.Ay' OFF tCE PcCialieD

v,i4E: Republic of the Philippines

ENERGY REGULATORY COMM1t' San Miguel Avenue, Pasig City

IN THE MATTER OF THE APPLICATION FOR APPROVAL OF THE TARIFF GLIDE PATH (TGP) CALCULATION PURSUANT TO ARTICLE VII OF THE RULES FOR SETTING THE ELECTRIC COOPERATIVES' WHEELING RATES (RSEC-WR) AND ERC RESOLUTION NO. 8, SERIES OF 2011, WITH PRAYER FOR PROVISIONAL AUTHORITY

ERC CASE NO. 2013-161 RC

BUKIDNON SECOND ELECTRIC COOPERATIVE, INCORPORATED (BUSECO), )1 a tOe C 0 l

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Applicant. 2013

ORDER

On July 31, 2013, Bukidnon Second Electric Cooperative, Incorporated (BUSECO) filed an application for approval of its Tariff Glide Path (TGP) Calculation pursuant to Article VII of the Rules for Setting Electric Cooperatives' Wheeling Rates (RSEC-WR) and the Commission's Resolution No. 8, Series of 20111 , with prayer for provisional authority.

In the said application, BUSECO alleged, among others, that:

1 It is an electric cooperative duly organized and existing under and by virtue of the laws of the Republic of the Philippines, with principal office at Manolo Fortich, Bukidnon;

2 It has the exclusive right and authority to operate electric light and power services in the City of Malaybalay, and in

••11•■•••••

1 A Resolution Adopting the Rules Governing the Tariff Glide Path Pursuant to Article VII Of the Rules for Setting the Electric Cooperatives' Wheeling Rates

ERC Case No. 2013-161 RC ORDER/October 7, 2013 Page 2 of 11

the Municipalities of Malitbog, Baungon, Talakag, Cabanglasan, Impasug-ong, Libona, Manolo Fortich, Sumilao, Lantapan and Barangay Lilingayon, part of Valencia City, all in the Province of Bukidnon by virtue of a franchise issued by the National Electrification Administration (NEA) pursuant to Presidential Decree No. 269, as amended by Presidential Decree No. 1645;

3. On September 23, 2009, the Commission issued and approved Resolution No. 20, Series of 2009, otherwise known as the "Rules for Setting the Electric Cooperatives' Wheeling Rates", which established a new rate-setting methodology for electric cooperatives, the issuance of which was made pursuant to its authority as provided under Section 43(f) of Republic Act No. 9136, otherwise known as the Electric Power Industry Reform Act of 2001 (EPIRA) and Section 5(a), Rule 15 of its Implementing Rules and Regulations (IRR);

4. Pursuant to the afore-mentioned Resolution, it filed its application for approval of the rate adjustment pursuant to the RSEC-WR on November 20, 2009. Accordingly, after the required public hearing, the Commission, in its Order dated January 11, 2010, granted the following rates:

Residential Low

Voltage Higher

Voltage Distribution Charges:

Ph P/kW 190.0300 PhP/kWh 0.5143 0.5134

Supply Charges: PhP/cust./mo. 41.6100 41.6100 PhP/kWh 0.5828

Metering Charges: PhP/cust./mo. 5.0000 31.1900 31.1900 PhP/kWh 0.3669

5. On April 19, 2010, a petition to initiate rule-making on the TGP pursuant to Article VII of the RSEC-WR was filed and docketed as ERC Case No. 2010-005 RM;

6. After a series of public consultations conducted by the Commission in its offices in Luzon, Visayas and Mindanao, in its Resolution No. 8, Series of 2011, the

ERC Case No. 2013-161 RC ORDER/October 7, 2013 Page 3 of 11

Commission resolved to adopt the "Rules Governing the Tariff Glide Path pursuant to Article VII of the Rules for Setting the Electric cooperatives' Wheeling Rates";

