Republic of the Philippines

ENERGY REGULATORYCOMMISSION
San Miguel Avenue, Pasig City
IN
THE
MATTER
OF
THE
APPLICATION
. FOR
APPROVAL OF THE POWER
SALES
CONTRACT
(PSC)
BETWEEN
SPC
ISLAND
POWER
CORPORATION
(SIPC)
AND
ILOILO
III
ELECTRIC
COOPERATIVE,
INC.
(ILECO
III),
WITH
MOTION FOR THE ISSUANCE
OF
PROVISIONAL
AUTHORITY
ERC CASE NO.
[LOILO
III
ELECTRIC
COOPERATIVE, INC. (ILECO
[II) and SPC ISLAND POWER
CORPORATION (SIPC),
Applicants.

2016-001

RC

KE'l:J~D
(OC
l!
,
. . 2.016
IMe: J.\l~
...2.,"L ..--.
Bv:

....~.--._--.--_.-.

x- - - - - - - - - - - - - - - - - - - - - - - -x
ORDER
On 05 January 2016, Iloilo III Electric Cooperative, Inc. (ILECO
III) and SPC Island. Power Corporation (SIPC) filed their joint
Application for the approval of their Power Sales Contract (PSC), with
prayer for the issuance of provisional authority.
In support of their prayer for the issuance of a provisional
authority, ILECO III and SIPC alleged the following:
1.

ILECO Ill's Transition Supply Contract (TSC) with Power

Sector Assets and Labilities Management Corporation
(PSCLM) expired last 25 December 2014. PSCLM advised
ILECO Ill' that the TSC will no longer be renewed and
that ILECO III should explore contracting its energy
requirements with power suppliers in the Visayas Grid.

ERC Case No. 2016-001 RC

ORDER/ 18 March 2016
Page 2 Of19
2.

In compliance with the Commission's "Guidelines for the

Recovery of Costs for the .Generation Component of
Distribution Utility Rates", the Panay-Guimaras Power
Supply Consortium where ILECO III is a member, invited
potential offerors to submit offers for the supply of its
electricity requirements. Power suppliers Green Core
Geothermal Inc, Solexas Energy International, NV Vogt
Philippines, SIPC, and Panay Energy Development
Corporation responded to the invitation and submitted
their offers on 24 September 2014. The technical working
group of the consortium evaluated the offer and, as a
result, it executed the PSC with SIPC on 19 March 2015 for
the supply of ILECO Ill's peaking power requirements.

3.

Pursuant to the ERC Rules of Practice and Procedures

(hereinafter, "Rules"), the Commission may exercise its
discretion by granting provisional relief prior to a final
decision; and

4.

It is understood that the interim relief sought by the

Applicants shall be subject to adjustments and other
conditions that the Commission may impose after hearing
and final determination is made thereon.

5.

In the same Application, ILECO III and SIPC prayed that

the Commission would:
a. Provisionally allow Applicants to buy and sell
electricity pursuant to their PSC during the pendency
of the instant Application; and
b. Grant other
premIses.

just

and equitable

relief under

the

DISCUSSION
The authority of the Commission to issue provisional authority
is pursuant to Section 4(e), Rule 3 of the Implementing Rules and
Regulations (IRR) of Republic Act No. 9136, otherwise known as the
Electric Power Industry Reform Act of 2001 (EPIRA), to wit:

SECTION 4. Responsibilities of the ERC. (e) Any application or petition for rate adjustment or for
any reliefaffectiagthe ",asume" must be verified,a"/j

