Decision, ERC Case No. 2012-014 RC

IN THE MATTER OF THE APPLICATION FOR APPROVAL OF PROPOSED CAPITAL -EXPENDITURE PROJECTS FOR THE YEARS 2011 TO 2015 (REGULAR PROJECTS)

ISABELA II ELECTRIC COOPERATIVE, INC. (ISELCO II),

Applicant. )(- -----------------------)(

ERC CASE NO. 2012-014 RC

DECISION

Before this Commission for resolution is the application filed on February 1, 2012 by the I sa bela II Electric Cooperative, Inc. (ISELCO II) for approval of its proposed capital expenditure projects for the years 2011 to 2015.

Having ·found said application sufficient in form and in substance with the required fees having been paid, an Order and a Notice of Public Hearing, both dated April 2, 2012, were issued setting the case for initial hearing on May 9, 2012.

In the same Order, ISELCO II was directed to cause the publication of the Notice of Public Hearing, at its own expense, twice (2x) for two (2)' successive weeks in two (2) newspapers of general circulation in the Philippines, with the date of the last publication to be made not later than ten (1 0) days before the date of the scheduled initial hearing. It was also directed to inform the consumers, 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 Notice of

ERC Case No. 2012-014 RC DECISION/December 15, 2014 of 16

Public Hearing and were requested to have their respective duly authorized representatives present at the initial hearing.

Likewise, the Offices of the Provincial Governor of lsabela and the Mayors of the Municipalities within the franchise area of ISELCO II were furnished with copies of the Order and Notice of Public Hearing for the appropriate posting thereof on their respective bulletin boards.

On May 8, 2012, ISELCO II filed its "Pre-Trial Brief' and "Compliance".

During the May 9, 2012 initial hearing, only the ISELCO II appeared. No intervenor/oppositor appeared nor was there any intervention/opposition registered.

At the said hearing, ISELCO II presented its proofs of compliance with the Commission's posting and publication of notice requirements which were duly marked as Exhibits "A" to "N-20", inclusive. Thereafter, it conducted an expository presentation of its application.

At the termination of the expository presentation, the Commission conducted a pre-trial conference. Thereafter, ISELCO II presented the following witnesses: 1) Mr. David Solomon M. Siquian, its General Manager who testified, among others, on the following: a) his duties and responsibilities; b) his authority to execute the verification and certification against forum shopping attached to the instant application; and c) the submission made to the Commission consisting of several documents, computations, annexes, schedules and maps concerning the capital projects; 2) Mr. Wilfreda N. Acasio, its Consultant who testified, among others, on the following: a) on his educational background and training; b) the financial and economic analysis he conducted relative to the proposed capital expenditure projects; c) the source of financing for the proposed projects and summary of various project costs; and d) rate impact of the proposed projects; and 3) Engr. Nestor M. Altoveros, its Technical Services Department Manager who testified, among others, on the following: a) his duties and responsibilities; b) the description of the various proposed projects; c) the manner by which the Distribution Development Plan (DDP) was undertaken; d) the assessment options and deficiencies he identified; and e) the technical evaluation and criteria he conducted.


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. ISELCO II was, then, directed to file its formal offer of evidence and additional supporting documents.

In the meantime, the Commission noted the following submissions made by ISELCO II:

1. The "Motion for Extension of Time to File Compliance" filed on June 26, 2012;

2. The "Second Motion for Extension of Time to File Compliance" filed on July 26, 2012";

3. The "Third Motion for Extension of Time to File Compliance" filed on July 27, 2012;

4. The "Fourth Motion for Extension of Time to File Compliance" filed on August 28, 2012;

5. The "Compliance" filed on November 8, 2012; and

6. The "Compliance" filed on November 14, 2012.

On December 26, 2012, ISELCO II filed its "Formal Offer of Evidence".

On March 5 to 7, 2013, the Commission conducted an ocular inspection on the assets of ISELCO II subject matter of the instant application.

On April 26, 2014 and July 21, 2014, the Commission issued Orders directing ISELCO ll to submit additional supporting documents.

On August 26, 2014, ISELCO II filed "Compliance".


On December 1, 2014, the Commission issued an Order admitting ISELCO ll's "Formal Offer of Evidence" and declaring the case submitted for resolution.

DISCUSSION

ISELCO II sought the Commission's approval of the following capital projects for the years 2011 to 2015:

PARTICULARS PROPOSED COST (PhP)

Projects for 2011 to 2015 Construction of Feeder Lines from San Rafael Substation 4,260,294.11 RefurbishmenURehabilitation of Cabagan Substation 4,676,069.79 Replacement of Overloaded Distribution Transformer (DTs) 63,936,651.60 Replacement of Defective Kilowatt-hour (kWhr) Meters 41,518,228.05 Clustering of Meters 78,227,341.43 Installation of Equipment at Distribution Lines 38,616,513.29 Conversion/Revamp/Upgrading of Distribution Lines 41,774,797.21 Acquisition of Load Logger and Thermal Scanner 7,961,864.63 Construction of Double Circuit Feeder Line from San Manuel Substation 6,056,231.74 Procurement and Installation of Feeder Metering for San Manuel Substation 1 I 758,908.79 RefurbishmenURehabilitation of Naguilian Substation 1,848,558.15 Installation/Construction of 10 MVA Power Transformer at Sta. Filomena, San Mariano 31,567,500.00 Construction of 16 km. 69 kV line from Naguilian Junction to San Mariano 45,024,520.38 Acquisition of Software (Engineering Analysis and AM/FM) 7,628,985.00 Replacement of Rotten, Defective or Broken Hardware, Materials and Equipment 84,886,691.58 Ad d-Ons 58,236,215.27 SCADA for San Rafael and San Manuel Substation 7,540,161.82 Rural Electrification 56,763,799.21 Renovation/Refurbishment of Administration and Engineering Building, Meter Laboratory and Extension of Engineering Building 13,095,750.00 Vehicles 64,536,925.00 Safety Equipment 938,784.00


Lineman's Tool and Equipment 2,262,871.26 Testing Equipment 3,897,671.46 Softwares/lnformation/Communication System Equipment 7,461,086.80 Logistics for 69 kV Subtransmission Maintenance 15,525,000.00

Total Cost of Proposed Capital Expenditures 690,001,420.57 Total Amount of Subsidy 56,763,799.21

Total Cost (Exclusive of Government Subsidy) 633,237,621.36

ISELCO II was organized and registered as non-stock, nonprofit electric cooperative with the National Electrification Administration (NEA) on February 25, 1978. Its organization was mandated by Republic Act No. 60381 as later amended by Presidential Decree No. 2692

. On June 22, 2007, it was registered with the Cooperative Development Authority (CDA) by virtue of Republic Act No. 6938 or "An Act to Ordain a Cooperative Code of the Philippines" and Republic Act No. 69393

.

