Republic of the Philippines

ENERGY REGULATORY COMMISSION

Exquadra Tower, Ortigas Center
Pasig City, Metro Manila

IN THE MATTER OF THE

APPLICATION FOR APPROVAL
OF THE EMERGENCY POWER
SUPPLY AGREEMENT BETWEEN
LA UNION ELECTRIC
COOPERATIVE, INC. AND
GNPOWER DINGININ LTD. CO.,
WITH PRAYER FOR
CONFIDENTIAL TREATMENT
OF INFORMATION,

2023-136 RC
ERC CASE NO. ______________

December 04, 2023

LA UNION ELECTRIC
COOPERATIVE, INC. (LUELCO)
AND GNPOWER DINGININ
LTD. CO. (GNPD),
Applicants.
x--------------------------------------------x

JOINT APPLICATION FOR APPROVAL OF

EMERGENCY POWER SUPPLY AGREEMENT
(With Motion for Confidential Treatment of Information)

Applicants La Union Electric Cooperative, Inc. (“LUELCO”) and

GNPower Dinginin Ltd. Co. (“GNPD”) (the “Applicants”), by
respective undersigned counsels, and to this Honorable Commission,
respectfully state that:
 The Parties

1. LUELCO is a non-stock and 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 Brgy. Sta. Rita East,
Aringay, Province of La Union. LUELCO is the holder of an exclusive
franchise issued by the National Electrification Commission to operate
an electric light and power distribution service in the City of San
Fernando and the Municipalities of Agoo, Aringay, Bacnotan, Bagulin,
Balaoan, Bangar, Bauang, Burgos, Caba, Luna, Naguilian, Pugo,
Rosario, San Gabriel, San Juan, Santo Tomas, Santol, Sudipen, Tubao,
all in the Province of La Union and the Municipality of Sison, in the
Province of Pangasinan.

2. GNPD is a limited partnership duly organized and

existing under and by virtue of the laws of the Republic of the
Philippines, with principal office at GNPower Energy Complex, Sitio
Dinginin, Barangay Alasasin, Municipality of Mariveles, Province of
Bataan. GNPD owns and operates a 1,336-megawatt (“MW”) coal-
fired power plant (the “Facility”) which it uses to supply power to its
customers.

3. The Applicants may be served with notices, orders, and

processes of the Honorable Commission through their respective
counsels at the addresses indicated below.

Statement of Facts

4. On 03 May 2019, the Supreme Court promulgated its

decision in Alyansa Para Sa Bagong Pilipinas, Inc. v. Energy Regulatory
Commission (“Alyansa Ruling”),1 which declared that power supply
agreements (“PSAs”) submitted to this Honorable Commission on or
after 30 June 2015 were required to undergo the competitive selection
process (“CSP”) prescribed by this Honorable Commission’s
issuances.

1 G.R. No. 227670, May 3, 2019.

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 5. This Honorable Commission’s Advisory dated 10 August
2023 informed all Distribution Utilities (“DUs”) with PSAs affected by
the Alyansa Ruling of the Commission’s approval of a transition
period to allow DUs the opportunity to source their power supply
requirements through emergency PSAs.

6. One of the PSAs affected by the Alyansa Ruling was

LUELCO’s Power Supply Contract with GNPD. On 22 September
2023, LUELCO received an Order dated 1 March 2023 (the “Dismissal
Order”) from this Honorable Commission directing it and GNPD to
stop implementing their Power Supply Contract under ERC Case No.
2016-056 RC. On the next billing cycle, GNPD immediately ceased its
supply to LUELCO.

7. Following receipt of the Dismissal Order, LUELCO

acknowledged the need to augment its power supply requirements to
prevent prolonged exposure of its member-consumers to the volatile
prices in the Wholesale Electricity Spot Market.

8. Hence, LUELCO and GNPD entered into an Emergency

Power Supply Agreement (the “EPSA”) to take effect on October 21,
2023. A copy of the EPSA is attached as Annex “A”.

9. On 23 October 2023, this Honorable Commission’s

Resolution No. 16, Series of 2023 (the “2023 CSP Rules”)2 took effect.
The 2023 CSP Rules provided for, among others, modified
requirements and timelines for the power supply procurement
process, including but not limited to requiring the DU to notify in
writing this Honorable Commission, the Department of Energy
(“DOE”), and National Electrification Administration (“NEA”) within
five (5) days from occurrence of a fortuitous or force majeure event.
(“FM/FE”).