ERC Case No. 2016-001 RC

ORDER/ 18 March 2016
Page 3 of 19

accompanied with an acknowledgment of receipt of a

copy thereof by the LGU Legislative Body of the locality
where the Applicant or petitioner principally operates
together with the certification of the notice of publication
thereof in a newspaper of general circulation in the same
locality.
The ERC may grant provisionally or deny the relief
prayedfor not later than seventy-five (75) calendar days
from the filing of the application or petition, based on the
same and the supporting documents attached thereto
and such comments or pleadings the consumers or the
LGU concerned may have filed within thirty (30)
calendar days from receipt of a copy of the application
or petition or from the publication thereof as the case
may be.
.
Thereafter, the ERC shall conduct a formal hearing on
the application or petition, giving proper notices to all
parties concerned, with at least one public hearing in the
affected locality, and shall decide the matter on the
merits not later than twelve (12) months from the
issuance of the aforementioned provisional order.
This Section 4(e) shall not apply to those applications or
petitions already filed as of 26 December 2001 in
compliance with Section 36 of the Act.
xxx
The power of the Commission to grant provisional authority has
been upheld by the Supreme Court. In the case of Freedom from
Debt Coaltion vs. ERC2(FDC Case), the validity of Section 4(e),
Rule 3 of the EPIRA-IRR was questioned on the ground that EPIRA
itself does not confer upon the ERC the power to issue provisional
orders. The Supreme Court, however, refuted this contention and
held that the letter and spirit of the law required that the authority of
the ERC to grant provisional power be upheld, thus:

Historically, therefore, in this jurisdiction, at least

beginning with the Public Service Act in 1936, the
regulatory bodies concerned have exercised the power to
grant provisional rate adjustments only because there
was a statutory grant of such powe)/

G.R. No. 161113, 15 June 2004.

'

ERC Case No. 2016-001 RC

ORDER/ 18 March 2016
Page40f19

The foregoing recital establishes the following salient

points: (1) Section 16(c) of the Public Service Act
authorizing the approval of provisional rate increases
has never been repealed and as such continues to be in
fullforce and effect up to the present; (2) The BOPW had
the power to grant provisional rate increases on the
basis of the provision of the Integrated Reorganization
Plan that the pertinent powers of the PSC were
transferred to it; (3) The applicability clause found in
Section 44 of the EPIRA is the same as or similar to the
applicability clauses contained in Sections 11 and 21 of
P.D. No. 1206 and Section 14 of E.O. No. 172; and, (4)
The applicability clause or transfer of power provision is
sufficient to effect the transfer of powers from a
regulatory agency to its successor.
All told, the provisions of the Public Service Act and E.O.
No. 17275 which relate to the power of the regulatory
body to approve provisional rates continue to have full
force and effect, and the power was transferred to the
ERC by virtue of Section 80 in relation to Section 44 of
the EPIRA. Said provisions are not inconsistent with the
EPIRA except the directives therein dispensing with the
need for prior hearing. They are deemed modified to the
extent that the EPIRA imposes a publication requirement
and, through the IRR, assures the customers affected the
opportunity to oppose or comment on the applicationfor
provisional rate adjustment before it is acted upon by the
ERC.
Indeed, both the letter and spirit of the law require that
the authority of the ERC to grant provisional power rate
adjustments should be upheld. The law is so clear that it
cannot be misread.
(Citations omitted.)
Although the FDC Case referred
particularly
to the
Commission's authority to grant provisional power rate adjustments,
the Supreme Court stated in National Association of Electricity
Consumers for Reforms us. ERC3 (NASECORE Case) that
Section 4(e), Rule 3 of the IRR of EPIRA does not distinguish as to
the kind of application
petition,

0'

G.R. No. 163935, 02 February 2006.

'0

Wi"'i

ERC Case No. 2016-001 RC

ORDER/ 18 March 2016
Pages oft9

Section 4(e), Rule 3 of the IRR of the EPIRA speaks of

"any application or petition for rate adjustment" without
making any distinctions. Hence, any application or
petition that would result in the adjustment or change in
the total price (retail rate) paid by the end-users,
whether this change or adjustment is occasioned by the
adjustment or change in the charges for generation,
transmission, distribution, supply, etc., falls within its
contemplation.
Notably, on 21 June 2007, Section 4(e), Rule 3 of the EPIRAIRR was further amended to include the following paragraph:

This section 4(e) shall not apply to Generation Rate

Adjustment Mechanism (GRAM), Incremental Currency
Exchange Recovery Adjustment (ICERA), Transmission
Rate Adjustment Mechanism, System Loss Rate
Adjustment
Mechanism,
Lifeline Rate Recovery
Mechanism, Cross-Subsidy Mechanism, Local Franchise
Tax Recovery Mechanism, Business Tax Recovery
Mechanism, Automatic Generation Rate Adjustment
Mechanism, VAT Recovery Mechanism, Incremental
Generation Cost Adjustment Mechanism, and Recovery
of Deferred Accounting Adjustment for Fuel Cost and
Power Producers by NPC and NPC-SPUG, Provided that,
such adjustment shall be subject to subsequent
verification by the ERC to avoid under recovery of
charges.
Thus, except for the foregoing, the ERC may grant provisional
relief in any application or petition that would result in the
adjustment or change in the total price (retail rate) paid by the endusers, regardless whether the same pertain to adjustment or change
in the charges for generation, transmission, distribution, supply, etc.
All applications and petitions for rate adjustment, except the
foregoing, fall within ERC's authority.

Procedural Requirements for the

Issuance of Provisional Authority
As discussed in the NASECORE Case, the following are the
procedural requisites for the grant of provisional authority under

Section4(e),Rule3 ofthe IRRofEPI~

ERC Case No. 2016-001 RC

ORDER/ 18 March 2016
Page 6 Of19
(1) The Applicant

must file with the ERG a verified

application/petitionfor rate adjustment. It must indicate
that a copy thereof was received by the legislative body
of the LGU concerned. It must also include a certification
of the notice of publication thereof in a newspaper of
general circulation in the same locality.
(2) Within

from
receipt
of
the
application/petition or the publication thereof, any
consumer affected by the proposed rate adjustment or
the LGU concerned may file its comment on the
application/petition, as well as on the motion for
provisional rate adjustment.
30

days

(3) If such comment is filed, the ERG must consider it in

its action on the motion for provisional rate adjustment,
together with the documents submitted by the Applicant
in support of its application/petition. If no such comment
isfiled within the 30-day period, then and only then may
the ERG resolve the provisional rate adjustment on the
basis of the documents submitted by the Applicant.
(4) However, the ERG need not conduct a hearing on the
motion for provisional rate adjustment. It is sufficient
that it consider the written comment, if there is any.
(5) The ERG must resolve the motion for provisional rate
adjustment within 75 days from the filing of the
application/petition.
(6) Thereafter, the ERG must conduct a full-blown
hearing on the application/petition not later than 30
days from the date of issuance of the provisional
order. Effectively, this provision limits the lifetime of the
provisional order to only 12 months
Applicants have complied with the requirement of filing a
verified application. Moreover, Applicants indicated and provided
proof in said Application that the legislative bodies of the Local
Government Units (LGU) concerned (i.e. Municipality of Sara and the
Province of Iloilo) have been furnished with copies of the Application.
As proof of receipt by said LGUs, Applicants attached certifications
issued by said LGUs to the Application as Annex "H" and "H-l".
Applicants further provided proof of publication of the
Applicationin a newspap" of genecalcinoulationwithin the franc~

ERCCase No. 2016-001 RC

ORDER/ 18 March 2016
Page70ft9
area of Applicant ILECO III. A copy of the newspaper and affidavit of
publication was attached to the Application as Annexes "I" and "1-1".