It is the exclusive franchise holder issued by the National Electrification Commission (NEC) to operate an electric light and power services in the Municipalities of Sta. Maria, San Pablo, Cabagan, Maconacon, Quezon, Santo Tomas, Tumauini, Divilacan, Delfin Albano, Mallig, Quirino, !lagan, Roxas, San Manuel, Aurora, Burgos, Gamu, Naguilian, Benito Soliven, San Mariano, and Palanan, all in the Province of lsabela.

2

3

"An Act declaring a National Policy Objective for the Total Electrification of the Philippines on an Area Coverage Service Basis, Providing for the Organization of the National Electrification Administration (NEA), the Organization, Promotion, and Development of Electric Cooperatives to Attain the Objective, Prescribing Terms and Conditions for their Operation, the Repeal of R.A. No. 2717, and For Other Purposes."

"Creating the 'National Electrification Administration' as a Corporation, Prescribing its Powers and Activities, Appropriating the Necessary Funds Therefor and Declaring a National Policy Objective for the Total Electrification of the Philippines on an Area Coverage Service Basis, the Organization, Promotion and Development of Electric Cooperatives to Attain the said Objective, Prescribing Terms and Conditions for their Operations the Repeal of Republic Act No. 6038, and for Other Purposes."

"An Act Creating the Cooperative Development Authority to Promote the Viability and Growth of Cooperatives As Instruments of Equity, Social Justice and Economic Development, defining its Powers, Functions and Responsibilities, Rationalizing Government Policies and Agencies with Cooperative Functions, Supporting Cooperative Development, Transferring the Registration and Regulation Functions of Existing Government Agencies on Cooperatives as such and Consolidating the same With the Authority, Appropriating Funds Therefor, and For Other Purposes."


A. MODELS USED IN FORECASTING

Under the Electric Cooperative's Distribution Utility Planning Manual (ECDUPM), all forecasting models formulated must be tested for validity and accuracy. Valid models should meet the following criteria for each statistical value:

1. Adjusted R2 should be at least 99%> (for trend analysis); 2. p-va/ue should be lower than 0.1; and 3. t-statistic should be greater than 2 or less than -2.

Accuracy of the model, likewise, should have a Mean Absolute Percentage Error (MAPE) of less than five percent (5°/o ).

These models can either be polynomial trend and its variants such as for example log and power, or time series technique such as Holt-Winter's method and optimized trend with seasonal factors which are formulated by the distribution utility planner in determining which model will produce the best forecast. The final resulting model should meet the technical criteria as indicated above.

All models it formulated were verified by the Commission in order to determine whether or not the resulting forecast conforms to the criteria as specified in the guidelines.

B. PERFORMANCE ASSESSMENT

Evaluating the performance of a distribution network will provide a complete picture of the needs of an EC in formulating project ideas. Below is the summarized assessment on the condition of the distribution system of ISELCO II in terms of safety, capacity, power quality, system loss, rural electrification project, other network requirement, and non-network projects:

a. Safety assessment

• ISELCO II did not provide any assessment whether its existing protective devices are capable of handling the expected/calculated fault currents in its system;


• Several of its substations were equipped with power fuse as the main protective device of its substation which is noncompliant to the requirement of the Philippine Grid Code (PGC);

• It has several deteriorated asset like rotten poles, broken and hardware.

b. Capacity assessment

• Substation capacity

It only provided the loading condition of its existing substations as of October 2011. No further assessment was provided.

Substation Installed capacity Peak kVA Percent loading Naguilian 5MVA 3.265 MVA 65.30% Roxas 10 MVA 9.084 MVA 90.84% Cabagan 10 MVA 7.490 MVA 74.90% Baligatan 15 MVA 10.604 MVA 70.69%

All of its substations are ideally loaded except for Roxas, Cabagan, and Baligatan Substations. The capacity concern of Roxas Substation was addressed in another capital expenditure application it filed and which was docketed as ERC Case No. 2012-013 RC.

• There is a requirement to provide additional capacities of distribution transformers due to increasing demand of its system; and

• It needs to provide connection facilities such as meters and service drop wires.

c. Power quality assessment

• Assessment in terms of voltage variation, voltage unbalance, total harmonic distortion, and other power quality parameters it needs to monitor pursuant to the requirements of the Philippine Distribution Code (PDC) was not provided in the application. It also failed to submit a voltage variation report to the Commission.


d. System loss assessment

Per annual report submitted to the Commission, its system loss performances for the Years 2012 to 2013 are as follows:

ISELCO ll's system loss report as declared in the Annual Report

Year Technical Loss Non-technical loss Total Remarks

2012 8.87% 7.28% 16.15% Total system loss is beyond the cap

2013 8.30% 7.02% 15.51% Total system loss is beyond the cap

Its system losses are attributed to:

• Inaccurate registration of energy consumed by its consumers due to defective kilowatt-hour meters; and

• Pilferage.

e. Rural Electrification

• There are still several barangays/sitios within its franchise area that needs to be energized. Since it is the mandate of the cooperative to provide rural electrification, the detailed plan in energizing the remaining barangays and sitios were conscientiously prepared and included in the capital expenditure application.

f. Other Network projects

• These are other projects necessary for the proper monitoring of its system and to improve the overall planning preparation of the DU for its capital expenditures such as for example feeder metering.

g. Non-Network projects

• It is already in their thirty-six (36) years old, and some of its offices are already deteriorated. Some of its vehicles have reached the end of their standard asset lives. There are equipment that need to be upgraded.


