ORIGINAL

Republic of the Philippines

ENERGY REGULATORY COMMISSION
San Miguel Avenue, Pasig City
ENERGY COM %SSIC

&
.IV D
~

IN THE MATTER OF THE

APPLICATION FOR APPROVAL
OF THE FIVE (5)-YEAR CAPITAL
EXPENDITURE (CAPEX)
R pty;
PROJECTS FOR THE YEARS
2017 TO 2021 AND FOR
AUTHORITY TO SECURE LOAN,
WITH PRAYER FOR
PROVISIONAL AUTHORITY
2017-039
ERC CASE NO. 2016- RC

PALAWAN ELECTRIC of
COOPERATIVE,
Applicant
3_
APPLICATION

Palawan Electric Cooperative (PALECO), through undersigned

counsel and unto the Honorable Commission, most respectfully state,
that:

1. PALECO is an Electric Cooperative created and existing

pursuant to the provisions of Presidential Decree No. 269, as
amended, with principal office at Barangay Tiniguiban,
Puerto Princesa City Philippines, represented herein by its
General Manager, Ric B. Zambales, duly authorized by its
Board of Directors by virtue of a Board Resolution dated 23
September 2016, copy of which is attached hereto as Annex
"A" and made an integral part hereof;

2. The filing of the instant Application is, likewise, authorized

under the afore-mentioned Board Resolution;

3. PALECO has been granted by the National Electrification

Administration (NEA) an authority to operate and distribute
electric light and power within the City of Puerto Princesa
and the Municipalities of Aborlan, Narra, Brooke's Point,
Sofronio Espanola, Cuyo, Magsaysay, Quezon, Roxas,
Taytay, El Nido, Araceli, San Vicente, Bataraza, Rizal,
Balabac, Cagayancillo, Agutaya, Dumaran all in the Province
of Palawan;
 ERG Case No. 2016- RC
Application for Approval of the Five (5)-Year CAPEX Projects
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4. This Application is filed pursuant to Section 43 (17 of Republic

Act No. 9136, otherwise known as the "Electric Power
lndustiy Reform Act of 2001" (EPIRA) and Section 5(a), Rule
15 of its Implementing Rules and Regulations (IRR), which
provide that any significant operating cost or project
investment of the National Transmission Corporation
(TRANSCO) and Distribution Utilities (DU5), which shall
become part of the rate base, shall be subject to verification
by the Honorable Commission to ensure that the contracting
and procurement of the equipment, assets and services
have been subjected to transparent and accepted industry
procurement and purchasing practices to protect the public
interest;

5. Section 20 (b) of Commonwealth Act No. 146, otherwise

known as the "Public Service Act" also mandates that
subject to established limitation and exceptions and saving
provisions to the contrary, it shall be unlawful for any public
service or for the owner, lessee, or operator thereof, without
the approval and authorization of the Commission previously
had to establish, construct, maintain, or operate new units or
extend existing facilities or make any other addition to or
general extension of the service;

6. The Distribution Services Open Access Rules (DSOAR) also

requires that installation of all types of lines and facilities
included in the DU's forecasted CAPEX approved by the
Commission shall be at the expense of the concerned DU
regardless of their location within its franchise area;

7. This Application is, likewise, filed pursuant to ERC

Resolution No. 26, Series of 2009, entitled "A Resolution
Amending the Rules for Approval of Regulated Entities'
Capital Expenditure Projects" (Amended CAPEX Rules),
which mandates that all Capital Expenditure (CAPEX)
Projects should be filed with and approved by the Honorable
Commission prior to their implementation. The filing of this
Application is consistent with the timelines set by the
Honorable Commission in its Resolution No. 20, Series of
2011;

8. The afore-cited Amended CAPEX Rules was issued by the

Honorable Commission to ensure that: a) the CAPEX
projects are timely, appropriate, necessary and cost efficient;
b) the CAPEX projects are consistent with the Distribution
Development Plan (DDP), Philippine Grid Code (PGC),
 ERC Case No. 2016- RC
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Philippine Distribution Code (PDC), and other relevant

government issuances; and c) the procurement of
equipment, materials and services are transparent,
competitive and compliant with the applicable rules, laws
and regulations;

9. The instant Application is consistent with the five (5)-year

rolling DDP submitted by PALECO to the Department of
Energy (DOE);

