Republic of the Philippines ENERGY REGULATORY COMMISSION San Miguel Avenue, Pasig City IN| THE MATTER OF THE APPLICATION FOR APPROVAL OF CAPITAL PROJECTS IN ACCORDANCE WITH THE PROVISIONS OF R.A. 9136 AND THE _— GUIDELINES TO GOVERN THE a : SUBMISSION, EVALUATION AND . 4 APPROVAL OF ELECTRIC CAPITAL PROJECTS, WITH PRAYER FOR PROVISIONAL AUTHORITY ERC CASE NO. 2009-111 MC CAMIGUIN ELECTRIC COOPERATIVE, INC. (CAMELCO), Applicant, x DECISION Before the Commission for resolution are the application and supplemental application filed on November 24, 2009, and on April 8, 2010, respectively, by Camiguin Electric Cooperative, Inc. (CAMELCO) for approval of its electric capital projects in accordance with the provisions of Republic Act No. 9136 and the Guidelines to Govern the Submission, Evaluation and Approval of Electric Capital Projects, with prayer for provisional authority. Original application filed on November 24, 2009 In the said application, CAMELCO alleged, among others, that: 1. “It has an exclusive franchise to operate an electric light and power services in the province of Camiguin; hERC Case No. 2009-111 MC. DECISION/December 15, 2010 Page 2 of 30 2. It entire service area is service by only one (1) substation with a capacity of 5 MVA connected to Mindanao Grid with two feeders. Feeder 1 supplies Liong to Bonbon via Catarman and Looc and feeder 2 supplies North Poblacion to Naasag via Mambajao. Based on the current segmentation of customers, has 12, 471 Residential customers and 1,130 customers that belongs to 220/240 V category; 3. It has to sustain the load growth, improve its system reliability and efficiency, reduce system losses and manage its transformers to serve better its consumers; 4. In order to provide customers with reliable and minimum cost power supply over the long term, there is a need to improve the delivery of electric service to its customers; 5. It has identified Capital Expenditure (CAPEX) projects that will reinforce the current infrastructure and will address technical loss and power quality, load growth, efficiency of service and safety to its personnel; Below is the Summary of the Proposed CAPEX projects: No. Project Name Cost age (PhP) 7 ___[ Replacement of Old/Existing Kilowatt-hour Meter 6,433,200 2 Reliability: Logistics 7,920,000 3 Construction of 3 Ph Line Parallel to the Existing 16,745,535 Backbone Line a Loose Connection Correction a 334,125 5 Upgrading of Conventional Type Protection Fused 5,964,000 Cutouts installed in the lateral lines 6 Replacement of Old/Overloaded/Poorly Rewound 7,250,111 Distribution Transformers a 7 Replacement of Dilapidated/Rotten Poles 10,897,830 8 ‘Software Requirement for Non-Technical Loss 1,350,000 | Reduction Program 9 ‘Streetlight Kilowatt-hour Metering 3,050,114 10 ____| Right-of-Way Clearance 1,112,215 11__| Preventive Maintenance of Substation 7,000,000 12 [Acquisition of 69 kV Line 16,000,000 Total [78,051,130 | 6. These CAPEX projects are necessary for the operation and maintenance of the distribution system of in order to extend efficient, reliable and quality service to its customers; 7. It most respectfully requests for the immediate relief and/or approval of this application in order to avoid irreparable losses which will ultimately result in deterioration of its services to the damage and prejudice of the public in general, and its members/consumers in particular; and iyERC Case No. 2009-111 MC DECISION/December 15, 2010 Page 3 of 30 8. _In the event of the approval of this application, the permit fee be paid within a period of six (6) months, with equal monthly installment, due to financial constraint’. Having found the original application sufficient in form and in substance with the required fees having been paid, an Order and a Notice of Public Hearing, both dated December 7, 2009, were issued setting the case for initial hearing on December 18, 2009. In the aforesaid Order, CAMELCO was directed to cause the publication of the Notices of Public Hearing, at its own expense, once (1x) in a newspaper of general circulation in the Philippines, at least five (5) days before the date of the scheduled 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 Municipalities within CAMELCO’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.ERC Case No. 2009-111 MC DECISION/December 15, 2010 Page 4 of 30 During the December 18, 2009'hearing, only CAMELCO appeared. No intervenor/oppositor appeared nor was there any intervention/opposition registered. At the said hearing, CAMELCO presented proofs of its compliance with the Commission's posting and publication of notice requirements which were duly marked as Exhibits “A" to “H’, inclusive. Thereafter, it conducted an expository presentation of its application. At the termination of the expository presentation, CAMELCO presented the following witnesses: 1) Engr. Arthur M. Bernardo, Manager