7 Pursuant to Article VII of the RSEC-WR, the Commission adopts and promulgates the Rules governing the movement of the initial tariff caps during the Regulatory Period, which shall be determined by the following formula:

Tariff x (1+Index "I" - Efficiency Factor "X" + Performance Incentive "S'y

The Index, "I" shall be an escalation factor to be used in adjusting the rates to reflect the combined impact of inflation and the load growth. There shall be an efficiency factor "X" to account for the operational efficiency of the electric cooperatives in setting their rates. There shall be a performance incentive "S" which shall reward or penalize the electric cooperatives for the above or below standard performance, respectively.

8. Following the afore-quoted formula, it proposes the following TGP calculation:

8.1 Index "I" Calculation

8.1.1 Consumer Price Index (CPI) Calculation (2010-2012)

Particulars Average CPI CPI YEAR n_i (2009) 121.00 YEAR n (2010) 126.10 4.21% YEAR n+i (2011) 132.70 5.23% YEAR n+2 (2012) 138.30 4.22%

8.1.2 Growth Rate Calculation (2010-2012)

Particulars Total KWh Sales Growth Rate YEAR n_i (2009) 90,047,009.38 YEAR n (2010) 92,965,254.16 3.24% YEAR nil (2011) 104,657,459.00 12.58% YEAR n+2 (2012) 109,771,706.74 4.89%

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8.2 Efficiency Factor "X" Calculation

8.2.1 Calculation of Man-Hours (2009-2012)

Particulars 2009 2010 2011 2012 Working Hours-Regular Employees 326,232 314,072 329,488 356,336 Working Hours-Contractual Employees

49,735 10,440 49,920 50,112

Total Working Hours 375,967 324,512 379,408 406,448 Less: Absences (Total in Hours) 2,876 4,936 3,628 4,448 Overtime (Total in Hours) - - - - Tardiness (Total in Hours) 68 178 216 354 Number of Man- Hours 373,023 319,398 375,564 401,646

8.2.2 FTE/CPE (2009-2012)

Particulars 2009 2010 2011 2012 Total Man-Hours 373,023 319,398 375,564 401,646 Full-Time Equivalent Man-Hours Per Year

2,080 2,080 2,080 2,080

FTE 179 154 181 193 Total Number of Billed Connections (Year-End)

61' 520 65,683 69,038 73,051

CPE 343 428 382 378

8.3 Performance Incentive "S" Calculation

8.3.1 SAIDI Calculation (2010-2012)

Particulars 2010 2011 2012 Customer Hours Affected 52,206,581 48,617,698 53,340,642

Number of Billed Customers 65,306 69,038 71,083

SAI DI 799.41 704.22 750.40

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8.3.2 SAIFI Calculation (2010-2012)

Particulars 2010 2011 2012 Customers Affected 693,279 635,396 560,438

No. of Billed Customers 65,306 69,038 71,083

SAIFI 10.62 9.20 7.88

8.3.3 SL Calculation (2009-2012)

Particulars 2009 2010 2011 2012 kWh Purchased 101,605,200.28 106,524,187.39 118,562,609.00 124,179,262.00 kWh Sold 90,047,009.38 92,965,254.16 104,657,459.00 109,771,707.00 Coop Use 195,663.11 139,551.03 142,217.00 -

System Loss (kWh) 11,635,815.29 13,595,558.05 13,806,154.00 14,463,875.00 System Loss (%) 11.45 12.76 11.64 11.65

Details of the aforementioned calculations are attached to the application.

