Republic of the Philippines


ENERGY REGULATORY COMMISSION San Miguel Avenue, Pasig City


IN THE MATTER OF THE APPLICATION FOR APPROVAL OF THE CONTRACT FOR THE SUPPLY OF ELECTRICITY BETWEEN BACAVALLEY ENERGY INC. (BEI), AND MANILA ELECTRIC COMPANY (MERALCO), WITH PRAYER FOR PROVISIONAL AUTHORITY,


ERC CASE NO. ___________


MANILA ELECTRIC COMPANY (MERALCO), Applicant.


x—————————————x APPLICATION


Applicant MANILA ELECTRIC COMPANY (MERALCO for brevity), through the undersigned counsel, most respectfully avers that:


1. Applicant is a private corporation duly organized and existing under the laws of the Republic of the Philippines, with principal office located at Lopez Building, MERALCO Compound, Ortigas Avenue, Pasig City. It may be served with notices and other processes of this Honorable Commission through its undersigned counsel at the address indicated herein.


2. Bacavalley Energy Inc. (BEI), a corporation organized and existing under the laws of the Republic of the Philippines, and engaged in the operation of San Pedro Methane Power Plant, (“SPMPP”), powered by the methane extracted from the San Pedro Landfill, located at San Pedro, Laguna, offered to supply and sell to Applicant MERALCO its electric power produced from its Power Plant.


3. Applicant MERALCO, in support of the development of renewable energy in the


country, accepted the offer of BEI. Accordingly, on November 12, 2010, applicant MERALCO and BEI executed a Contract for the Supply of Electricity (“CSE” for brevity), under a “Take and Pay” arrangement, with a contract price equivalent to the ERC-approved NPC Time of Use (TOU) rates. Said contract has a term of two (2) years from the delivery period commencement date, unless sooner terminated upon any of the grounds mentioned in the CSE.


4. The salient features of the aforesaid CSE are: “2.2. Take and Pay Contract. Subject to Section 2.5 hereof, Buyer shall accept


all deliveries allocated by Seller and Buyer shall pay for the kWh delivered by Seller as measured by the Buyer’s Billing Meter based on the Contract Price.


2.3. Contract Price. The Contract Price is the ERC-Approved NPC Time-Of-Use


(‘TOU’) Rates for Luzon, including any changes thereto as approved by the ERC, governmental and WESM charges stipulated in Sections 6.2 and 6.3, Franchise and Benefits to Host Communities (FBHC) charge. Provided, that, GRAM and ICERA charges and other NPC Automatic Cost Adjustments (ACA), including but not limited to Fuel and Purchase Power Cost Adjustment, (FPPCA) and Foreign Exchange Adjustment ,(FxA), shall not form part and are excluded from the computation of the Contract Price; Provided, further, that when the existing TOU Rates are no longer in effect or are no longer applicable, and the ERC approves a new set of TOU Rates or Benchmark Rates, such new rates shall be used; Provided, finally, that when no new set of TOU Rates or Benchmark Rates have been approved by the ERC pursuant to this Section, the parties shall, as soon as it has become manifest that the existing TOU Rates are no longer applicable, meet and renegotiate the Contract Price to ensure its complete pass-through. Any violation of this Section shall be a ground for termination of this Contract upon prior notice.


xxx xxx xxx 2.6. Regulatory Approvals. As soon as practical after the execution of the


Contract, the Buyer shall file an application with the ERC for the approval of this Contract. However, both parties shall cooperate in this undertaking and shall provide all the necessary support including the submission of all the documents required to expedite the approval of the Contract. This Contract shall not become effective unless the terms and conditions hereof, including the complete pass- through of the Contract Price and all other charges and taxes stipulated herein, have been approved, provisional or otherwise, by the ERC. Any disallowance of the generation cost or contract price, or any component thereof, as stipulated herein, for recovery from end-users, shall be for the sole account of the Seller and shall not prejudice the Buyer.


xxx xxx xxx”


A copy of the said CSE is hereto attached as ANNEX “A” and made integral part hereof. 5. At present, the existing NPC TOU rates for Luzon are those provisionally approved


by the ERC in its Order dated February 16, 2009, under ERC Case No. 2009-004RC, entitled “In the Matter of the Application for the Approval of the Proposed New Basic Generation Rates for Luzon, Visayas and Mindanao Grids with Prayer for Provisional Authority”.