of its Technical Services Department, who testified, among others, on his duties and responsibilities; his Participation in the preparation and submission of documents, computations, annexes, schedules and maps submitted in support of the application; the description of the project; and the necessity of the projects in the operation and maintenance of the distribution system; 2) Mr. Adrian E. Ebcas, its General Manager, who testified, among others, on his duties and responsibilities; his Participation in the preparation of the application; the individual description of each Project and the amount involved, and on how these Projects are to be financed; and 3) Dr. Ricardo E. Rotoras, its Consultant in the capacity-building program for personnel, who testified, among others, on the Program offered by the Rural Electrification Initiative of the International Finance Corporation (REIFC) and the Association of Mindanao Rural Electric Cooperatives (AMRECO) relative to the said projects; the workshop he conducted with CAMELCO’s personnel; and the importance of capital expenditure planning to improve services and their compliance with the criteria established for technical and financial evaluation. "On even date, CAMELCO filed its “Pre-Trial Brief of KYERC Case No. 2009-111 MC DECISION/December 15, 2010 Page 5 of 30 In the course of their direct examinations, additional documents were Presented and duly marked as exhibits. The direct examinations having been terminated, the Commission propounded clarificatory questions on the said witnesses. The Commission found that its proposed acquisition of the National Transmission Corporation's (TRANSCO) 69 kV subtransmission line was only valued at PhP16,000,000.00 or less than the true cost of the entire line valued at PhP68,689,546.05. Thus, it was directed to file a supplemental application to correct the deficiency. ‘On January 27 to 29, 2010, the Commission conducted an ocular inspection on CAMELCO’s assets, subject of the instant applications. On May 27, 2010, CAMELCO filed its “Formal Offer of Evidence” on the original application. ll. Supplemental application filed on April 6, 2010 In the said supplemental application, CAMELCO alleged, among others, that: 1. “It has previously filed its application for the approval of its various capital Projects sometime on November 24, 2009 in the above-entitled case; 2. In the course of the hearing it was found out that one of the items of the Proposed project pertaining to the acquisition of the National Transmission Corporation's (TransCo) 69 kV sub-transmission lines was valued only at PhP16,000,000.00;ERC Case No. 2009-111 MC DECISION/December 15, 2010 Page 6 of 30 3. The said amount represents only a portion of the value of the said TransCo asset to be purchased considering the fact that there are three main portions of the said asset that will be acquired, namely: a) the Aplaya to. Solana 69 KV lines and the Solana (Jasaan) to Solana 69 kV lines which will be owned jointly or in consortium between CAMELCO and Misamis Oriental I! Electric Cooperative, Inc. (MORESCO II); and b) the ‘Solana (Jasaan) to Balingasag 69 kV line which will also be jointly owned or in consortium between CAMELCO and MORESCO II with a total value of PhP29,950,866.69; and c) the Balingasag to Kinoguitan 69 kV lines valued at PhP38,738,679.36 which asset shall be owned solely by CAMELCO with MORESCO II having the right of subscription, and as such the total cost of the said TransCo asset is valued at PhP68,689,546.05: 4. In view of this deficiency in the cost of the capital projects being applied for, it is constrained to file this Supplemental Application and hereby submit the following documents in support thereof, to wit: a) Economic and Financial Evaluation; a1 Net Present Value and Internal Rate of Return (NPV/RR); a2 Acquisition of 69 KV Line Sub-transmission Assets with impact on rate base; a3 Net Present Value (NPV) Internal Rate of Return (IRR) a4 Benefit/Cost Ratio; and a5 Payback Period b) Detailed Costs of Labor and Materials of Project ; 1 Sub-Transmission Assets for Sale to CAMELCO and MORESCO II which shows the total cost of 69 KV lines and their respective costs to acquired in consortium between CAMELCO and MORESCO I and the 69 kV lines solely to be owned by CAMELCO; b.2 The Economic and Financial Analysis in the acquisition of the 69 kV line Sub-transmission Assets of TransCo; b.3 Projected Financial and Economic Analysis which shows the a) Impact/Effect on Rate Base; b) Net Present Value and Rate of Return; c) Benefit/Cost Ration; and the alternative analysis which consist of d) Return on Investment (ROI); e) Payback Period; and f) Break-even Analysis; and b4 Summary of Project Cost showing the new cost of acquisition of the 69 kV lines in the amount of PhP130,740,676.05; VeERC Case No. 2009-111 MC DECISION/December 15, 2010 