9. As observed, there is a minimal upward adjustment in its rates resulting in a 6.27% adjustment including "S" and 0.97% adjustment excluding "S" on the rates, as shown hereunder:

Year "I" "X" "5" TGP A (Including S)

TGP A (Excluding S)

2010 0.97% 0.00% 1.10% 2.07% 0.97% 2011 0.00% 0.00% 2.10% 2.10% 0.00% 2012 0.00% 0.00% 2.10% 2.10% 0.00%

Total 6.27% 0.97%

10. The following documents are, likewise, attached to the application:

10.1 MFSR (Sections B & E) (2009-2012);

10.2 Billing Determinants Template (kWh Sales, Number of customers, kW Demand (2009-2012);

10.3 Sample Bills (One per customer type for 2009-2012);

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10.4 Regional CPI (2009-2012);

10.5 RFSC/Reinvestment fund Utilization (2009-2012);

10.6 Consumer Complaints (Summary or tracking form) (2009-2012); and

10.7 Audited Financial Statement (2010-2012);

Compliance with Pre-Filinq Requirements

11. In compliance with the pre-filing requirements under Section 2, Rule 6 of the Commission's Rules on Practice and Procedure, it furnished copies of the application and all its annexes the legislative bodies of Manolo Fortich, Bukidnon where its office is principally located as well as the Provincial Board of the Province of Bukidnon, as evidenced by the Affidavit of Service executed by Ms. Junkie Dalde, an associate under the Office of the General Manager, and the certifications of the legislative bodies aforementioned. Likewise, a copy of the said application was published in The Goldstar Daily, a newspaper of general circulation in its franchise area, as evidenced by the Affidavit of Publication executed by the Editor, and original copy of the issue showing the published application, copies of which are attached to the application;

Application for Provisional Authority

12. Its current rate is no longer responsive since the costs of providing electric service to the member-consumers increased significantly;

13. With this unresponsive current rate, an urgent remedy is imperative and should necessarily be implemented;

14. Considering the length of time to resolve the instant application, it being not the only application to be resolved by the Commission, it is only appropriate and reasonable that a provisional authority to immediately implement the proposed rate prayed for be granted;

ERC Case No. 2013-161 RC ORDER/October 7, 2013 Page 7 of 11

15. The provisional authority thus prayed for would bring forth relief on the financial constraints currently suffered by it, if not remedied, may resort to unreasonable operational decline; and

Prayer

16. Thus, its prays that after due notice and hearing, the Commission:

16.1 Approve the proposed TGP Rates, calculated as follows:

Type of Consumer Particulars Unit

Approved RSEC- Rates

Tariff Glide Path

Rates Including

S

Tariff Glide Path

Rates Excluding

S

Residential

Distribution PhP/kWh 0.5143 0.5466 0.5193 Supply PhP/kWh 0.5828 0.6194 0.5885 Metering PhP/kWh 0.3669 0.3899 0.3705 Metering PhP/meter/mo. 5.00 5.31 5.05

Low Voltage

Distribution PhP/kWh 0.5134 0.5456 0.5184 Supply PhP/cust./mo. 41.61 44.22 42.02 Metering PhP/meter/mo. 31.19 33.15 31.49

Higher Voltage

Distribution PhP/kW 190.03 201.95 191.88 Supply PhP/cust./mo. 41.61 44.22 42.02 Metering PhP/meter/mo. 31.19 33.15 31.49

16.2 Issue an Order granting a provisional authority for it to implement the said proposed TGP rates pending hearing and final evaluation of the application.

Finding the said application to be sufficient in form and in substance with the required fees having been paid, the same is hereby set for initial hearing, expository presentation, pre-trial conference and evidentiary hearing on November 13, 2013 (Wednesday) at nine o'clock in the morning (9:00 A.M.) at BUSECO's Main Office, Manolo Fortich, Bukidnon.

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BUSECO is hereby directed to cause the publication of the attached 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 (10) days before the date of the scheduled initial hearing. It is also directed to inform the member-consumers within its franchise area, by any other means available and appropriate, of the filing of the instant application, its reasons therefor, and of the scheduled hearings thereon.

Let copies of the application, this Order and the attached Notice of Public Hearing be furnished the Office of the Solicitor General (OSG), the Commission on Audit (COA), and the Committees on Energy of both Houses of Congress. They are hereby requested, if they so desire, to send their duly authorized representatives at the scheduled hearings.