C. PROJECT FORMULATION

Preparation of capital expenditure projects requires diligent formulation of project ideas that resulted in the assessment of a distribution network in coming up with a particular solution. Several alternatives should be considered in addressing a deficiency of a system in order to provide a technically feasible and economically viable project for its member consumers.

D. GOAL SETTING AND PRIORITIZATION

In order to meet the desired goal of an EC in addressing the deficiencies of its system, the degree of importance of the identified criteria should be established due to economic considerations affecting electric consumers.

Under the ECDUPM, the safe installations and operation of the distribution system should be the first priority of the electric cooperatives and should comply with the safety requirements of the Philippine Electrical Code (PEC). Capacity problems take second priority after the safety problems. This shall include the identified future requirements of consumers. The third priority of the EC is to correct the voltage violations in the distribution system and other power quality problems.

Priorities regarding improvements in service reliability, reduction of system losses and rural electrification shall be set by the EC considering its access to financial resources.

E. PROJECT FINANCING AND INDICATIVE RATE IMPACT

Based on its application, ISELCO II intends to finance the cost of its capital expenditure by securing loans from financial institutions with an interest rate of nine percent (9%) per annum payable in fifteen (15) years.

Shown further is the Commission's simulation as to the indicative effect on ISELCO ll's existing Reinvestment Fund for Sustainable Capital Expenditures (RFSC) rate with the implementation of the proposed capital projects considering the proposed financing scheme:

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Indicative Effect on the Existing RFSC Rate of ISELCO II if No Loans Availed 2014 . 2015

. 2016 2017 2018 TOTAL ..

Forecasted energy sales, kWh 139,816,091 148,680,040 158,768,685 169,879,572 181,455,470 798,599,858.00 Cash balance beginning, PhP,

5,435, 771.00 (43,379,029.90) (118,760,571.71) (86,599,315.73) (37 ,509,539.92) 5,435,771.00 excess/( shortfall) CASH INFLOWS

current year collection 51,676,027.23 54,952,142.78 58,680,905.98 62,787,489.81 67,065,941.71 295,162,507.52

[email protected]/kWh 50% of income on leased properties 419,081.00 419,081.00 419,081.00 419,081.00 419,081.00 2,095,405.00

rural electrification subsidy 15,620,492.16 14,189,442.55 loan proceeds from financial

-institutions, PhP - - - - -Total Cash Inflows, PhP 67,715,600.39 69,560,666.34 59,099,986.98 63,206,570.81 67,485,022.71 297,257,912.52

Available cash for disbursment 73,151,371.39 26,181,636.44 (59,660,584. 73) (23,392,744.92) 29,975,482.79 302,693,683.52

CASH OUTFLOWS CAPEX requirement 63,009,177.86 97,527,878.50 - - - 160,537,056.36 rural electrification project 15,620,492.16 14,189,442.55 old debt (old amortization) 36,683,219.00 32,493,428.00 26,938,731.00 14,116,795.00 3,035,825.00 113,267,998.00

new amortization (new CAPEX), PhP - - - . - - -

ERC Permit Fee, PhP 1,217,512.28 731,459.09 - - - 1,948,971.36

Total Cash Outflows, PhP 116,530,401.29 144,942,208.14 26,938,731.00 14,116,795.00 3,035,825.00 275,754,025.72 Cash balance ending, PhP,

(43,379,029.90) (118,760,571.71) (86,599,315.73) (37,509,539.92) 26,939,657.79 26,939,657.79 excess/( shortfall) Excess/(shortfall) on RFSC, PhP/kWh (0.3103) (0.7988) (0.5454) (0.2208) 0.1485 0.0337

Indicative Effect on the Existing RFSC Rate of ISELCO II at 9% Interest Rate for 15 years

2014 ' 2015 2016 2017 2018 TOTAL

Forecasted energy sales, kWh 139,816,091 148,680,040 158,768,685 169,879,572 181,455,470 798,599,858.00 Cash balance beginning, PhP, 5,435,771.00 11,934,124.44 14,472,254.78 27,025,304.40 56,506,873.85 5,435,771.00 excess/( shortfall) CASH INFLOWS

current year collection 51,676,027.23 54,952,142.78 58,680,905.98 62,787,489.81 67,065,941.71 295,162,507.52 @PhP0.3696/kWh 50% of income on leased properties 419,081.00 419,081.00 419,081.00 419,081.00 419,081.00 2,095,405.00

rural electrification subsidy 15,620,492.16 14,189,442.55 loan proceeds from financial 63,009,177.86 97,527,878.50 - - - 160,537,056.36 institutions, PhP Total Cash Inflows, PhP 130,724,778.25 167,088,544.84 59,099,986.98 63,206,570.81 67,485,022.71 457,794,968.88

Available cash for disbursment 136,160,549.25 179,022,669.27 73,572,241.75 90,231,875.21 123,991 ,896.56 463,230,739.88

CASH OUTFLOWS

CAPEX requirement 63,009,177.86 97,527,878.50 - - - 160,537,056.36

rural electrification project 15,620,492.16 14,189,442.55

old debt (old amortization) 36,683,219.00 32,493,428.00 26,938,731.00 14,116,795.00 3,035,825.00 113,267,998.00

new amortization (new CAPEX), PhP 7,696,023.52 19,608,206.36 19,608,206.36 19,608,206.36 19,608,206.36 86,128,848.95

ERC Permit Fee, PhP 1,217,512.28 731,459.09 - - - 1 ,948,971.36

Total Cash Outflows, PhP 124,226,424.81 164,550,414.50 46,546,937.36 33,725,001.36 22,644,031.36 361,882,874.67 Cash balance ending, PhP, 11 ,934,124.44 14,472,254.78 27,025,304.40 56,506,873.85 101 ,347,865.21 101,347,865.21 excess/( shortfall) Excess/(shortfall) oil RFSC, PhP/kWh 0.0854 0.0973 0.1702 0.3326 0.5585 0.1269

Detailed discussion of the Commission's resolution of the proposed capital expenditures is embodied in a separate document hereto attached as Annex "A" and made integral part of this Decision.