Page 7 of 30 ¢) Projected income Statement of CAMELCO for the year 2010 to 2013; d) Actual liabilities and other credits; e) — Corrected Cash Flow Statement for 2010 to 2013; f) Working Schedules for availment of loans from National Electrification Administration (NEA); and 9) Rate Schedule for residential, commercial, Public buildings and street lights; 5. Thus, it prays that the foregoing supplemental application be admitted to show the corrected value of the acquisition of the TransCo 69 kV sub- transmission lines which form part of the capital projects of CAMELCO in the above-captioned case’. Having found the supplemental application sufficient in form and in substance with the required fees having been paid, an Order and a Notice of Public Hearing, both dated June 8, 2010, were issued setting the case for hearing on June 28, 2010. On June 23, 2010, CAMELCO filed its “Pre-Trial Brief’ on the supplemental application During the June 28, 2010 hearing of the supplemental application, only CAMELCO appeared. No intervenor/oppositor appeared nor was there any intervention/opposition registered. At the said hearing, CAMELCO presented proofs of its compliance with the Commission's posting and publication of notice requirements which were duly marked as Exhibits “A” to "D- ; inclusive. Thereafter, it conducted an expository presentation of its supplemental application. LeERC Case No. 2009-111 MC DECISION/December 15, 2010 Page 8 of 30 At the termination of the expository presentation, CAMELCO presented the following witnesses: 1) Engr. Arthur M. Bernardo, Manager of its Technical Services Department, who testified, among others, on his duties and responsibilities; his Participation in the preparation and submission of documents, computations, annexes, schedules and maps submitted in support of the supplemental application; the description of the project subject matter of the supplemental application; the fact that the project will be financed through loans and from its five percent (5%) Reinvestment Fund (RF); the financial capability of the cooperative to pay its financial obligations; and 2) Dr. Ricardo E. Rotoras, its Consultant in the capacity- building program for personnel, who testified, among others, on the program offered by the Rural Electrification Initiative of the International Finance Corporation (REIIFC) and the Association of Mindanao Rural Electric Cooperatives (AMRECO) relative to the said projects; the workshop he conducted with CAMELCO's Personnel; the importance of capital expenditure planning to improve services and their compliance with the criteria established for technical and financial evaluation. In the course of their direct examinations, additional documents were presented and duly marked as exhibits. The direct examinations having been terminated, the Commission propounded clarificatory questions on the said witnesses. On July 13, 2010, CAMELCO filed its “Formal Offer of Evidence” on the supplemental application.ERC Case No. 2009-111 MC DECISION/December 15, 2010 Page 9 of 30 DISCUSSION CAMELCO sought the Commission's approval of the following projects: 1. Procurement of Kilowatt-hour (kWhr) Meters b. c. Project Description: * Procurement of the following: 1) three thousand five hundred (3,500) units of electronic single phase kilowatt hour (kWh) meters for residential consumers; 2) six hundred forty-five (645) units of electronic single phase kWh meters for commercial consumers; and 3) fifteen (15) pieces of kV2 three (3) phase meters for commercial consumers Rationale of the Project: + Improvement of power quality and reliability * Reduction of system loss Project Cost: PhP6,433,200.00 2. Procurement of Tools and Equipment for Logistics, and Motor Vehicles a Project Description’ * Procurement of one (1) unit of digital meter test set, four (4) units of digital multi-meter, one (1) unit of insulation resistance tester, fifty (50) pairs of safety shoes, fifteen (15) pieces of hot stick telescope, twelve (12) pieces of ten feet long hot stick, ten (10) pieces hot stick (shotgun), twenty-five (25) pairs of lineman’s gloves, sixteen (16) sets of lineman’s tools, ten (10) sets of construction tools, sixteen (16) pieces of step ladder extension, one (1) set load logger, one (1) set of live-line maintenance tool and equipment, two (2) units of Yamaha DT 125 motorcycles, ten (10) units Multicab four-wheel drive, twenty-five (25) units of handheld radios, two units of laptop computers, and one (1) unit transformer loss tester yyERC Case No, 2009-111 MC DECISION/December 15, 2010 Page 10 of 30 b. Rationale of the Project: © Improvement of power quality and reliability * Improvement of response time in power service interruptions c. Project Cost: PhP7,920,000.00 3. Construction of Three (3) Phase Line Parallel to the Existing Backbone Line and Procurement of Recloser and Capacitor a. Project