10. On 27 October 2023, LUELCO sent a Notification of Force

Majeure/Fortuitous Event (“Notice of FM/FE”) of the same date to each
of the following:

2Implementing Guidelines for the Procurement, Execution, and Evaluation of Power Supply Agreement
Entered into by Distribution Utilities for the Supply of Electricity to their Captive Market.

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 (a) Hon. Monalisa C. Dimalanta, this Honorable
Commission’s Chairperson & CEO;

(b) Hon. Raphael Perpetuo M. Lotilla, the DOE Secretary; and

(c) Hon. Antonio Mariano C. Almeda, the NEA

Administrator.

11. According to the Notices of FM/FE, LUELCO deemed that

the FM/FE is a series of events that started with the (a) issuance of the
Dismissal Order, which directed LUELCO and GNPD to suspend their
Power Supply Contract, and (b) belated issuance of the 2023 CSP
Rules, which became effective only on 23 October 2023 and prevented
LUELCO from timely proceeding with the procurement of supply
through competitive selection process.

12. In compliance with the 2023 CSP Rules, LUELCO gave

notice to this Honorable Commission, the DOE, and NEA of the
occurrence of the FM/FE on 23 October 2023. Copies of the Notices of
FM/FE sent to this Honorable Commission, the DOE, and NEA are
attached as Annexes "H and series”.

13. The EPSA was the result of a negotiated procurement of

emergency power supply due to the occurrence of FM/FE under
Section 2.3.53 of DOE Department Circular No. 2023-06-0021.4 Thus,
the EPSA was immediately implemented to address the fortuitous
event disclosed in the Notices of FM/FE.

3 2.3.5. Negotiated procurement of Emergency Power supply wherein the Emergency Power
Supply Agreement (EPSA) shall be filed with the ERC within thirty (30) calendar days after
the occurrence of the Force Majeure/Fortuitous Events, without need of any prior clearance
or certification from the DOE, and shall have a maximum and non-extendible period of one
(1) year from its execution. The EPSA shall be immediately implemented to address the
emergency, subject to conditions to be defined by the ERC; Provided, that the procurement
of emergency power supply shall not be entitled to any form of subsidy;
4 Prescribing the Policy for the Mandatory Conduct of the Competitive Selection Process by the Distribution

Utilities for the Procurement of Power Supply for their Captive Market.

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 14. The Applicants filed this Joint Application to seek the
approval of the EPSA.

Salient Features of the EPSA

15. The duly executed EPSA contains the following salient

provisions:

15.1. TERM AND CONTRACTED CAPACITY. The

EPSA shall be valid from 22 October 2023, for a period of twelve
(12) months. The contracted capacity under the EPSA is 5 MW.

15.2. CONTRACT PRICE. The Contract Price shall be

composed of the Capacity Fee, Energy Fee, and Governmental
Charges.

15.3. CAPACITY FEE. The Capacity Fee is computed as

follows:

Capacity Fee = Php 1,887/ kW-mo * Contracted Capacity * Adj

Contracted Capacity = 5,000 kW
Adj = Adjustment due to Force Majeure
computed as:

Where:
ACCij = Contracted Capacity less affected capacity due to Force
Majeure, Scheduled Outages and Unscheduled
Outages for interval i and day j within the Billing
Period n
Int = The number of Trading Intervals per day
n = The number of days for the current Billing Period

15.4. ENERGY FEE. The Energy Fee is computed as

follows:

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 Where:

IEF = Initial Energy Fee equal to $0.0328 / kWh

CIFn = CIF Cost of Fuel for Billing Period n
CIF0 = Base CIF Cost of Fuel equal to $10.2514 / million kcal
MAE = monthly actual energy, in kWh, or max (MEOT, AE)

Where:

MEOT = 65% * Contracted Capacity * 24 * Billing Period

Days, in kWh
AE = actual energy delivered, in kWh

16. Because the Dismissal Order stopped the implementation

of LUELCO’s Power Supply Contract with GNPD, LUELCO’s
forecasted supply-demand scenario from October 2023 to September
2024 shows a deficit of 4.18 MW to 14.52 MW. A copy of LUELCO’s
detailed supply-demand scenario is attached as Annex “G”.