Compliance with Substantial

Requirements for the Grant
of the Provisional Authority
More importantly, the Commission looked into the alleged
necessity in the issuance of the provisional authority to implement
Applicants' power supply agreement, as prayed for in their
Application. After initial review thereof, the Commission determined
the need therefor based on the following considerations:
1.
ILECO III
demonstrates
Forecasted Supply- Demand Scenario

Historical

and

ILECO Ill's serves the power requirements of thirteen (13)

municipalities, namely; Anilao, Banate, Barotac Viejo, San Rafael,
Ajuy, Lemery, Sara, Concepcion, San Dionisio, Batad, Balasan,
Estancia, and Carles., all in the Province of Iloilo (hereinafter,
"Franchise Area").
The table below shows ILECO Ill's current power suppliers,
Peak Demand, and Supply Deficit. Historically, in 2013 and 2014, it
already had a combined supply deficit of 12.2 MW which, as alleged
by Applicants, needs to be addressed in order to ensure sufficient
power supply to ILECO Ill's customers. Such power deficit is a
clear indication that there is necessity for additional
generation capacity. Based on ILECO Ill's load forecast, there is a
need to obtain additional capacity to address its current shortage of
power requirements in order to improve reliability and quality of
electric power to its customers, to wit:

Peak Demand (MW)

GCGI
PEDC1&2
PEDC3
PSALM
Total Supply (MW)
Surplusj(Deficit)

Historical
2014
2013
13.80
14-44
3.00
3.00
2.00
2.00

201!)
14.41

2016
15.26

5.50
4.00

5.50
2.00
3.00

Forecasted
2017
2018
16.23
18.52
5.50
"."0
2.00
2.00
3.00
3.00

201Q
19.52
5.50
2.00
3.00

2020
19.85
'>.50
2.00
3.00

3.02
8.02

3.02
8.02

9.50

10.50

10.50

10.50

10.50

10.50

(6-42)

(5.78)

(4.91)

(4.76)

(5.73)

(8.02)

(9.02)

(9.35)

ERC Case No. 2016-001 RC

ORDER/ 18 March 2016
Page 8 oft9
As alleged in the Application, in order to address its power
deficit, ILECO III solicited offers from various suppliers and after
much negotiation, it found SIPC's credentials most eligible to be its
peak demand power provider under the given premises:

First, ILECO Ill's TSC with PSALM has expired on 25

December 2014. The latter advised the former that the TSC will
not be renewed and that ILECO III should explore contracting
its energy requirements with power suppliers in the Visayas
Grid.

Second, Based on ILECO Ill's load forecast as shown

above, there is urgent necessity for additional peaking power
supply for year 2016 onwards. Having come to an agreement,
ILECO III and SIPC executed the subject PSC on 19 March 2015
for the supply of 5,280,000 kWh.
Thus, on the basis of Applicants' allegations on urgency and
necessity, and eligibility of the power supplier, as supported by
several documents, and without prejudice to further findings by the
Commission as may be determined during the actual hearing in this
case, it appears that, in so far as provisional approval is concerned,
there is justifiable basis in granting the immediate relief prayed for.
2.

Procurement

Process

On 26 May 2014, PSALM formally informed ILECO III that the

Contract for the Supply of Electric Energy (CSEE) will no longer be
renewed upon its expiration on 25 December 2014. Hence it urged
ILECO III to explore contracting its energy requirements with power
suppliers in the Visayas Grid.
To secure its power supply for the year 2015 onwards, ILECO
III, through the Panay-Guimaras Power Supply Consortium (PGPSC),
an association of electric cooperatives in the Panay-Guimaras Island,
to which ILECO III is a member, invited potential existing Offerors or
New Generation Companies to submit offers for the supply of the
power requirements of ILECO III together with ILECO II and
ANTECO. The Invitation to Bid was published on 15 and 22 August
2014 issue of the Philippine Daily Inquirer and Philstar Daily.
In response to the invitation, five (5) power suppliers, namely;
Green Core Geothermal Inc., Solexas Energy International, NY Vogt
Philippines, SIPC, and Panay Energy Devel~nt
Corporation
submitted their offers on 24 September 2014/

ERC Case No. 2016-001 RC

ORDER/ 18 March 2016
Page 9 Of19
After evaluating said offers and conducting negotiations, ILECO
III and SIPC executed the PSC for the supply of 5,280,000 kWh.
In executing the subject agreement, the following factors were
considered by ILECO III:
a) SIPC's proposal was the most responsive bid offer for the
supply of peaking power requirements of ILECO III; and
b) SIPC's certainty to deliver the needed power because its
power plant already exists and is already connected to the
Visayas Grid.
3.