6. It must be emphasized that the CSE, aside from allowing Applicant MERALCO to


take clean energy at lower cost, offers certain benefits to its customers. For one, it will reduce the dependence of Applicant MERALCO in sourcing its power requirements from the Wholesale Electricity Spot Market (WESM), thereby protecting its customers from the price volatility in the WESM. In another, the CSE is on a “take and pay” arrangement and has no capacity fee. Moreover, since BEI is an embedded generator, there will be no additional burden on the customers in terms of transmission line losses.


7. The governmental and WESM charges stipulated in Sections 6.2 and 6.3 of the


CSE, and which form parts of the Contract Price, are as follows: “6.2. Governmental Charges. All value added taxes, sales taxes, goods and


services taxes, excise taxes, import duties, stamp taxes and similar taxes imposed by any government authority (“Governmental Charges”) on or with respect to the Product, including taxes on fuel purchased by the Seller to generate and deliver electricity pursuant to this Contract, or the transactions contemplated by this Contract, shall be for the account of the buyer and shall form part of the Contract Price. The seller’s own income taxes, property taxes and local business taxes are for its account. In the event that the Seller is required by Applicable Laws to remit or pay any such Governmental Charges, such amounts will be set forth in the invoice the next subsequent Billing Period and shall be due and payable by the buyer according to the provisions of this Contract. Any changes to these Governmental Charges, upward or downward, or the imposition of additional Governmental Charges that are approved to be collected from the end-users, will affect the Contract Price invoiced to the Buyer. Any disallowance by the ERC of any Governmental charge for the complete pass-through by the Buyer to end- users shall be for the sole account of the Seller and shall not prejudice the Buyer.


6.3. WESM Charges. Except for market fees, all other fees and charges imposed


by the Wholesale Electricity Spot Market (“WESM Charges”) on or with respect to the Product that are approved to be collected from the end-users shall be for the account of the Buyer and shall form part of the Contract Price. Market fees shall be for the sole account of the Seller and shall not be charged to the Buyer as part of the Contract Price.”


8. Pursuant to Rule 6, Section 2 and Rule 20 B, Section 2 of the ERC Rules of Practice


and Procedure and Article IV, Section 2 of the ERC Guidelines for the Recovery of Costs for Generation Component of the Distribution Utilities’ (DUs) Rates, Applicant MERALCO has also attached the following documents in support of the instant Application:


Document


1. Acknowledgement receipt by the Sangguniang Panlungsod of Pasig of a copy of the Application.


2. Affidavit of Publication stating the fact of publication of the Application in a newspaper of general circulation.


3. Complete issue of the newspaper of general circulation where the Application was published.


4. Articles of Incorporations of Bacavalley Energy Inc. 5. Securities and Exchange Commission (SEC) Certificate of


Incorporation of the said Articles of Incorporation.


6. General Information Sheet of Bacavalley Energy Inc. (BEI) as submitted with the SEC


7. Board of Investment (BOI) Certificate of Registration 8.


Environmental Compliance Certificate issued by the Department of Environment and Natural Resources.


9. Details of the Power Supply Agreements.


10. Agreement for Methane Recovery and Electricity Generation between BEI and Pilotage Trading & Construction.


11. Connection Agreement between MERALCO and Bacavalley Energy Inc. (BEI)


12. Letter of Mr. Peregrino Fernandez Jr. with stamped receipt


of the ERC, in connection with BEI’s Application for the issuance of Certificate of Compliance.