17. The indicative rate impact on LUELCO’s overall

generation rate with and without the additional supply from GNPD
are as follows:

Without GNPD EPSA

Supplier Rate (Php/kWh)
GMEC 8.3460
MPPCL 9.8427
WESM 10.2891
Total 9.2614

With GNPD EPSA @ [%] CUF

Supplier Rate (Php/kWh)
GMEC 8.3460
MPPCL 9.8427
GNPD 5.2473
WESM 8.7990
Total 8.7990

18. The Applicants respectfully submit copies of the following

documents in support of the Joint Application:

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 Description of Document Annex
EPSA “A”

Executive summary of the EPSA “B”

[Confidential] Generation rate and derivation “C”

[Confidential] Financial model “D”

[Confidential] Coal procurement process “E”

Technical and economic characteristics of the “F”

Facility

LUELCO’s demand-supply scenario “G”

Proof of Exemption from Conduct of CSP “H and series”

Allegations in Support of the Motion for

Confidential Treatment of Information

19. Section 1, Rule 4 of the Revised Rules of Practice and

Procedure of the Energy Regulatory Commission (“ERC RRPP”) provides
that a party to any proceeding before the Honorable Commission may
request that documents and/or information in the Honorable
Commission’s possession be treated as confidential and not be
disclosed.

20. In line with this, GNPD prays that Annexes “C”, “D”, and
“E” (collectively, the “Confidential Documents”) and the information
contained therein be treated as confidential not be disclosed any
persons other than the officers and staff of the Honorable Commission.

21. The foregoing documents contain information and data

involving GNPD’s power rate calculations and financial model, as well
as how these are derived. They are not generally available to the
public, are proprietary, privileged, and confidential in nature, and
should be protected as trade secrets. In Air Philippines Corporation vs.
Pennswell, Inc.,5 the Supreme Court held that:
5 G.R. No. 172835, December 13, 2007.

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 A trade secret may consist of any formula, pattern, device, or
compilation of information that: (1) is used in one's business; and
(2) gives the employer an opportunity to obtain an advantage over
competitors who do not possess the information. Generally, a trade
secret is a process or device intended for continuous use in the
operation of the business, for example, a machine or formula, but can
be a price list or catalogue or specialized customer list. It is
indubitable that trade secrets constitute proprietary rights. The
inventor, discoverer, or possessor of a trade secret or similar
innovation has rights therein which may be treated as property, and
ordinarily an injunction will be granted to prevent the disclosure of
the trade secret by one who obtained the information "in confidence"
or through a "confidential relationship." American jurisprudence has
utilized the following factors to determine if an information is a trade
secret, to wit:

(1) the extent to which the information is known

outside of the employer's business;

(2) the extent to which the information is known by

employees and others involved in the business;

(3) the extent of measures taken by the employer to

guard the secrecy of the information;

(4) the value of the information to the employer and to

competitors;

(5) the amount of effort or money expended by the

company in developing the information; and

(6) the extent to which the information could be easily

or readily obtained through an independent source.6

22. In the Decision in ERC Case No. 2015-111 RC dated 30 May

2017 entitled In the Matter of the Application for Approval of the Power
Supply Agreement Between Nueva Ecija II Electric Cooperative, Inc.-Area 2
(NEECO II – Area 2) and PNOC Renewables Corporation (PNOC RC), the
Honorable Commission categorically stated that formulas and pricing
structures of a generation company must be treated as confidential and
may not be publicly disclosed, thus:

6 Emphasis and underscoring supplied.

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 In the case of PNOC RC, the documents sought to be protected from
disclosure contains formula and pricing structures used in arriving
at their proposed tariff. In fact, all three (3) documents were used by
the Commission in evaluating the reasonableness of the proposed
rate. In the electric power industry w(h)ere prices is[sic] a major
consideration in selecting one’s supplier, it is apparent that the
assumptions used in arriving at one’s proposed tariff is considered
a competitive leverage by one player against its competitors.

Thus, the Commission resolves to treat the said documents

confidential and may not be publicly disclosed.7

23. Thus, the Honorable Commission has recognized the

importance of maintaining pricing structures as confidential to ensure
the competitiveness of the generation sector. Information, which falls
within the definition of a trade secret as defined by jurisprudence, is
clearly information that merits the confidential treatment provided for
under Rule 4 of the ERC RRPP.

24. The interest of the consuming public is sufficiently

protected by the review and evaluation of the rates under the EPSA by
the Honorable Commission, without the need to disclose the contents
of Confidential Documents. The reasonableness and transparency of
the prices of electricity is to be assured by the Honorable Commission
through its own review and verification of GNPD’s operating costs
and expenses.

25. Further, if the Confidential Documents and the

information contained therein are leaked to GNPD’s competitors, they
will gain undue advantage and could use such information and
documents in their operations. Furthermore, the negotiating power of
GNPD with parties it plans to contract with or with whom it is
currently doing business, will clearly be thwarted if it is compelled to
disclose such information.