Salient Features of the PSC

The Commission likewise considered the salient features of the

PSC as summarized below:
Type of Plant

Diesel Power Plant

Installed
Capacity

PDPP3 has an installed generating

capacity of 110 MW but with a
current dependable capacity of 66
MW.

Term

The PSC shall be for five (5) years to

commence on the Agreed Date and
end on the Scheduled Termination
Date unless the term is extended or
adjusted by the following events:
a. The happening
Majeure;

of

b. A reduction
in the
Contract Quantity; and

Force
Monthly

c. An extension of the Term of this

Contract mutually agreed upon in
writing by the Parties.
Effectivity

The PSC shall become effective upon

concurrence
of the
following
conditions:

ERC Case No. 2016-001 RC

ORDER/ 18 March 2016
Page 10 of 19
a. The Parties have obtained their
respective corporate approvals
including, where necessary, the
approval of the parties' respective
Board of Directors, to enter into
this Contract and to perform
their
respective
obligations
hereunder;
b. The ERC has issued a Provisional
Authority to Implement this
Contract; and
c. SIPC started delivery of electricity
to ILECO III (the "Agreed Date").
Delivery Point

a. SIPC shall deliver or cause the

delivery of electricity at the high
voltage
side
of its
main
transformer.
b. The active power delivered to
ILECO III must be within the
system frequency range of 59.7 to
60.3Hz and a reactive power
output
under
steady
state
conditions within the voltage
range + 5% of nominal value at
connection point in accordance
with the Grid Code.

Contract Quantity
SIPC shall supply ILECO III a total Contract Quantity of
5,280,000 kWh for five (5) years, or an annual contract quantity of
1,056,000 kWh. The PSC is essentially a peaking power
arrangement intended to supplement the power supply contracts of

!LECO III between the hom, from

170121O'l
to

ERC Case No. 2016-001 RC

ORDER/ 18 March 2016
Page 11 Of19

Daily Schedule of Nomination:

INTERVAL
DEMAND
ENERGY
(kW)
(kWhr)

TIME
1701-1800

18
1q

1801- 1900
1901- 2000
2001- 2100

20
21

Daily Total Quantity

1,000

1,000

1,000
1,000
1,000

1,000
1,000
1,000

4,000

4,000

Monthly Contract Quantity

BILLING
PERIOD

NUMBER ENERGY/DAY ENERGY/Mo.

OF DAYS
(kWh)
(kWh)

Dec. 26 - Jan. 25
Jan. 26 - Feb. 25
Feb. 26 - Mar. 25
Mar. 26 - Apr. 25
Apr. 26 - May. 25
May 26 - June 25
June 26 - Jul. 25
Jul. 26 - Aug. 25
Aug. 26 - Sept. 25
Sept. 26 - Oct. 25
Oct. 26 - Noy. 25
Nov. 26 - Dec. 25

22
22
22

4,000
4,000
4,000

88,000
88,000
88,000

22

4,000

88,000

22
22
22

4,000
4,000
4,000
4,000

88,000
88,000
88,000
88,000

4,000
4,000

88,000
88,000
88,000

22
22
22
22
22

4,000
4,000

Yearly Contract Quantity

88,000

1,056,000

ILECO III is committed to purchase from SIPC at least the

Monthly Contract Quantities of energy or the "Lift-or-Pay
Commitment". The "Lift-or-Pay Commitment" refers to the
commitment of the Buyer to purchase the Monthly Contract
Quantities during the Term or any extension of the Contract.
Reduction
Quantity

of

Contract

For the scheduled maintenance of

its facilities, ILECO III shall be
allowed to reduce a Monthly
Contract Quantity only once a
year during the Term of the
Contract, subject to the extension
of the Term.