Description: * The project consists of the construction of two (2) 22.19 kms. 3- phase line parallel to the existing backbone fine. The project includes: a) transfer of 3-100 kVAR from the existing line to Balbagon Bus; b) transfer of the 50 kVAR from Balbagon to Mahinog Poblacion; and c) installation of additional three (3) units of 50 KVAR shunt capacitor at Compol, Catarman b. Rationale of the Project: * Improvement of power quality and reliability * Address load growth ©. Project Cost: PhP16,745,535.00 4. Procurement, Installation and Correction of Loose Connections a. Project Description: * Procurement of various sizes of compression connectors b. Rationale of the Project: * Improvement of power quality and reliability * Reduction of system loss WhERC Case No. 2009-111 MC DECISION/December 15, 2010 Page 11 of 30 c. Project Cost: PhP334,125.00 5. Upgrading of Conventional Type Protection Fused and Cut-outs Installed in the Lateral Lines a. Project Description: ‘* Replacement of Pin type insulators, Class 55-5, Hotline clamps and lightning arresters b. Rationale of the Project: * Promote better coordination in times of power fault * Reduction of operating cost . Project Cost: PhP5,964,000.00 6. Installation of Distribution Transformers a. Project Description: + Installation of thirty-one (31) units of 10 kVA transformers, sixteen (16) units of 1 kVA transformers, fifty-three (53) units of 25 kVA transformers and six (6) units of 37.5 kVA transformers b. Rationale of the Project: + Improvement of power quality and reliability * Reduction of system loss c. Project Cost: PhP7,250,111.00ERC Case No. 2009-111 MC DECISION/December 15, 2010 Page 12 of 30 7. Replacement of Dilapidated and Rotten Wooden Poles with Stee! Poles a. Project Description: * Replacement of dilapidated and rotten wooden poles with twenty- five (25) pieces of 40 footer poles, two hundred fifty (250) pieces of 35 footer poles, two hundred fifty (25) pieces of 30 footer poles and two hundred fifty (250) pieces of 25 footer poles b. Rationale of the Project: * Improvement of power quality and reliability * Provision of protection to the distribution system and safety to the Public and personnel doing maintenance works c. Project Cost: PhP10,891,830.00 8. Procurement of a Software for Non-Technical Loss Reduction Program a. Project Description: * Procurement of engineering tools consisting of a software for non- technical reduction program b. Rationale of the Project: © Improvement of power quality and reliability * Enhancement of analysis of the distribution system c. Project Cost: PhP1,350,000.00 9. Streetlight Kilowatt-hour Metering a. Project Description: + Procurement of service drop wire #6 duplex, compression connector, meter box and other accessories for streetlight kWh meteringERC Case No. 2009-111 MC DECISION/December 15, 2010 Page 13 of 30 b. Rationale of the Project: ‘+ Prevention of pilferage of electricity c. Project Cost: PhP3,050,114.00 10. Easement of Right-of-Way (ROW) Clearance a. Project Description: * Cutting down of old and leaning trees and cutting of hedgerows that may obstruct the lateral lines. The project includes payment to the Local Government Unit (LGU) concerned for the amount of trees b. Rationale of the Project: * Reduction in power interruption c. Project Cost: PhP1,112,215.00 11. Preventive Maintenance of Substation a. Project Description: * Maintenance works consisting of the following: oil filtering of the 5 MVA transformer, replacement of cable termination at 13.2 KV side and comprehensive testing of relays, sulfur hexafluoride (SF6) circuit breaker and other auxiliary devices b. Rationale of the Project: + Prolongation of the life of its equipment ©. Project Cost: PhP1,000,000.00 aERC Case No. 2009-111 MC DECISION/December 15, 2010 Page 14 of 30 12. Acquisition of a 69 kV Subtransmission Assets a. Project Description: * Acquisition of 69 kV subtransmission lines: 1) four kilometers (4 km.) with twenty-three (23) structures Aplaya- Solana line; 2) seventeen (17) km. with one hundred seventy-six (176) structures ‘Solana-Balingasag line; and 3) thirty-five (35) km. with two hundred seventy-three (273) structures Balingasag-Balingoan line b. Rationale of the Project: * Improvement of its primary backbone of its distribution system ©. Project Cost: The total project cost is as follows: Table 1. Total Project Cost PhP68,689,546.00 DESCRIPTION PROJECT CosT | (PhP) | Procurement of kilowatt-hour (kWhr) meters 6,433,200.00 Procurement of tools and equipment for logisties 7,920,000.00 Construction of three (3) phase line parallel to the 16,745,535.00 existing backbone line and procurement of recloser and capacitor Procurement, installation and correction of loose 334,125.00 connections Upgrading of conventional type protection fused and cut 5,964,000.00 outs installed in the lateral lines Installation of