“G”


“H” “I”


“J” “K” “L” “M” MT – Dec. 14, 2010


Annex “B”


“C” “D”


“E” “F”


MONICA M. MARTIN Counsel for Applicant


Roll of Attorneys No. 55693


PTR No. 0035735; 02/17/10; Makati City IBP No. 825314; 04/19/10; RSM


MCLE Compliance No. III-0013365; 30 March 2010 7th


Floor, Lopez Building, MERALCO Compound Ortigas Avenue, Pasig City


Telephone No.: 1622-2260/Fax No. 1622-3550 Email:regulatory.legal.admin@meralco.com.ph


REPUBLIC OF THE PHILIPPINES } CITY OF PASIG


}S.S. VERIFICATION AND CERTIFICATION OF NON-FORUM SHOPPING I, IVANNA G. DELA PEÑA, Filipino, of legal age, married, with office address at 12th


Floor, Lopez Building, MERALCO Compound, Ortigas Avenue, Pasig City, after being sworn in accordance with law, hereby depose and say that—


1. I am the First Vice President & Head, Regulatory Management Office, of Applicant


Manila Electric Company (MERALCO). In such capacity, I have caused the preparation and filing of the foregoing Application.


2. Moreover, I have been authorized by the Board of Directors of MERALCO to certify


that Applicant has not heretofore filed any similar action, pleading or application involving the same issues before the Supreme Court, the Court of Appeals or any other lower courts or administrative. A copy of the Secretary’s Certificate authorizing me to cause the preparation of the instant Application and sign this Verification and Certification is attached hereto as ANNEX “V;”


3. I have read and understood the allegations contained therein and the same are


true and correct based on my personal knowledge and authentic records made available to me in the ordinary course of business of MERALCO.


4. To the best of my knowledge, no similar action or proceeding is pending before


the Supreme Court, the Court of Appeals, the lower courts or administrative bodies; 5. If I should hereafter learn that a similar action has been filed before the Supreme


Court, the Court of Appeals, the lower courts or administrative bodies, I undertake to report such fact to this Honorable Commission within five (5) days from notice of such fact.


IN WITNESS WHEREOF, I have hereunto affixed my signature this 13th day of December 2010 at Pasig City, Philippines.


IVANNA G. DELA PEÑA Affiant


SUBSCRIBED and SWORN to before me this 13th day of December 2010, affiant


exhibited to me her Social Security System ID bearing the number 03-5122810-4. NOTARY PUBLIC


Doc. No. 11 Page No. 4 Book No. I Series of 2010.


IRISH MAE V. RODRIGUEZ Counsel for Applicant


Roll of Attorneys No. 55995


PTR No. 5931757; 01/14/10; Pasig City IBP No. 815931; 01/22/10; RSM


MCLE Compliance No. III-0008426; 9 February 2010 ROMMEL L. YAP Counsel for Applicant Roll of Attorneys No. 43007


PTR No. 5931752; 01/14/10; Pasig City IBP No. 815929; 01/22/10; RSM


MCLE Compliance No. III-0002564; 11 August 2009


JOSE RONALD V. VALLES Counsel for Applicant


Roll of Attorneys No. 42281


PTR No. 5931751; 01/14/10; Pasig City IBP No. 815930; 01/22/10; RSM


MCLE Compliance No. III-0002562; 11 August 2009


13. General Plant Description


14. Letters/Correspondence between MERALCO and BEI leading to the signing of the CSE.


15. Certificate of Endorsement issued by the Department of Energy. 16. Excerpts from MERALCO’s Distribution Development Plan,


pages 5-6 and 38-39.


17. MERALCO’s Demand Side Management (DSM) program 18. BEI’s Audited Financial Statement for Years 2009 and 2008 19. Certification issued by the Development Bank of the Philippines ALLEGATIONS IN SUPPORT OF THE


PRAYER FOR PROVISIONAL AUTHORITY 9. Last December 10, 2008, Republic Act No. 9513 otherwise known as “An Act


Promoting the Development, Utilization and Commercialization of Renewable Energy Resources and for other Purposes”, was signed into law by the President of the Philippines. One of its primary objectives is to “encourage the development and utilization of renewable energy resources as tools to effectively prevent or reduce harmful emissions and thereby balance the goals of economic growth and development”.


10. The execution of the CSE between applicant MERALCO and BEI brings the government


closer to the realization of this objective. This is applicant and BEI’s way of showing their support not only to the government’s efforts to increase the utilization of indigenous and renewable energy but more importantly, to the global call for sustainable development.