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A perusal of the evidence presented herein showed that the approval of ISELCO ll's capital projects for the years 2011 to 2015 is in accordance with the provisions of R.A. 9136, the Commission's "Resolution Amending the Rules for Approval of Regulated Entities' Capital Expenditure Projects" and will redound to the benefit of electricity consumers in terms of continuous, reliable and efficient power supply as mandated by R.A. 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'?.

WHEREFORE, the foregoing premises considered, the application filed by the lsabela II Electric Cooperative, Inc. (ISELCO II) for approval of its capital expenditure program for the years 2011 to 2015 is hereby APPROVED with MODIFICATION.

Accordingly, the following are the confirmed, approved and deferred capital expenditure projects:

A. CONFIRMED PROJECTS:

PROPOSED COST PARTICULARS (PhP)

Construction of Feeder Lines from San Rafael Substation 1 '130,844.69 Refurbishment/Rehabilitation of Cabagan Substation 710,000.00 Replacement of Overloaded Distribution Transformer 18,896,612.81 Replacement of Defective kWhr Meters 6,113,191.47 Installation of Protective Equipment at Distribution Lines 5,437,978.88 Acquisition of Load Logger and Thermal Scanner 970,000.00 Construction of Double Circuit Feeder Line from San Manuel Substation 1 ,371,094.50 Acquisition of Software (Engineering Analysis and AM/FM) 1,684,708.20 Replacement of Rotten, Defective or Broken Hardware, Materials and Equipment 19,066,575.55 Add-Ons 11,945,764.24 Rural Electrification 26,953,864.50 Renovation/Refurbishment of Administration and Engineering Building, Meter Laboratory and Extension of Engineering Building 2,651,529.95


B. APPROVED PROJECTS:

PARTICULARS Refurbishment/Rehabilitation of Cabagan Substation Replacement of Overloaded Distribution Transformer Replacement of Defective kWhr Meters Installation of Protective Equipment at Distribution Lines Acquisition of Load Logger and Thermal Scanner Procurement and Installation of Feeder Metering for the San Manuel Substation Refurbishment/Rehabilitation of Naguilian Substation Acquisition of Software (Engineering Analysis and AM/FM) Replacement of Rotten, Defective or Broken Hardware, Materials and Equipment Add-Ons SCADA for San Rafael and San Manuel Substation Rural Electrification Renovation/Refurbishment of Administration and Engineering Building, Meter Laboratory and Extension of Engineering Building Vehicles Testing Equipment Softwaresllnformation/Communication System Equipment

Total Cost of Proposed Capital Expenditure Projects Total Amount of Subsidy

TOTAL COST(Exclusive of Government Subsidy)

23,487,685.70 5,859,806.27

126,279,656.76 26,953,864.50 99,325,792.26

PROPOSED COST (PhP)

3,602,896.20 17,519,691.50 9,762,460.92 8,646,936.20 4,176,261.45

1 ,502,896.20 1,219,930.80 3,000,000.00

34,658,440.04 34,590,192.10 6,226,650.00

29,809,934.71

10,400,000.00 20,284,000.00

3,345,422.45 1 ,601,278.50

190,346,991.07 29,809,934.71

160,537,056.36


C. DEFERRED PROJECTS:

PROPOSED COST PARTICULARS (PhP)

Clustering of Meters -Conversion/Revamp/Upgrading of Distribution Lines -Installation/Construction of 10 MVA Power Transformers at Sta. Filomena, San Mariano -Construction of 16 km. 69 kV Line from Naguilian Junction to San Mariano -Logistics for 69 kV Subtransmission Maintenance -

Year 2011 2012 2013 2014 2015

Relative thereto, ISELCO II is hereby directed to remit to the Commission, within fifteen (15) days from receipt hereof, a total permit fee in the amount of One Million Nine Hundred Forty-Eight Thousand Nine Hundred Seventy-One and 36/100 Pesos (PhP1 ,948,971.36), computed as follows:

PhP259,862,848.62 -----------------------------X PhP0.75 = PhP1 ,948,971.36

PhP100.00

Breakdown of Permit Fees

Project Cost (PhP) Permit Fees (PhP} Due Date 17,523,035.02 Within fifteen (15) 35,207,205.33 395,476.80 from receipt hereof 46,595,551.91 63,009,177.86 822,035.47 June 30, 2015 97,527,878.50 731,459.09 December 15, 2015

Total (PhP) 259,862,848.62 1,948,971.36 -

days

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Further, ISELCO II is hereby directed to: 1) submit a progress report with an indication of any variance in the implementation of the project and time schedule; and 2) conduct a competitive bidding for the purchase of major materials in the implementation of the proposed project.

SO ORDERED.

Pasig City, December 15, 2014.