distribution transformers 7,250,117.00 Replacement of dilapidated and rotten wooden poles 70,891,830.00 with steel poles Procurement of a software for non-technical loss 1,350,000.00 reduction program Streetlight kilowatt-hour metering 3,050,111.00 Easement of Right-of Way (ROW) clearance 1,112,216.00 Preventive maintenance of substation 1,000,000,00 | Acquisition of 69 kV subtransmission assets 68,689,546.00 TOTAL 130,740,676.00 yhERC Case No. 2009-111 MC DECISION/December 15, 2010 Page 15 of 30 Summary of Annual CAPEX Most of the projects in the instant application were identified to address power quality and reliability and enhance power supply and efficiency in the service. Simulation results proved that looping of its two feeders (up to Fatima bus) can immediately solve voltage violations currently experienced at the feeder end points. The said project is important to CAMELCO's distribution system given the geographical topology of the island province. The looping project may consist of two (2) options, namely: a) to add 3-50 KVAR shunt capacitors at Looc Cat Bus; and b) to transfer existing capacitors to other buses. These options are expected to reduce technical systems loss. Demand and Energy Forecasts The tabulation below shows that the total demand will increase at a rate of 10.8% from 2008 to 2013: aT 2008 (Actual) 3.282 2009 3.356 2010 3.427 2011 3.497 2012 3.568 2013 3.638 Energy sales forecast for 2009 to 2013 (Figure 2) increases at about the ‘same rate of increase in Demand (Figure 1) Figure 1. Demand forecast (2009-2013) 44ERC Case No. 2009-111 MC DECISION/December 15, 2010 Page 16 of 30 Figure 1. Demand forecast (2009-2013) PPP EE no ev SPAS Ct FP FO SES 2 2 2 Figure 2. Energy Sales forecast (2009-2013) Energy Sales, KWH PF PO © YO cr FP Oo ov Sees 2 2 2 Figure 3 and 4 show the trend for Demand and Energy Sales forecast, respectively, for 2009 to 2013. Figure 3. Demand forecasts for Feeders 1 and 2 Demand, kWERC Case No. 2009-111 MC DECISION/December 15, 2010 Page 17 of 30 Figure 4. Energy forecasts for Feeders 1 and 2 —+—Feeder 1 2 Feeder? The load growth of a distribution utility (DU) is the most important factor influencing the expansion of its distribution system. It is thus essential that a DU is able to incorporate accurate load forecasting in its planning activities. In lieu of the long-range load forecasting (15 or 20 years planning horizons), short-term load forecasting (with time horizons of up to 5 years) can also be used. An ideal case forecast would predict future loads in details, extending even to the individual customer level. However, in practical application, such is less required. On CAMELCO’s part, short-term load forecast (5-years planning horizon) was used to predict the future loads in its franchise area Following are graphical representations of CAMELCO’s demand and energy sales forecast for fifteen (15) years. It is observed that the demand is projected to increase from 1.2 MW in 1994 to 4.3 MW in 2023, equivalent to an average rate of increase of about 4.62 % per year. Energy sales are projected to increase at an average rate at 6.54%: ¢/ERC Case No. 2009-111 MC DECISION/December 15, 2010 Page 18 of 30 Figure 5. 15-years Demand Forecast (1994-2023) $5,000 pm 4,500 4,000 3,500 3,000 2,600 2,000 1,800 | 1,000 500 Electricity Demand, KW 1990 199520002005 2002015 20202025. Figure 6. 15-years Energy Sales Forecast (1994 — 2023) 25000000 ———— ‘20000000 4000000 } 10000000 Energy Sales, KWH ‘5000000 ot a 1990 199520002005 20102015 20202028, TECHNICAL ANALYSES Single Line Diagram of its Distribution System Conduction of power is from a 69 kV transmission line at Esperanza, Kinoguitan, Misamis Oriental wheeled down to a 13.2 kV through a 5 MVA transformer and continue through fifty-three kilometers (53 kms.) submarine cable to Liong Switchyard in Lion, Guinsiliban. Power will then be distributed to the entire yh coverage area of CAMELCO.ERC Case No. 2009-111 MC DECISION/December 15, 2010 Page 19 of 30 CAMELCO's total system demand is 3.28 MW which corresponds to sixty-six percent (66%) of its transformer loading capacity. The total demand of feeder 1 teached 2.40% MW while feeder 2 was 0.88 MW demand, or barely 1/3 of the total demand. Its technical loss reached 0.416 MW (12% of the total system power). Total system power includes 0.245 MW system copper loss and 0.171 MW submarine cable loss. The present system profile of CAMELCO shows that there are voltage violations in five (5) buses from feeder 1. In 2008, with an electricity demand of 3.28 MW, load end feeder experienced low voltage with as low as one hundred eighty- eight (188) volts. Four (4) buses show significant voltage drop at 0.85 pu. The succeeding exhibits show CAMELCO’s simplified single line diagram of its distribution system, system profile, and voltage variation: CAMIGUIN ELECTRIC COOPERATIVE, INC SINGLE