11. The immediate implementation of the CSE will encourage and stimulate the


development of emerging renewable energy resources in the country thereby contributing to the realization of the government’s objective of having an alternative source of power in the Philippines to ease up dependence in non-renewable sources of energy. In addition, the immediate implementation of the CSE will redound to the benefit of the customers of Applicant MERALCO as the advantages under the CSE as herein previously mentioned can already be effected. Accordingly, there is a paramount relevance and urgent need for the immediate issuance of a provisional authority to implement the subject CSE. In support of this Application and the prayer for provisional authority, a copy of the Judicial Affidavit of Mr. Vicente C. Sioson, Senior Manager and Head of Energy Sourcing Office, is attached hereto as ANNEX “U.”


PRAYER WHEREFORE, it is respectfully prayed to this Honorable Commission that upon filing


of the instant Application, and pending hearing thereon, a provisional authority be immediately issued authorizing the implementation of the Contract for the Supply of Electricity between MERALCO and BEI; and after hearing on the merits, a Decision be rendered APPROVING the said Contract and all the charges stipulated therein.


Other relief just and equitable under the circumstances are likewise prayed for. Pasig City, 13 December 2010.


MANILA ELECTRIC COMPANY Applicant


MERALCO Compound


Ortigas Avenue, Pasig City By:


“R” “S” “T”


“N” “O”


“P” “Q”


A 6


news The Manila Times ■ BELITTLES FROM A1 Palace belittles GMA record


(CBCP) on Sunday said that the re- cent spate of human-rights viola- tions in the country has made the Aquino administration no different from its predecessor.


The group expressed shock at the fact that the Aquino administration has an average of “one extra-judicial killing per week.”


They said that the number of sectoral leaders jailed on false charges “has continued to increase.” Palace spokesman Edwin Lacierda,


however, disagreed, saying that the Aquino administration is committed to uphold the human rights of each individual. “They must be wearing crimson- colored glasses and oblivious to the recent statement during the last Hu- man Rights Day and his [President Benigno Aquino 3rd] decision on the Morong 43,” Lacierda added. “It‘s the usual propaganda which has no basis in fact. The Aquino administra- tion is committed to the human rights of each individual and the observance of due process accorded to everyone, friend or foe,” he said in a text message. President Aquino also said that his administration will study carefully the proposal of former House Speaker Jose de Venecia Jr. to grant general amnesty to other political prisoners. De Venecia has suggested that the


Aquino administration should also drop the charges filed against other political detainees like what he did to the “Morong 43.” Last week, the President ordered the withdrawal of criminal charges against the Morong 43, or the 43 health workers who were arrested in February in Morong, Rizal, on suspi- cion that they were members of the New People’s Army.


Nobel decision Mr. Aquino also on Monday said that he does not see the need to explain to the United States or to any other coun- try the Philippines’ decision not to


■ HOLIDAYS FROM A1 More public holidays


“Every paid holiday goes to the bottom line of the balance sheet, and, like minimum wages, can pressure firms that operate on low- profit margins to reduce their work force, close, or move into the underground economy,” it said. “The government rarely consults business stakeholders, although each holiday adds tens of millions of dollars to their payrolls,” the study added. The study noted that the number of Philippine holidays had risen from 12 in 1987 to the 21 this year, mainly for religious festivals, and that parliament was considering 16 more. Lawmakers were looking to declare


holidays that would honor, among others, soldiers, families, children, farmers, fishermen, Chinese Lunar New Year, pets and human rights. The business groups also took issue with the fickle and unpredict- able nature of the holiday declara- tions, which they noted were sometimes done on very short notice, disrupting work schedules and increasing corporate costs. “It makes us more uncompeti- tive,” John Forbes, of the American


■ TRANSPORT FROM A1 DOTC readies P748-B plan


will guide formulation of the Me- dium-Term Transportation Develop- ment Plan.