Increase of Contract Quantity SIPC may, upon written request

of ILECO III thirty (30) days
pdo, to the targetbillingped~

ERC Case No. 2016-001 RC

ORDER/ 18 March 2016
Page 12 Of19
makes available to ILECO III the
energy requested in excess of the
Contract Quantity but is not
obliged to grant the same. If SIPC
agrees to grant such request and
makes available to ILECO III the
energy requested in excess of the
Contract Quantity, ILECO III
shall pay an amount computed in
accordance with the provisions
on Monthly Payments. The
increased quantity agreed by
SIPC for that specific Billing
Period/s consequently becomes
the Monthly Contract Quantity
for that period, which shall then
be the basis of the Lift-or-Pay
provision.
Plant Outage Allowance

The power plant is expected to

conduct Planned Outages for its
maintenance
programs
to
optimize plant efficiency and
reliability.
However,
it
is
inevitable that the plant may
experience Unplanned Outages
occasionally due to various
unexpected reasons. Because of
such circumstances, the plant is
allowed not to deliver or cause
the delivery of energy to ILECO
III up to a maximum of fifteen
percent (15%) of the total number
of nominated hours annually
within each Contracted Year.

Planned Outages

When the power plant schedules

a planned outage, ILECO III shall
be informed at least seven (7)
days before the relevant trading
day when the Planned Outage
shall be performed. If the outage
shall cause inability to SIPC to
deliver full or even partial of the
required energy by ILECO III,
SIPC shall be relieved of the
responsibility to deli"", "'

""'i

ERC Case No. 2016-001 RC

ORDER/ 18 March 2016
Page 13 of19
the delivery of energy to ILECO
III, provided the total number of
hours affected is within the Plant
Outage Allowance.
Unplanned Outages

4.

Should an outage occur during

any time interval when SIPC is
serving the final Hourly Contract
Quantity (HCQ) preventing the
power plant from delivering
power to ILECO III, SIPC shall
immediately inform ILECO III of
the cause, details, and possible
extent of the outage through
telephone. However such notice
shall not relieve SIPC from the
responsibility to deliver or cause
the delivery of the confirmed
final HCQ within the trading day.
Thereafter, SIPC shall be relieved
of the responsibility to deliver or
cause the delivery of energy to
ILECO III, provided that the total
number of hours is within the
Plant Outage Allowance.

Commission's Initial Evaluation ofPSC Rates

The cost of energy to be delivered or caused to be delivered by

SIPC to ILECO III is computed at PhP2.50/kWh as the Basic Rate,
plus Fuel Fee which is the actual cost of fuel used during the Billing
Period to deliver energy, specifically computed as follows:
Basic Rate

PhP2.50/kWh

Add: Fuel fee

Energy Fee

x.xx/kWh
PhPx.xx/kWh

The Basic Rate represents the fixed and variable costs incurred
by SIPC in delivering energy to ILECO III including the capital
recovery and profit margin. The Fuel Fee refers to the average
monthly cost of fuel used to generate one (1) kWh of energy exported
by the Power Plant considering the actual amount of bunker-C and
diesel fuel consumed, computed at the weighted average price of said
fuel, dudng the Bming ped

ERC Case No. 2016-001 RC

ORDER/ 18 March 2016
Page 14 Of19

The Fuel Fee is computed as follows:

Fuel Fee (in P/KWh)
(FF)

Fuel Oil Consumption Rate x Fuel Cost

= (FOCR) x (FC)

Fuel Oil Consumption Rate - o.2S61li/kWh

Fuel Cost, FC (in PhP /li), is the price at which SIPC
acquired the fuel equivalent to the weighted average
price of fuels (Bunker-C and Diesel) consumed for
the month.
SIPC submitted its true cost of generation as follows (excluding
fuel cost):
Capital Recovery Fee (CRF)
Fixed Operation and Maintenance Costs
Variable Operation and Maintenance Costs
TOTAL