LINE DIAGRAM Feeder 1 Demand 2.4050 MW Feeder 2 Demand ‘subceble 2 0.8796 MW Figure 7. Simplified Single Line Diagram of CAMELCO' Distribution System ‘Table 3. CAMELCO System's Profile (2008) i eee ore [2008 (actual) | 3.282 | 0.245 | 7.46] 0.171] 5.21ERC Case No. 2009-111 MC. DECISION/December 15, 2010 Page 20 of 30 Table 4. Bus Voltage Profile (2008) 2008 (actual) | 3.282 0.88 0.85 085 | 0.85 0.85 Capacity Requirement Studies In the year 2008, the 5 MVA substation is sixty-six percent (66%) loaded of its, rated capacity. The loading capacity was projected to increase to sixty-seven percent (67%) in 2009, and to seventy-three percent (73%) in 2013. Thus, for the whole five (5) year planning period, the substation is still within the required minimum limit. Hence, no substation project is needed by CAMELCO. Figure 8 shows how demand and the substation’s capacity increases at approximately the same rate during the planning period: Figure 8. Yearly Projected Demand and Substation Capacity 2 | 2013, 3.262 3.366 3.497 3.668 | 3.626 i m2 | 7ERC Case No. 2009-111 MC DECISION/December 15, 2010 Page 21 of 30 Voltage Drop Studies Simulation studies showed that during the five (5) year planning period, five (6) buses violate the minimum voltage requirement of the Philippine Distribution Code (PDC) at 0.9 per unit (pu) values. For instance, low voltages are predicted at the load ends of Balbagon, Fatima, Kuguita and Yumbing in 2011. Additional drop of 0.01 pu are to be experienced in these buses in 2012 and further voltage drops will be experienced by 2013. With these findings, CAMELCO proposed projects that will improve the voltage variation. Shown below are illustrations of its voltages drop: 2009 | 3.356 | 0.88 0.85 | 0.84 | 0.84 | 0.84 2010 | 3.427 | 0.87 04 | 0.84 | 0.84 | 0.984 2011 | 3.497 | 0.87 024 | 0.83 | 083 | 0.83 2012 | 3.568 | 0.87 0.83 | 0.83 | 0.62 | 0.82 2013 | 3638 | 0.86 0.83 | 0.82 | 0.82 | 0.82 Figure 9. Projected voltage profile at Yumbing Voltage at Yumbing 2012ERC Case No. 2009-111 MC DECISION/December 15, 2010 Page 22 of 30 Systems Loss Studies Figure 10 shows the total system's technical loss and the loss due to the ‘submarine cable. It is to be noted that about 40% of the total technical loss is due to the submarine cable. This amount of loss drastically hinders the desire of CAMELCO to reduce its overall losses to single digit. While this figure shows that the system's technical loss is projected to increase, its rate is expected to be considerably low and is expected that it will impact on the overall performance of the EC in the next five years: ‘Figure 10. Projected loss (System and Submarine Cable) ee “ Lowe 0% (css3 System 7.48 mmm sue Canie| 521 Toa! 1260 Construction of 3-Phase Line Parallel to the Existing Backbone Line CAMELCO considered three (3) options in addressing the unreliability and low voltage situation within its franchise area. The Construction of 3- Phase Line Parallel to the Exis ing Backbone Line is the option that was Considered to be the optimal solution. ghERC Case No. 2009-111 MC DECISION/December 15, 2010 Page 23 of 30 The proposed project will improve the voltage variation per bus in 2009 ‘as shown in Table 6 below from the levels shown in 2008 (refer to Table 4): Table 6. Bus Voltage Profile (2009-2010) — Option 4 Year |Demand|S/S Capacity| Voltage Violation per Bus in Per Unit _| Forecast) (MW) | (% Loading) |Tpequeno|Balbagon|Fatima|Kuguita |Yumbing| 2009 | 3.356 66 0.90 | 088 | 090 | 090 | 090 As shown in the foregoing table, one bus (Balbagon) will still have voltage Violation despite the construction of the 3-phase line parallel to the existing backbone line. This can be addressed by transferring the existing three (3) units of 100 kVAR capacitors to Balabagon Bus and by transferring the 50 KVAR capacitors from Balbagon to Mahinog Poblacion, thus, avoiding additional cost of purchasing new capacitors. Moreover, three (3) units of 50 KVAR shunt capacitors will also be added at Compol, Catarman. All the foregoing project components will reduce technical system loss in 2009 to the levels shown in Table 7. The total system loss in 2009 is about 1.60% lower than the level registered in 2008 as previously shown in Table 3: ‘Table 7. Substation capacity (2009-2010) - Option 1 Year |Demand|S/S Capacity Loss Total Loss Forecast) (MW) | (% Loading) "System | % [Cable] % | MW] _% |__2009 3.356, 68 0.191 |5.69/0.181|5.3910.372] 11.08ERC Case No. 2009-111 MC. DECISION/December 15, 2010 Page 24 of 30 Acquisition of 69kV Line from Aplaya to Balingasag and Balingasag to Balingoan (Kinoguitan) The 56-kilometer 69 KV subtransmission line for sale by TRANSCO is comprised of the following components: 1) four (4) kilometers Aplaya-Solana (Jasaan) line; b) seventeen (17) kilometers Solana (Jasaan) ~ Balingasag line; and ©) thirty five (35) kilometers Balingasag — Balingoan (Kinoguitan) line. The first two components will be acquired by the consortium formed and proportionately shared by CAMELCO and Misamis Oriental I! Rural Electric Service Cooperative, Inc. (MORESCO II), considering that both ECs are connected to the said lines. The third component will be acquired solely by CAMELCO. The acquisition cost of PhP68,689,546.05 proposed by CAMELCO was based on the 2008 net book value of the said assets and will be subject to the final approval upon the application to be filed per ERC Guidelines to the Sale and Transfer of the TranCo’s Sub-transmission Assets and the Franchising of Qualified Consortium. COST ANALYSIS CAMELCO updated the costs of its capital projects that were already identified for implementation within the next five (5) years (2009 - 2013) for appropriate funding. Costs were duly evaluated and updated to consider peso devaluation, price inflation of commodities and other financial and physical if contingencies.ERC Case No. 2009-111 MC DECISION/December 15, 2010 Page 25 of 30 The Bill of Materials, Labor and Contingency costs estimated for these electric capital projects are consistent with NEA’s Standards on Specific Construction Assembly Units for electric distribution system. The estimated costs of non-electric capital projects were determined based on prevailing market prices. Determination of costs was made with the assistance of professional engineering consultants. Competitive biddings conducted were made public and transparent. CAMELCO's 2009 to 2013 proposed capital expenditure will require a total investment of PhP 130.75 Million. However, the Commission deferred the approval of CAMELCO's proposed projects for 2013 amounting to PhP6,175,145.00 which will be included in the future CAPEX filing pursuant to ERC Resolution No. 26, Series of 2009 ("Resolution Amending the Rules for Approval of Regulated Entities’ Capital Expenditure Projects"), Therefore, the adjusted total capital project cost for 2009 to 2012 is One Hundred Twenty-Four Million Five Hundred Sixty-Five Thousand Five Hundred Thirty-One Pesos (PhP124,565,531.00). CAMELCO’s Members’ Contribution for Capital Expenditure? approved in accordance with the Rules for Setting Electric Cooperatives’ Wheeling Rates (RSEC-WR) is PhP0.5324/kWh. Its MCC is not enough to finance the capital Projects. Thus, the project cost will be financed through loans from NEA and other financing institutions. Detailed review of other project costs disclosed that said amounts are within the ODRC Valuation Handbook. Labor cost was found to be feasonable. The detailed costs of the project were estimated based on the NEA *Members’ Contribution for Capex~ PYPO.5324/kWh x 12,850,112 kWh = PhP6,841,400.ERC Case No. 2009-111 MC. DECISION/December 15, 2010 Page 26 of 30 2008 Price index. The annual amortization of its yearly projects is based on a fifteen (15) year term payment and nine percent (2%) interest rate: ‘on CAMELCO's MCC. . ea ne Financed thru Loans 20,594,386 | 22,431,309 | 44,913,824 36,626,012 | 124,565,531 A. Amortization (New) 2,564,917 2,554.917 (2,554,917 2,554,917 | 10,219,666 NEA Loan/Other Fit 2,782,803 2,782,803 2,782,803 8,348,409 NEA LoanOther Financing 6.082 | 7e6og2 | — 152.169 828,111 828,114 ‘TransCo Amortization {included in the MCC computation) - - 1,936,934 2,685,706 4,622,640 A.1 Total Amortization (if @ 9% |_ interest rate, 15 years payment) 2,554,917 5,337,720 6,103,801 6,931,912 | __20,928.350 A.2 Total Amortization (if @ 9% interest rate, 10 years payment) | 3,209.019| 6,704,268 7.686.479 | _ 8,706,601 26,286,367 B. Amortization (Old) 3,806,754 3,806,754 3,806,754 3,806,754 15,227,017 C._ Permit Fees 154.458 168,235 336,854 274,695. 934,242 1 @ 9%, 18 years term Total (A.1 + B+C) 6,516,129 9,312,709 | 15,864,517, 18,801,907 | 50,495,262 10 years term 10,679,257 ad [Ene 13,424,463 14,573,165 Equivalent Member Capital Contribution (MCC) in PhP- 7,147,184 7,758,753 | _ 29,200,306 Excess/(Shortfall) on MCC if 15 “Bape i years term payment, = cy Equivalent MCC in PRP (2.165.524) | (8,411,548) |_ (11,043,154) | 21,204,956) Equivalent MCC in PhP/KWh (0.1613) (0.6009) (0.7578) (0.3883) The acquisition of TRANSCO's 69 KV line will result in avoided connection charges. Below are the associated annual connection charges corresponding to the ‘subtransmission assets to be acquired: jeble&. Estimated Annual Connection Charges — Annual Circuit | No.of | 2009 Cost of ‘Sub-transmission Asset Connection kM | Structures | Asset(PhP)? Charge (PhP) CAMELCOMORESCO I consortium 1. Aplaya — Solana 69 kV line eet 4 23 4,693,626.68 608,773.68 Fi een oeeeoeo RY 7 176 | 19,825,720.95 | 2,911,529.28 : CAMELCO 7 Bali . Balingasag - Balingoan 69 RV [45 273° | 40,780,681.44 13,947,692.52 Total Subtransmission Asset 5 472 65,300,029.07 17,467,995.48 ¥ uERC Case No. 2009-111 MC DECISION/December 15, 2010 Page 27 of 30 Savings