-~~ ;j(~ ENAIDA G. CRUZ-DUCUT

Commissioner

Chairperson r.J

Q~~_,rl.~~~ GL~~

1

1CTORIA . YAP-TARUC Commissi er

JOSEFINA PATR~-~MAGPALE-ASIRIT c~

1

~[;'oner


Copy Furnished:

1. VERGARA ROBLES LAW OFFICES Attention: ATTY. EMMANUEL EMILIO P. VERGARA

Counsel for Applicant ISELCO II The Penthouse, Park Avenue Mansions Park Avenue, Pasig City

2. ISABELA II ELECTRIC COOPERATIVE, INC. (ISELCO II) Attention: MR. DAVID SOLOMON M. SIQUIAN

General Manager lsabela II Electric Cooperative, Inc. (ISELCO II) Alibagu, !lagan, lsabela

3. The Office of the Solicitor General 134 Amorsolo Street, Legaspi Village Makati City, Metro Manila

4. The Commission on Audit Commonwealth Avenue Quezon City, Metro Manila

5. The Senate Committee on Energy GSIS Bldg., Roxas Blvd., Pasay City Metro Manila

6. The House Committee on Energy Batasan Hills, Quirino City, Metro Manila

7. Office of the President of PCCI Philippine Chamber of Commerce and Industry (PCCI) 3rd Floor, Chamber and Industry Plaza (CIP) 1030 Campus Avenue corner Park Avenue McKinley Town Center, Fort Bonifacio, Taguig City

8. Office of the Provincial Governor Province of lsabela

9. Office of the Municipal Mayor Santa Maria, lsabela

10. Office of the Municipal Mayor San Pablo, lsabela

11. Office of the Municipal Mayor Cabagan, lsabela

12. Office of the Municipal Mayor Maconacon, lsabela

13. Office of the Municipal Mayor Quezon, lsabela


14. Office of the Municipal Mayor Santo Tomas, lsabela

15. Office of the Municipal Mayor Tumauini, lsabela

16. Office of the Municipal Mayor Divilacan, lsabela

17. Office of the Municipal Mayor Delfin Albano (Magsaysay), lsabela

18. Office of the Municipal Mayor Mallig, lsabela

19. Office of the Municipal Mayor Quirino, lsabela

20. Office of the Municipal Mayor llagan, lsabela

21. Office of the Municipal Mayor Roxas, lsabela

22. Office of the Municipal Mayor San Manuel, lsabela

23. Office of the Municipal Mayor Aurora, lsabela

24. Office of the Municipal Mayor Burgos, lsabela

25. Office of the Municipal Mayor Gamu, lsabela

26. Office of the Municipal Mayor Naguilian, lsabela

27. Office of the Municipal Mayor Benito Soliven, lsabela

28. Office of the Municipal Mayor San Mariano, lsabela

29. Office of the Municipal Mayor Palanan, lsabela

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ANNEX "A"

PROPOSED CAPITAL PROJECTS

Project Title (1) Construction of feeder lines from San Rafael Substation

Project Code Project Type Project Rank Project Category

PRI-FDR DC

•••

• I • • • cts

Project Description Duration

• Construction of 1.15 km. 3-phase double circuit 13.2 kV line for Feeders 2 and 3 of the new San Rafael Substation;

• Construction of 3.32 km. 3-phase underbuilt 13.2 kV line that will connect Feeder 3 of San Rafael Substation to the existing 3-phase line at Nueva Era, San Manuel; and

• Construction of 1. 79 km. 3-phase underbuilt 13.2 kV line for Feeder 1 of San Rafael Substation to the existing line at Lanting, Roxas.

Project Justification

Initial - 2011; revised to 2012-

2013

To serve as distribution feeder lines for the newly constructed San Rafael Substation

Commission's Evaluation On February 1, 2012, ISELCO II filed an application for the approval of an emergency project which involves among others the immediate construction of a new substation at San Rafael, Roxas subject under ERC Case No. 2012-013 RC. However, the proposed emergency CAPEX did not include the construction of outgoing feeder lines.

Thus, ISELCO II filed the above stated proposal to construct three (3) outgoing feeder lines (Feeder 1, 2, & 3) for it to be able to distribute power from the newly constructed San Rafael Substation to the existing distribution network.

On the other hand, the Commission adjusted the proposed cost of the project based on the actual expenditure that was incurred per documents provided b ISELCO II.

1

Pro ect to continue as

Pro ect to continue with technical amendments Project to be deferred which may be included in its next

ication with additional ·ustification

Project Title (2) Refurbishment/Rehabilitation Substation SS-REF/REHAB CAB S/S

of Cabagan

Project Code Project Type Project Rank Project Category Substation/Prima Distribution Pro ect


• Installation of 69 kV SF6 circuit breaker at Cabagan Substation;

• Installation of 69 kV disconnect switch at Cabagan Substation; and

• Installation of feeder metering at Cabagan Substation.


Initial - 2011 to 2012; revised to

2013-2014

To comply with the requirements of the Philippine Grid Code (PGC) for grid connection and to improve the monitoring of the distribution feeder network of the Cabagan Substation

Commission's Evaluation Section 4.5.1.2 and 4.5.1.3 of the PGC (Amendment No. 1) provides that:

{( .. .4. 5. 1. 2 The Connection point shall be controlled by a circuit breaker that is capable of interrupting the maximum short circuit current at the point of connection. Howeve0 connections to subtransmission lines, 69 kV and below, shall at least be rovided with disconnect switches and

2

faulted circuit indicators at the Tapping Points but all substations connected thereto shall be provided with circuit breaker(s).

4.5.1.3 Disconnect switches shall also be provided and arranged to isolate the circuit breaker for maintenance purposes ... "

At present, ISELCO ll's Cabagan Substation is equipped with a 69 kV Power Fuse as the primary protective device of its power transformer which is non-compliant with the provision of the PGC. Hence, ISELCO II intends to acquire an SF6 circuit breaker and disconnect switch to comply with the requirement of the standard. In addition, ISELCO II will likewise install feeder metering for the Cabagan Substation for monitoring purposes and to improve the overall planning preparation of its capital expenditures.

On the other hand, the Commission adjusted the proposed cost of the project based on the actual expenditure incurred for 2013 and the corresponding revision made by ISELCO II per documents provided.

ct to continue with technical amendments Project to be deferred which may be included in its next


Project Title (3)


Replacement of overloaded distribution transformer SLRP-REP DXT -.-Other Network uirements

Project Description Duration Replacement transformers

of overloaded distribution 2011-2015

3

~-- --~--- -J

Commission's Evaluation The purpose of the proposed capital project is to replace existing distribution transformers that are found to have reached the loading limit of the equipment due to increasing demand of its customers. This is to ensure that future capacities will be accommodated by ISELCO II without disrupting the reliability of its service.

