment and optimization during reset process for the third (3") Regulatory Period in accordance with the Rules for Setting Distribution Wheeling Rates (RDWR) and other pertinent issuances of the Commission. SO ORDERED. Pasig City, December 1, 2010. NAIDA J (bie Chairperson Car | Commissioner Comnifssioner Coffimissioner ees DECISIONERC Case No. 2009-118 MC DECISION/December 1, 2010 Page 11 of 14 Copy Furnished: 1. 10. 11. 12, 413. 14, 15. MANILA ELECTRIC COMPANY (MERALCO) Attention: Attys. Jose Ronald V. Valles, Rommel L. Yap, Francis, Dino Antonio, Carmen Grace Ramos, Angelica Diane B. Monteza, and Paul B. Sorino ‘Counsels for the Applicant 7" Floor, Lopez Building Ortigas Avenue, Pasig City The Office of the Solicitor General 234 Amorsolo Street, Legaspi Village, Makati City Metro Manila The Commission on Audit Don Mariano Marcos Avenue Diliman, Quezon City, Metro Manila The Committee on Energy ‘Senate of the Philippines GSIS Building, Roxas Blvd., Pasay City, Metro Mania The Committee on Energy House of Representatives Batasan Hills, Quezon City, Metro Manila Mr. Edgardo G. Lacson President Philippine Chamber of Commerce and Industry (PCCI) 3 Floor, ECC Building, Sen. Gil Puyat Avenue Makati City Office of the City Mayor City of Manila 1000 Office of the City Mayor Quezon City 1100 Office of the City Mayor City of Caloocan 1400 Office of the City Mayor City of Makati 1200 Office of the City Mayor City of Malabon 1470 Office of the City Mayor City of Mandaluyong 1550 Office of the City Mayor City of Muntinlupa 1770 Office of the City Mayor City of San Jose de! Monte, Bulacan 3023 Office of the City Mayor City of Valenzuela 1440ERC Case No. 2009-118 MC DECISION/December 1, 2010 Page 12 of 14 16. Office of the City Mayor City of Pasig 1600 17. _ Office of the City Mayor Pasay City 1300 18. ‘San Antonio, Quezon 4324 19. Office of the Municipal Mayor Mauban, Quezon 4330 20. Office of the Municipal Mayor Tiaong, Quezon 4325 21. Office of the Municipal Mayor Cainta, Rizal 1900 22. Office of the Municipal Mayor Meycauayan, Bulacan 3020 23. Office of the Municipal Mayor Obando, Bulacan 3021 24, Office of the Municipal Mayor Dolores, Quezon 4326 25, Office of the Municipal Mayor Sampaloc, Quezon 4329 26. Office of the Municipal Mayor Pagbilao, Quezon 4302 27. Office of the Municipal Mayor Lucban, Quezon 4328 28. Office of the Municipal Mayor Tayabas, Quezon 4327 29. Office of the Municipal Mayor Marilao, Bulacan 3019 30. Office of the Municipal Mayor Norzagaray, Bulacan 3013 31. Office of the Municipal Mayor ‘Sta. Maria, Bulacan 3022 32, Office of the Municipal Mayor Angat, Bulacan 3012 33. Office of the Municipal Mayor Dofa Remedios Trinidad, Bulacan 3009 34. Office of the Municipal Mayor Candelaria, Quezon 4323ERC Case No. 2009-118 MC DECISION/December 1, 2010 Page 13 of 14 35. 36. 37. 38. 39, 40. a. 42, 43. 45. 47. 48. 49, 50. 51. 52. 53. Office of the Municipal Mayor Sariaya, Quezon 4322 Office of the Municipal Mayor Taytay, Rizal 1920 Office of the Municipal Mayor Bustos, Bulacan 3007 Office of the Municipal Mayor Guiguinto, Bulacan 3015 Office of the Municipal Mayor Pandi, Bulacan 3014 Office of the Municipal Mayor Bocaue, Bulacan 3018 Office of the Municipal Mayor Bulacan, Bulacan 3017 Office of the Municipal Mayor Balagtas, Bulacan 3016 Office of the Municipal Mayor Teresa, Rizal 1880 Office of the Municipal Mayor Jala-jala, Rizal 1990 Office of the Municipal Mayor Cardona, Rizal 1950 Office of the Municipal Mayor Baras, Rizal 1970 Office of the Municipal Mayor ‘Angono, Rizal 1930 Office of the Municipal Mayor Tanay, Rizal 1980 Office of the Municipal Mayor Baliwag, Bulacan 3006 Office of the Municipal Mayor ‘San Rafael, Bulacan 3008 Office of the Municipal Mayor San Miguel, Bulacan 3011 Office of the Municipal Mayor San Ildefonso, Bulacan 3010 Office of the Municipal Mayor Pilla, Rizal 1910 Office of the Municipal Mayor Morong, Rizal 1960ERC Case No. 2009-118 MC DECISION/December 1, 2010 Page 14 of 14 55. Office of the Municipal Mayor Binangonan, Rizal 1940 56. Office of the Municipal Mayor Plaride!, Bulacan 3004 57. Office of the Municipal Mayor Malolos, Bulacan 3000 58. Office of the Municipal Mayor Calumpit, Bulacan 3003 59. Office of the Municipal Mayor Pulilan, Bulacan 3005 60. Office of the Municipal Mayor Rodriguez, Rizal 1860 61. Office of the Municipal Mayor San Mateo, Rizal 1850 62. Office of the Municipal Mayor Hagonoy, Bulacan 3002 63. Office of the Municipal Mayor Paombong, Bulacan 3001 64, Office of the Municipal Mayor Meycauyan, Bulacan 3020