Based on a study commissioned by


the Australian Agency for International Development (AusAID), the NTP will require an investment of about P748.67 billion for 2010 until 2016. Proposed modal specifications of the Strategic National Transport Net- work are National Road Network, Na- tional Port Network, National Railway Network, Road Ro-Ro (roll-on, roll-off) Terminal System and Urban Transport Networks in metropolitan areas. Of the total, investment for road and road transport amounts to P520.02 bil- lion; port and maritime safety, P117.96 billion; air transport, P64.88 billion; and railway, P45.81 billion. The study said that expenditures for infrastructure in the Philippines over the last decade averaged only about 2.7 percent of the gross domestic product (GDP), the total value of goods and services produced in a country in a year. This average was well below the benchmark of at least 5 percent of GDP,


■ PINOYS FROM A1 Three Pinoys feared dead


Five died immediately and rescu- ers initially hoped some of the 17 missing had reached a lifeboat. Maritime New Zealand coordi- nated desperate efforts by five trawlers to search the remote area 1,000 nautical miles north of the McMurdo Antarctic base and 1,500 nautical miles from New Zealand’s southern tip. Rescue controller Dave Wilson ad-


mitted defeat late Monday, saying “it was increasingly unlikely further sur- vivors would be found”.


Maritime New Zealand spokesman


Ross Henderson said that the boat ap- peared to have gone down in calm con- ditions and did not send an SOS. “We had no distress signal. At this


stage we don’t know what caused the vessel to sink,” he told Agence France-Presse.


AFP


which Asian middle-income countries spend to meet their needs, and lower than the infrastructure investment per GDP of many other countries. For the transport sector alone, spending in the country averaged only 1 percent of GDP, broken down into airports (0.1 percent of GDP), ports (0.05 percent), railways (0.1 percent) and roads (0.75 percent). Socio-economic Planning Secretary


Cayetano Paderanga had said that the NTP will give policy directions for a com- plete network of transport infrastructure. He added that there is need to link multimodal transport systems among identified growth centers that could facilitate public-private part- nerships (PPP) projects in the areas. Multimodal transport systems involve


air, sea and road transportation modes within and between the country’s islands. In his first State of the Nation Ad-


dress, President Benigno Aquino 3rd in July this year identified PPP as a strategy to finance infrastructure and basic services through the assistance of the private sector.


Chamber of Commerce and the principal author of the study, told a news conference. He said that small companies that


lacked the resources to pay extra holiday pay were often forced into the “underground economy”, where no taxes were paid and laws safeguarding labor rights were ignored. Meanwhile, potential foreign


investors simply shunned the country, according to Forbes. Oscar Sanez, president of the Business Processing Association of the Philippines, said that the problem impacted heavily on outsourcing, one of the country’s few globally competitive industries. “If you operate on a low margin


and your cost increases, then you start looking elsewhere,” he told Agence France-Presse. However, Cristino Panlilio, head of the Board of Investments, dismissed the issue as overblown, saying many of the Philippines’ neighbors also had many holidays and remained competitive. “They’re wrong in saying it’s costing us,” he said.


send a representative to Oslo, Norway, for the Nobel Peace Prize ceremony honoring a Chinese dissident. During an interview in Malacanang, he said that he will be meeting with US Ambassador to the Philippines Harry Thomas Jr. this week to discuss a “wide range” of topics. He added that it was Thomas who asked for a meeting. “We have not had an opportunity to touch base from the early stage we managed to talk,” the President said. When asked if the Philippines’ no-


show at the Nobel awarding rites will be discussed in the meeting, Mr. Aquino said, “I don’t think it be- hooves the Philippines to explain to any other country its actions. We are a sovereign country.”


Some human-rights advocates


have questioned and expressed dis- appointment over the country’s de- cision to snub the ceremony in Oslo. The President explained that he


wanted to put the interest of the Fili- pinos first in skipping the awarding in Oslo. “We have immediate problems, among them all those [Filipinos] in- carcerated in China. We’ve had strained relations because of the [Au- gust 23 hostage] incident and so many other things, my interest has to be first with the Filipinos,” he said. The August 23 hostage-taking fi- asco left eight Hong Kong tourists dead and strained relations between Manila and Beijing. A government official, President said, informed him the possibility of the United States withdrawing grants to the country because of the coun- try’s move to skip the Nobel rites. “That is unofficial at this point in


time, there might be, but then again today I got the word that certain em- bassy officials are asking who of their officials are being quoted. They are trying to check if anybody said any- thing to that effect,” he said.


TUESDAY December 14, 2010


AFP


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