ISELCO II will likewise utilize the old/replaced/pulled-out distribution transformers that are found to be still in working condition to minimize the cost of its proposed activity.

On the other hand, the Commission adjusted the proposed cost of the project based on the actual expenditure incurred for the years 2011 to 2013 and the corresponding revision made by ISELCO II per documents rovided.

Pro ect to continue with revised Pro ect to continue with technical amendments Project to be deferred which may be included in its next

lication with additional ustification

·-·- ··---. - . -m Loss Reduction

Project Title (4) Project Code Project Type Project Rank Project Category Other Network Re uirements

Project Justification To provide accurate measurement of energy consumed by each member-consumers.

4

Commission's Evaluation · The purpose of the proposed capital expenditure project is to replace existing kilowatt-hour meters that are found to be defective in order to en·sure that all energy consumed by every customers are accurate.

The proposed activity will likewise improve the system technical loss of ISELCO II due to avoided losses caused by improper registration of defective kilowatt-hour meters.

On the other hand, the Commission adjusted the proposed cost of the project based on the actual expenditure incurred for the years 2011 to 2013 and the corresponding revision made by ISELCO II per documents rovided.

ect to continue with revised ect to continue with technical amendments

Project to be deferred which may be included in its next lication with additional ·ustification

Project Description Duration Relocation of metering facilities at elevated centers or clusterin structures 2011-2015

5

Commission's Evaluation The proposed project is intended to relocate residential electric kilowatt-hour meters from the consumer's premises to the DU's electric pole in order to mitigate the occurrence of pilferage activity and reduction in system loss.

Article 11 of the Magna Carta for Residential Electricity Consumers states that;

" ... The customer has the right to a meter installed in a clean place free of vibration and where it will be easily accessible and visible for reading and testing by both the distribution utility and the consumer ...

. . . Meters shall be located on the outside wall of the building or private pole and shall not be more than 3 meters nor less than 1.52 meters mounting height ...

. . . Clustering of meters may be allowed under any of the following circumstances:

1. Upon the request of a consumer; 2. When there is no right of way; or 3. In areas with high incidence of electricity

pilferages ... "

The proposed CAPEX is being pursued to mitigate the occurrence of pilferage activity in its coverage area and to lessen its system loss. Resolution No. 10, Series of 2014 provides that an area be considered as high incidence of pilferage if the difference between the check meter or any recording device and the aggregated consumption of all meters in the said area is more than the system loss cap for a period of at least four (4) weeks. However, ISELCO II did not present any additional proof or documents that could justify the need of implementing the proposed project that will comply with the requirement of the guidelines.

The Commission resolved to defer the proposed capital project which may be included in its next capital expenditure application. ISELCO II must present additional ·ustifications for the pro osed ro·ects.


6

Project Title (6) Installation of protective equipment at


distribution lines PRI-PROCT EQMNT

• Distribution Pro ects

Project Description · Duration Installation of protective devices (such as reclosers, fault indicators, fuse link, fuse cut-out & arrester combination) on backbone and lateral lines.

To rovide a safe and reliable distribution network

Commission's Evaluation .

2011-2015

The proposed capital project is intended to improve the safety and reliability of ISELCO ll's distribution network by providing each specific section of its system with an appropriate protective device to guard the whole distribution grid from being interrupted by the occurrence of fault incidents.

Equipment such as reclosers, fuse link, and fuse cut-out provides the necessary protection needed during fault condition by disrupting the flow of power within the faulted section of the line without affecting the whole distribution grid. Fault indicators on the other hand are used for easy identification of faulted sections in the line in order to shorten the length of restoring power during fault interruptions. The installation of protective equipment will improve the safety as well as the reliability of ISELCO ll's distribution network.

The Commission adjusted the proposed cost of the project based on the actual expenditure incurred for the years 2011 to 2013 and the corres ondin revision made b ISELCO II er documents rovided.

7


Project Title (7) Conversion/revamp/upgrading of distribution lines


PRI- 30CVN . . - . -• Distribution Pro

Project Description Duration The proposed capital project involves the conversion of distribution lines from: 1-phase to Vphase; 1-phase to 3-phase; and V-phase to 3-

hase.


2011-2015

To address power quality issues on overextended primary lateral lines 1-phase & V-phase

Commission's Resolution The proposed capital project is intended to address power quality issues on overextended primary/secondary/lateral lines.

However, the Commission could not determine the deficiency of ISELCO ll's distribution system per power quality criteria as manifested in its application considering that it failed to provide a detailed quantitative performance of its system in terms of voltage level and voltage imbalance parameters. Hence, no clear assessment was provided whether or not the proposed capital expenditure will be technically feasible and economically viable to the consumer.

8



Project Title (8) • • . . ....... - .. . RELlA-LOGlSTlCS Project Code

Project Type Project Rank Project Category

Non-network uirements 2

• uirements

Project Justification • Thermal scanner - use to identify or locate hot spots or loose

connections that are potential causes of failures on the distribution system.

• Load logger - a device that records data overtime to monitor the loading condition of the distribution lines or distribution transformer for ro er mana ement and identification of the distribution uti lit .

Commission's Evaluation The proposed capital project will help improve the maintenance and monitoring activity of ISELCO II for the proper management of the distribution network.

The Commission adjusted the cost of the project based on the actual expenditure incurred for 2013 and the corresponding revision made b ISELCO II er documents rovided.

r'"'"""'"T to continue with technical amendments Project to be deferred which may be included in its next a ication with additional ustification

9

Project Title (9)


Construction of double circuit feeder line from San Manuel Substation PRI 13.2KV DC SM -.-• Distribution Pro ect

Project Description Duration Construction of a 4.08 km. 3-phase 13.2 kV line Initial - 2012; double circuit feeder lines for San Manuel revised to 2012-Substation. 2013

Project Justification To serve as distribution feeder lines for the newly constructed San Manuel Substation.

Commission's Evaluation On February 1, 2012, ISELCO II filed an application for the approval of an emergency project which involves among others the relocation of the 10 MVA Munoz Substation to San Manuel, lsabela, subject of ERC Case No. 2012-013 RC. However, the proposed emergency CAPEX did not include the construction of outgoing feeder lines.