in the amount of PhP15,707,844.00 annually will be realized resulting from the acquisition of the subtransmission assets. Said amount was computed considering the annual connection charge of PhP13,947,692.52 (acquisition of CAMELCO only) plus half of the sum of PhP608,773.68 and PhP2,911,529.28 (acquisition through consortium between CAMELCO and MORESCO III). Shown below is the indicative over-all rate impact taking into account the savings resulting from avoided connection charges: ‘Table 10. Adjusted impact on CAMELCO's MCC considering savings in connection charges Energy Sales in kWh 12,850,112 | 13,424,463 | 13,998,815 | 14,573,165 | 64,846,555 Equivalent Member Capital Cantrbution (MCG) in Phe 6.841.400 | 7,147,184| 7,452,969] 7,758,753 29,200,306 Excess/(Shortall) on MCC i715 ie years term payment ae e Equivalent MCC in PhP. 325,271 | (2,165,524) | (8,411,548) | (17,043,154) | (21,294,956) |_ Equivalent MCC in PhP/KWh. 0.0253 | (0.1613) (0.6009) (0.7578) | _ (0.3883) ‘Savings from Connection Ghana npn : -| 15,707,844) 15,707,844) 31,415,688, | Over-all impact in PhP/Wh - = 4.4224 4.0779 0.5728 Equivalent MCC in PhP/kWh ‘considering the savings from the 0.0253 | (0.1613) 0.5212 0.3201 0.1845 {sale of substransmission asset A perusal of the evidence presented herein showed that the approval of CAMELCO's electric capital projects (2009-2012) in accordance with the provisions of Republic Act No. 9136 and the “Guidelines to Govern the Submission, Evaluation and Approval of Electric Capital Projects’, with prayer for provisional authority, 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’)ERC Case No. 2009-111 MC DECISION/December 15, 2010 Page 28 of 30 WHEREFORE, the foregoing premises considered, the applications filed by Camiguin Electric Cooperative, Inc. (CAMELCO) for approval of its electric capital Projects (2009-2012) in accordance with the provisions of Republic Act No. 9136 and the “Guidelines to Govern the Submission, Evaluation and Approval of Electric Capital Projects", with prayer for provisional authority, is hereby APPROVED with modification. Relative thereto, CAMELCO is hereby directed to pay a total permit fee in the amount of Nine Hundred Thirty Four Thousand Two Hundred Forty-Two Pesos (PhP934,242,00), computed as follows: PhP124,565,531.00 a X PRP O.75 = PhP934,242,00 PhP100.00 As requested, CAMELCO is authorized to pay the said permit fee on staggered basis as follows: Year __| Total Project Cost (PhP) Series of Payment Permit Fees (PhP) | 2009 20,594,386.00 Within fifteen (15) days from 154,458.00 receipt hereof 2010 22,437,309,00 July 15, 2011 168,235.00 2011 44,913,824.00 December 15, 2011 336,854.00 2012 36,626,012.00 December 45, 2012 274,695.00 TOTAL 124,565,531.00 934,242.00 Further, CAMELCO’s 2013 proposed project is hereby deferred for inclusion in its capital expenditure filing pursuant to ERC Resolution No. 26, Series of 2009 (‘Resolution Amending the Rules for Approval of Regulated Entities’ Capital Expenditure Projects’). The acquisition of the 69 kV subtransmission assets of the National Transmission Corporation (TRANSCO) will be subject to final approval upon the application to be filed pursuant to the Commission's “Guidelines to the Sale and Transfer of the TransCos Sub-transmission Assets and the Franchising of Qualified Consortiums”ERC Case No. 2009-111 MC DECISION/December 15, 2010 Page 29 of 30 Finally, CAMELCO is directed to: 1) submit a progress report with indications of any variance in the implementation of the projects and time schedule; 2) endeavor to negotiate for a longer loan amortization; and 3) conduct competitive bidding for the purchase of major materials in the implementation of the proposed projects. SO ORDERED. Pasig City, December 1, 2010. aa (Oa IAIDA G. Cl -DUCUT Chairperson Pag pen Commissioner Commissioner sypncspMehco eRe cas no. 200311 me bsn feERC Case No. 2009-111 MC DECISION/December 15, 2010 Page 30 of 30 Copy Furnished: 1 ATTY. ARNIDO O. INUMERABLE Counsel for CAMELCO. 405 Street, U.E. Village, Cainta, Rizal 2. GAMIGUIN ELECTRIC COOPERATIVE, INC. (CAMELCO) Attention: MR. ADRIAN A. EBCAS General Manager Mambajao, Camiguin 3. Commission on Audit Commonwealth Avenue Quezon City 4 Senate Committee on Energy GSIS Building, Roxas Boulevard Pasay City 5, House Committee on Energy Batasan Hills, Quezon City 6. Office of the President of PCCI Philippine Chamber of Commerce and Industry (PCI) 3” Floor, ECC Building, Sen. Gil Puyat Avenue Makati City 7. Office of the Municipal Mayor Municipality of Mambajao Province of Camiguin 8. Office of the Municipal Mayor Municipality of Catarman Province of Camiguin 9. Office of the Municipal Mayor Municipality of Mahinog Province of Camiguin 10. Office of the Municipal Mayor Municipality of Sagay Province of Camiguin 11. Office of the Municipal Mayor Municipality of Guinsiliban Province of Camiguin