=
=
=
=

PhPL1so2/kwh
PhPO.707S/kwh
PhPo.828o/kwh
PhP2.68S7/kWh

Based therefrom,
SIPC's true cost of generation
is
Php2.68S7/kWh. However, SIPC alleged that it decided to offer to
DUs (including ILECO III) a lower Base Price of Php2.50/kWh
broken down as follows:
Capital Recovery Fee (CRF)
Fixed Operation and Maintenance Costs
Variable Operation and Maintenance Costs
TOTAL

=
=
=
=

PhPO.964S/kwh
PhPO.707S/kwh
PhPo.828o/kwh
PhP2.soo/kWh

The Commission considered the following rate components in

determining the reasonableness of the proposed rates as the same
were derived based on a long run avoidable cost:
a. Capital Recovery Fee - a capital related element that will
allow SIPC to recover the cost of its investment over the life of
the plant together with a reasonable rate of return;
b. O&M Fee - a component to recover operating and
maintenance costs. The power plant 0 & M cost is commonly
composed of local and foreign, where the local 0 & M cost
represents locally denominated plant operating cost such as
salaries, wages, overhead, and technical expenses, while
foreign 0 & M cost represents maintenance of spare parts,

,upplie" and all othe, oost ""odated with the "id parts

'l

ERC Case No. 2016-001 RC

ORDER/ 18 March 2016
Page 15 of19
are usually imported. The cost component of 0 & M is
classified into the following:
Fixed O&M - a component to recover fixed operating and
maintenance (O&M) costs. This cost is determined by the
capacity of the plant, not the level of utilization; and
Variable O&M - an element to recover variable O&M costs.
These non-fuel costs will vary with the amount of
electricity generated.
c. Fuel Fee - a component to recover fuel costs.
The Commission considers the peaking power that will be
supplied by SIPC will not only address the urgent need of ILECO Ill's
electricity requirements but will also lessen the latter's exposure to
the volatility of WESM prices. Based on ILECO Ill's submission,
SIPC's rate is lower compared with the spot price during four (4)
hours deliveries (7:00 P.M. to 10:00 P.M). Thus, it derived a
generation
cost of PhP2.2373/kWh
(excluding Fuel). The
Commission's rate of PhP2.2373/kWh is lower than SIPC's rate of
PhP2.500/kWh, lower by PhPo.2627/kWh, or lower than SIPC's
TCGR by PhP0-4484/kWh. Further, the Commission compared
SIPC's rates with that of the Commission's previously approved rate
for diesel plants.4 The result was that SIPC's rate is comparable or
within the level of the Commission's previously approved diesel
plants.
5.

RATE IMPACT

In order to determine the impact of the implementation of the

PSC on ILECO Ill's generation costs, an analysis was conducted by
the Applicants to determine the overall cost of power with supply
from SIPC and the cost without supply from SIPC. The results of the
said analysis are summarized hereunder:

Supplier
GCGI
PEDC
SIPC
WESM

Without SIPC
Supply Mix
Rate
(%)
(PhP/kWh)
54.76%
5.05
39.82%
6.334
5.42%
100%

13.147
6.00

With SIPC
Supply Mix
Rate
(%)
(PhP/kWh)
54.76%
5.05
39.82%
6.334
1.66%
10.968
13.147
3.76%
100%
5.9642
/

4 Based

respectively on 4 hours and

12

hours per day operation.