Thus, ISELCO II filed the above stated proposal to construct a double circuit outgoing feeder lines for it to be able to distribute power from the newly constructed (relocated) San Manuel Substation to the existing distribution network.

The Commission adjusted the proposed cost of the project based on the actual expenditure incurred by ISELCO II per documents

rovided.

Pro ect to continue with revised ca Pro ect to continue with technical amendments Project to be deferred which may be included in its next

cation with additional ·ustification

10

Project Title (1 0) Procurement and installation of feeder metering for San Manuel Substation


PRI 13.2KV FM SM Other Network uirements 2 Other Network uirements

Project Description . Duration Installation of feeder metering at San Manuel Substation

Project Justification -

Initial- 2012; revised to 2014

To monitor each feeders consumption and other parameters for overall lannin and management o eration

Commission's Evaluation ISELCO II intends to install feeder metering at San Manuel Substation for monitoring purposes and to improve the overall planning preparation for its capital expenditures. With feeder metering, it could easily determine the system's loss per feeder by comparing the kilowatt-hour consumption registered by the feeder meter and the kilowatt-hour consumption registered in all of the meters installed in the feeder.

On the other hand, the Commission adjusted the cost of the proposed project based on the corresponding revision made by ISELCO II per documents rovided.

Project to be deferred which may be included in its next ·on with additional ustification

11

J

Approved CAPEX Cost

Project Title (11)


Refurbishment/rehabilitation Substation SSNAG-FM OCB CF

• Distribution Pro ect

of Naguilian


• Repair of Oil Circuit Breaker (OCB) to be installed at Naguilian Substation;

• Installation of cooling fans for the power transformer at Naguilian Substation; and

• Installation of feeder metering at Naguilian Substation.


Initial - 2012; revised to 2014

To comply with the requirements of the PGC for grid connection; to provide additional capacity and to avoid overheating of equipment; and to improve the monitoring of the distribution feeder network of the Na uilian Substation.

Commission's Evaluation -Section 4.5.1.2 of the PGC (Amendment No. 1) provides that:

{{ .. .4. 5. 1. 2 The Connection point shall be controlled by a circuit breaker that is capable of interrupting the maximum short circuit current at the point of connection. However, connections to subtransmission lines, 69 kV and below, shall at least be provided with disconnect switches and faulted circuit indicators at the Tapping Points but all substations connected thereto shall be provided with circuit breaker(s) ... "

At present, ISELCO ll's Naguilian Substation is equipped with a 69 kV Power Fuse as the primary protective device of its power transformer which is non-com liant with the rovision of the PGC.

12

Hence, ISELCO II intends to rehabilitate an old Oil Circuit Breaker (OCB) in its inventory to be utilized as a primary protective device of its substation transformer to comply with the requirement of the Grid Code.

Further, ISELCO II will likewise install cooling fans to the power transformer of Naguilian Substation to provide additional capacity and avoid overheating of equipment. In addition, ISELCO II will install feeder metering at the said substation for monitoring purposes and to improve the overall planning preparation for its capital expenditures.

Even though the Commission approves the proposed capital project due to the safety requirements of the standard and the financial consideration of the project, ISELCO II should be reminded to conduct further economic study with its proposal in order to determine whether or not it will be more viable to procure a new circuit breaker in comparison to rehabilitating an old equipment for the benefit of the consumers.

The Commission adjusted the proposed cost of the project based on the corresponding revision made by ISELCO II per documents provided.


lication with additional ·ustification

Approved CAPEX Cost , .

2011 2012 2013 2014 (PhP) (PhP) (PhP) (PhP)

- - - PhP1 ,219,930.80

2015 (PhP)

-

Project Title (12) lnsatallation/construction of 10 MVA power transformer at Sta. Filomena San Mariano


2

Project Description .::: :, . .,.., ~ Duration Construction of a new 10 MVA Substation at Sta. Filomena, San Mariano

2012

13

Project Justification ISELCO II did not provide any justification in its application (no technical write-u , ·ust the title and the estimated cost of the ro·ect

Commission's Evaluation The Commission could not assess the necessity of the proposed capital project considering that ISELCO II did not outline/identify the problem that need to be addressed and no technical and economic justification was provided.

The Commission resolved to defer the



Project Title (13) Construction of 16 km. 69 kV line from Naguilian unction to San Mariano


Project Description Duration Construction of a 69 kV subtransmission line for the ro osed San Mariano Substation


2012

To connect the proposed 10 MVA Substation at Sta. Filomena, San Mariano to the transmission rid

14

Commission's Evaluation The Commission could not determine the necessity of the proposed 10 MVA Substation at Sta. Filomena, San Mariano as discussed in Project No. 12 hence the proposed sub-transmission project is likewise resolved for deferment.


Project Title (14)


Acquisition of software (engineering analysis and AM/FM PRI-AQN ENGGSOFT Non-network uirements 2 Non-network uirements

Project Description I Duration Procurement of engineering software and

Initial- 2012; revised AM/FM (Automated Mapping/Facilities to 2012 & 2015 Mana ement

Project Justification To improve service efficiency and the overall planning preparation for its ca ital ex enditures

Commission's Resolution ISELCO II intends to acquire engineering software (to facilitate shortcircuit calculations, load flow, power quality analysis, etc.) and AM/FM software (mostly refers to software that allows utility to digitize, manage and analyze its network data) to improve the overall planning preparation for its capital expenditures and proper management of the distribution network.

The Commission adjusted the proposed cost of the project based on the actual expenditure incurred for 2012 and the corresponding revision made b ISELCO II per documents rovided.

15

ct to continue with technical amendments Project to be deferred which may be included in its next a lication with additional ustification

Project Title (15) Replacement of rotten, defective or broken hardware materials and e · ment

Project Code Project Type Project Rank Project Category • and Seconda Distribution ct

Project Description Duration Replacement of rotten poles, defective or broken hardware, materials and e ui ment.