Likewise, let copies of this Order and the attached Notice of Public Hearing be furnished the Offices of the Mayors of the City and Municipalities within the franchise area of BUSECO and the Provincial Governor of Bukidnon for the appropriate posting thereof on their respective bulletin boards.

BUSECO is hereby directed to furnish all those making requests therefor with copies of the application and its attachments, subject to reimbursement of reasonable photocopying costs.

On the date of the initial hearing, BUSECO must submit to the Commission its written Compliance with the jurisdictional requirements attaching therewith, methodically arranged and duly marked, the evidences on the actual posting and publication of the Notice of Public Hearing consisting of certifications issued to that effect, signed by the aforementioned Mayors and Governor or their duly authorized representatives, bearing the seals of their offices, and the affidavits of the Editors or Business Managers of the newspapers where the said Notice of Public Hearing were published together with the complete issues of the said newspapers, and such other proofs of compliance with the requirements of the Commission.

BUSECO and all other interested parties are directed to submit, at least five (5) days before the date of the initial hearing and pre-trial conference, their respective Pre-trial Briefs containing, among others:

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a. a summary of admitted facts and proposed stipulation of facts;

b. the issues to be tried or resolved;

c. the documents or exhibits to be presented, stating the purposes thereof and proposed markings therefore; and

d. the number and names of the witnesses, with their written testimonies in an individual affidavit form, to be attached to the Pre-trial Brief.

Failure of BUSECO to submit the required Pre-Trial Brief and Judicial Affidavits of its witnesses within the prescribed period shall be a ground for cancellation of the scheduled hearings, and the resetting of which shall be six (6) months from said date of cancellation.

As part of the pre-trial conference, BUSECO must also be prepared to make an expository presentation of its application, aided by whatever communication medium that it may deem appropriate for the purpose, in order to put in plain words and explain, for the benefit of the member-consumers and other concerned parties, what the application is all about and the reasons and justifications being cited in support of the rate adjustments prayed for.

SO ORDERED.

Pasig City, October 7, 2013.

FOR AND BY AUTHORITY OF THE COMMISSION:

ENAIDA G. CRUZ-DUCUT Chairperson

tki rn/ SECO/TGP/2013-161 RC/initial order

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Copy Furnished:

1 Atty. Alan C. Gaviola Counsel for BUSECO Room No. 203, 2nd Floor, Crown Plaza Building, 3rd Avenue, North Reclamation Area, Cebu City, Cebu

2. Bukidnon Second Electric Cooperative, Inc. (BUSECO) Manolo Fortich, Bukidnon

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

4. Office of the Commission on Audit Don Mariano Marcos Avenue, Diliman, Quezon City

5. The Committee On Energy Senate of the Philippines GSIS Building, Roxas Blvd., Pasay City

6. The Committee On Energy House of Representatives Batasan Hills, Quezon City

7 Office of the City Mayor Malaybalay City, Bukidnon

8. Office of the City Mayor Valencia City, Bukidnon

9. Office of the Municipal Mayor Baungon, Bukidnon

10. Office of the Municipal Mayor Cabanglasan, Bukidnon

11. Office of the Municipal Mayor Impasug-ong, Bukidnon

12. Office of the Municipal Mayor Lantapan, Bukidnon

13. Office of the Municipal Mayor Libona, Bukidnon

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14. Office of the Municipal Mayor Malitbog, Bukidnon

15. Office of the Municipal Mayor Manolo Fortich, Bukidnon

16. Office of the Municipal Mayor Sumilao, Bukidnon

17. Office of the Municipal Mayor Talakag, Bukidnon

18. Office of the Governor Province of Bukidnon

19. Philippine Chamber of Commerce and Industry (PCCI) 3rd Floor, ECC Building, Sen. Gil Puyat Ave., Makati City