26. Accordingly, one (1) copy each of the Confidential

Documents is placed in a sealed envelope, with the said envelope and
each page of the documents and/or information stamped with the
word “Confidential.”

7 Emphasis supplied.

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 PRAYER

WHEREFORE, the foregoing premises considered, the

Applicants respectfully pray that this Honorable Commission:

1. ISSUE an Order (a) GRANTING the Applicants’

prayer and treating the Confidential Documents (i.e., Annexes
“C”, “D”, and “E”), and all information contained therein, as
confidential, (b) DIRECTING their NON-DISCLOSURE to
persons other than the officers and staff of the Honorable
Commission, (c) continuously PROTECTING the said
information from public disclosure by maintaining the same
separate and apart from the records of the case, and (d) ensuring
that these are NOT DIVULGED to unauthorized persons,
pursuant to Rule 4 of the ERC RRPP;

2. DIRECT that the interim rates to be charged under

the EPSA shall be capped at the latest ERC-approved generation
tariff specific for the plant; and

3. ISSUE a Decision GRANTING the Joint Application

and APPROVING the EPSA, including all the rates, fees,
charges, and tariff adjustment mechanisms set out therein at the
rates provided in the EPSA, and authorizing LUELCO to charge
and collect the fees therein from its customers reckoned from the
start of power supply by GNPD to LUELCO under the EPSA.

The Applicants also pray for such other reliefs just and equitable
under the circumstances.

Makati City for Pasig City, 16 November 2023.

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 DECHAVEZ LERIOS-AMBOY AND EVANGELISTA
LAW OFFICES8
Counsel for Applicant LUELCO
Unit 2008, Tycoon Centre
Pearl Drive, Ortigas Center, Pasig City 1605
E-mail: powerlawfirm@gmail.com

By:

DITAS A. LERIOS-AMBOY
Roll of Attorneys No. 40628
PTR No. 8979121, January 04, 2023, Pasig City
IBP Lifetime Member No. 012301, RSM
MCLE Compliance Cert. No. VII-0022795, Aug. 01, 2022

LORAINE B. BOBILES
Roll of Attorneys No. 73213
PTR No. 8979119, January 04, 2023, Pasig City
IBP Member No. 280380 January 10, 2023, RSM Chapter
MCLE Compliance No. VII – 0022637, 20 July 2022

Pursuant to Office of the Court Administrator Circular No. 56-2015, hereunder are the MCLE
8

Compliance Numbers of the undersigned Firm’s name partners, to wit:

Partners MCLE Compliance Date of Issuance

Joseph Ferdinand M. MCLE Exemption Certificate No. VII- March 23, 2022
Dechavez Acad003687
Ditas A. Lerios-Amboy Certification No. VII-0022795 August 01, 2022
Nelson V. Evangelista Certification No. VII-0022649 July 20, 2022

11 | Page
 GATMAYTAN YAP PATACSIL
GUTIERREZ & PROTACIO9
Counsel for Applicant GNPD
30/F 88 Corporate Center
Sedeño corner Valero Streets
Salcedo Village, Makati City 1227
Tel. Nos.: (632) 8894-0377 to 79;
Fax No.: (632) 8552-1978

By:

SOPHIA P. INOTURAN
PTR No. 9566860; 1/03/2023; Makati City
IBP No. 293350; 1/10/2023; Makati Chapter
Email address: sophie.inoturan@cagatlaw.com
Roll No. 63792
MCLE Compliance No. VII-0003179;
05/27/2021; Pasig City

MARCO P. NIGRO
PTR No. 9566869; 1/03/2023; Makati City
IBP No. 293322; 1/10/2023; PPLM Chapter
Email address: marco.nigro@cagatlaw.com
Roll No. 71064
MCLE Compliance No. VI-0029854;10
04/14/2022; Pasig City

9 Pursuant to Office of the Court Administrator Circular No. 56-2015, the MCLE Compliance
Numbers of the undersigned firm’s name partners are as follows:
Name MCLE Compliance No. Date of Issuance
Jaime Renato B. Gatmaytan VI-0019861 03/29/2019
Ben Dominic R. Yap VII-0003193 05/27/2021
Norma Margarita B. Patacsil VII- 0026420 02/20/2023
Anthony Mark A. Gutierrez VII-0020031 06/01/2022
Jesus Paolo U. Protacio VII-0014292 03/31/2022

10Atty. Nigro has completed all units for the 7th MCLE Compliance Period and is awaiting the
corresponding certificate.

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