Increase/
Decrease

0.0~58

ERC Case No. 2016-001 RC

ORDER/ 18 March 2016
Page 16 of 19
The above table showed that the entry of SIPC could result to
rate decrease by Phpo.03S8/kWh. Although SIPC displaces WESM
purchases with a decrease of PhP2.179/kWh (13.147-10.968), the
blended rate decrease is minimal because the volume involved or the
contracted quantity is significantly low.
The Commission has a mandate to protect the interest of the
electricity consumers insofar as they are affected by the rates, by
ensuring that the tariffs imposed are consistent with the principle of
full recovery of prudent and reasonable costs.
The initial evaluation of the instant application disclosed that
the PSC entered into by and between ILECO III and SIPC will
redound to the benefit of ILECO Ill's member-consumers in terms of
reliable, continuous, and efficient supply of power within its franchise
area at reasonable costs as mandated by Section 2(b), Chapter 1 of
Republic Act No. 9136 otherwise known as the Electric Power
Industry Reform Act of 2001 (EPlRA), to wit:

Section

2.

Declaration of Policy -

(b) to ensure the quality, reliability, security

and affordability of the supply of electric
power;
WHEREFORE, the foregoing premises considered, the
Commission hereby PROVISIONALLY APPROVES the Power
Sales Contract (PSC) between Iloilo III Electric Cooperative, Inc.
(ILECO III) and SPC Island Power Corporation (SIPC), subject to the
following conditions:
a. Approved Base Rate
Component
CRF
FixedO&M
Variable O&M
Fuel Fee

PhP/kWh
0.964S/kWh
0.6023/kWh
0.670S/kWh
Pass-through
To be computed based on fuel consumption
rate of 0.2S61li/kWh or actual whichever is
lower

b. The CRF and O&M shall not be subject to pric

adjustment for the duration of the contract;

or index

ERC Case No. 2016-001 RC

ORDER/ 18 March 2016
Page 17 Of19
c. The final generation cost that can be recovered shall be
determined by the Commission in its Decision in the instant
application; and
d. In the event that the final rate is higher than that provisionally
granted, the resulting additional charges shall be collected by
SIPC from ILECO III. On the other hand, if the final rate is
lower than
that provisionally granted,
the amount
corresponding to the reduction shall be refunded by ILECO III
to its customers by crediting the same in their electric bills over
a period to be determined by the Commission.
SO ORDERED.
Pasig City, 18 March

2016.
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JOSE VICENTE B. S~

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Chairman and CEO ~

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Commissioner

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RC - ILECO III -SIPC PA

Commissioner

ERC Case No. 2016-001 RC

ORDER/ 18 March 2016
Page 18 of 19
Copy Furnished:
1.

i\tty.llusseIAJabado
Counsel for SIPC and ILECO III
3/F, Builder's Center Building
170
Salcedo St., Legaspi Village, Makati

2.

Office of the Solicitor General

134 Amorsolo Street, Legaspi Village, Makati City

3.

Commission on i\udit
Commonwealth Ave., Quezon City

4.

The Senate Committee on Energy

GSIS Building, Roxas Boulevard, Pasay City

5.

The Committee on Energy

House of Representatives
Batasan Hills, Quezon City

6.

The Municipal Mayor

i\nilao, iloilo

7.

The Municipal Mayor

Banate, iloilo

8.

The Municipal Mayor

Barotac Viejo, iloilo

9.

The Municipal Mayor

San Ilafael, iloilo

10.

The Municipal Mayor

i\juy, iloilo

11.

The Municipal Mayor

Lemery, iloilo

12.

The Municipal Mayor

Sara, iloilo

13.

The Municipal Mayor

Concepcion, iloilo

14.

The Municipal Mayor

San Dionisio, iloilo

15.

The Municipal Mayor

Batad, iloilo

16.

The Municipal Mayor

BaIasan, iloilo

17.

The Municipal MayoV'

Estancia, iloilo

jJ

"

ERC Case No. 2016-001 RC

ORDER/ 18 March 2016
Page 19 of 19
18.

The Municipal Mayor

Carles, Iloilo

19.

The Governor
Province of Iloilo

20.

21.

National Grid Corporation of the Philippines (NGCP)

Quezon Avenue corner BIR Road, Dilirnan, Quezon City
Dir. Ellen C. Ebcas
TWG

14/F, Pacific Center Bldg., San Miguel Ave.,

Ortigas, Pasig City
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