To maintain a safe and reliable distribution

Commission's Evaluation

2011-2015

The proposed project will replaced existing assets (e.g. poles, lines, hardwares, etc.) that are found to be broken/rotten/defective in order to avoid accident. This is to maintain a safe and reliable distribution system.




16

Project Title (16) Project Code Project Type Project Rank Project Category

Add-ons ONR-ADDONS Other Network 2 Other Network

uirements

irements

Project Description Duration Procurement of distribution transformers, service drop wires, and meterin e uipment 2011-2015

~r.t·lWii!l@[email protected]~ To cater the needs oi )l8WCUStomers

Commission's Resolution The proposed capital project will ensure that all new customers will be accommodated by ISELCO II. It has the obligation and mandate to serve all consumers in its franchise area.


Project to be deferred which may be included in its next lication with additional ustification


SCADA for Roxas and San Manuel Substation SS-SCADA RXS&SNM Non-network uirements 3 Non-network uirements

17

Project Description Duration Installation of SCADA (Supervisory Control and Initial- 2012; Data Acquisition) system at San Rafael and San revised to 2015 Manuel Substations

ISELCO ll's monitorin and control of its substations

Commission's Evaluation SCADA generally refers to an industrial process wherein a computer system monitors and controls a process. In the case of a distribution system, SCADA is being utilized to monitor and control substation equipments such as transformers and reclosers. The distribution data is then archived for further engineering analysis.

This project will lower the cost of managing the distribution system by meeting the following requirements:

1. Real time monitoring on the status of substations (P, Q, S, I and other power system parameters);

2. Proper load management; 3. Faster fault finding and service restoration; 4. Minimize field crew deployment; and 5. Accurate data gathering of distribution data.

The Commission adjusted the proposed cost of the project based on the corresponding revision made by ISELCO II per documents

rovided.

ect to continue with technical amendments


Rural electrification



18

.-

Project Justification To comply with its mandate to provide total electrification to every remote baran a s/sitios within its covera e area

Commission's Evaluation This proposed project is for the extension of distribution lines to barangays and sitios in the coverage area of ISELCO II in accordance to rural electrification program. The cost of the project will be subsidized b NEA/LGU.



Project Title (19)


Renovation/refurbishment of administration and engineering building, meter lab and extension of - . -- . buildi •

Non-network Re uirements 4

• • -- uirements

Project Description Duration and

2012-2013

19

I#M&£fli~1tiltofjjt.Ji~ I To im rove service efficienc .

Commission's Evaluation ISELCO II intends to improve its service by providing a spacious and more convenient facility to its personnel and member-consumers.

The Commission adjusted the proposed cost of the project based on the actual expenditure incurred for the years 2012 to 2013 and the corres ondin revision made b ISELCO II er documents provided.

Project to be deferred which may be included in its next oo1ucc:tt1·on with additional ·ustification

Project Title (20) Project Code Project Type Project Rank __ . __ _ Project Category

Vehicles

Non-network uirements 4 Non-network Re uirements

Project Description Duration Procurement of vehicles such as boom trucks, service vehicles, and motorc cle 2011-2015

~iiZ·'&£1!J!MHitof\!t.li~ To 1m rove serv1ce eff1c1enc

Commission's Evaluation ISELCO II needs additional service vehicles to augment its existing old vehicles. It will facilitate the delivery of service, maintenance activity, and response time of ISELCO II within its coverage area.

The Commission adjusted the proposed cost of the project based on the actual expenditure incurred for the years 2011 to 2013 and the corres ending revision made b ISELCO II er documents rovided.

20

•

to continue with technical amendments Project to be deferred which may be included in its next a lication with additional ·ustification


-. . ment

Non-network Re uirements 4

• ·- uirements

Project Description Duration Procurement of hard hats, insulating gloves,

rotective o les, etc.

Commission's Evaluation

2012-2015

The proposed capital project is intended to provide safety to personnel of ISELCO II to minimize or to completely eradicate the occurrence of accidents in the working area. This is also a requirement from the Occupational Safety and Health Standards (OSHS) set up by the Department of Labor and Employment (DOLE). However, proposed project should be realigned to OPEX of ISELCO II.

21

• • e •


Lineman's tool and ment

·Non-network uirement 4 Non-network uirement

should be reali ned to OPEX of ISELCO II.


. -. . Non-network 4

•

ment

uirement

uirement

Project Description Duration Procurement of clamp tester, volt-ammeter, me er etc.

Project Justification . . .

2011-2015

For the proper monitoring and maintenance of metering facilities and distribution network.

22

• c .. •

Commission's Evaluation The Commission adjusted the proposed cost of the project based on the corresponding revision made by ISELCO II per documents

rovided.

nditure ct to continue with technical amendments

Project to be deferred which may be included in its next a lication with additional ustification

Approved CAPEX Cost

PhP56,661.00 PhP3,288,761.45 Total PhP3,345,422.45

Project Title (24) Softwares/information/communication system


· ment -. . Non-network Re uirements 4

• • uirements

Project Description Duration Procurement of accounting software, meter reading device, com uters, hand held radio, etc.

2011-2015

rwNw:IJIMBit¥i!t.li= To 1m rove servtce eff1c1enc

Commission's Evaluation Accounting software will make financial management of the ISELCO II more organize, accurate and provide faster assessment of its financial conditions while meter reading device will improve meter reading activity as well as billing activity. Benefits of the said project will redound to reduce OPEX.

The Commission adjusted the proposed cost of the project based on the actual expenditure incurred for the years 2011 to 2013 and the corres ending revision made b ISELCO II per documents provided.

23

j

• • .. ..

Project Title (25)


Logistics for 69 kV sub-transmission maintenance

Commission's Evaluation · · The Commission could not determine the details of the proposed project. No discussion was provided in its application. The project is resolved for deferment.


lication with additional ustification

24

_____________________________________________________________________ __j

Decision, ERC Case No. 2012-014 RC

Documents

Transcript of Decision, ERC Case No. 2012-014 RC