10. Consistent with the requirement of the filing of applications

for approval of CAPEX Projects, the instant Application is
verified by PALECO's authorized representative, General
Manager, Ric B. Zambales, by. virtue of Board Resolution
dated 8 September 2016 approving the proposed CAPEX
Projects, subject of this Application, a copy of which is
hereto attached as Annex "B";

11. Information on the proposed CAPEX Projects had been

widely disseminated through posting in the conspicuous
places of the City of Puerto Princesa and the Municipalities
of Aborlan, Narra, Brooke's Point, Sofronio Espanola, Cuyo,
Magsaysay, Quezon, Roxas, Taytay, El Nido, Araceli, San
Vicente, Bataraza, Rizal, Balabac, Cagayancillo, Agutaya,
Dumaran, all in the Province of Palawan as certified to by
Ms. Nerisa S. Regal, Polity Advocacy Officer and Regulatory
Compliance Officer, who was tasked to undertake such
dissemination, a copy of which is attached hereto as Annex
"C". The Notices posted in the areas aforementioned
specifically contained the following:

a. the proposed projects;

b. the reasons for proposing said projects;

C. the source of fund for the said projects; and

d. the indicative rate impact of the said projects.

12. In accordance with the Amended CAPEX Rules and

consistent with the DDP and PDC, PALECO shall acquire,
construct and implement the following five (5)-year CAPEX
Projects for Calendar Years (CY5) 2017-2021, with a total
APPROXIMATE cost of One Billion, One Hundred Sixty-one
Million, Eight Hundred Eighteen Thousand Two Hundred
Forty PESOS (PhP1,161,818,240), The background for
PALECO's distribution system and the results of the planning
 ERC Case No. 2016- RC
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process on how the projects are formulated are presented

Five-Year Statement of The DDP, a copy of which is hereto
attached as Annex "D":

THE PROPOSED CAPEX PROJECTS

A. CAPITAL ASSET CATEGORIES

12.1 NETWORK CAPEX PROJECTS

Amount Per Year of Implementation

Project Project Description Fund (PhP in million) Total
code Source 2017 2018 2019 2020 2021 Cost
(PhP in
million)
555- This project is a one NEAl 29,144 29,144
01 (1) outdoor type 5 BankLoan
MVA substation rated
at 69 to 13.217.62 kV
with two (2) feeders
that will be installed at
Barangay Manalo,
(Northern) Puerto
Princesa City

SS5- This project is a one NEAl 29,144 29,144

02 (1) outdoor type 5 BankLoan
MVA substation rated
at 69 to 13.2/7.62 kV
with two (2) feeders
that will be installed at
Barangay
Montible(Southern)
Princesa City.

SA-Ol Installation and NEA 38,928 38,928

integration of /BankLoan
Advance
Communication
Newtork (SCADA) to
PALECO control room
as Grid System
Operator eight (8)
power plants, and two
(2) substations in the
Palawan Grid

PD- Rehabilitation of old RFSC/Other 2,648 2,648

CR-01 lines and installation of Income
new three-phase
primary line going to
SM Mall
 ERC Case No. 2016- RC
Application for Approval of the Five (5)-Year CAPEX Projects
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PD-C- Upgrading of 10 RFSC/Other 4,968 4,968

01 kilometer primary Income
conductors from
ACSR #1/0 to ACSR
336.4 MCM of Narra
Feeder 2
PD-C- Upgrading of primary RFSC/Other 1,794 1,794
02 conductors of El Nido Income
Feeder from ACSR
#1/0 to ACSR 336.4
MCM

PD- Installation of Three (3 RFSC/Other 8,100 5,400 2,700 2,700 5,400 24,300
PQ-01 ) units single phase Income
76.2 KVA, 7.62 kV
Automatic Voltage
Regulator will be
installed to different
system (DXS). to
correct the power
quality problem.
PD-Q- Conversion of 23 RFSC/Other 2,151 3,826 2,592 8,569
02 kilometers Single Income
Phase to Three Phase
Line from Barangay
San Rafael To
Barangay Langogan,
of San Jose Feeder
Puerto Princesa City
(at 3 periods)

PD- Conversion of 19.44 RFSC/Other 3,001 3,000 4.032 2,188 12,221

CR-02 kilometers Single Income
Phase to Three Phase
Line from Barangay
Villa Libertad To
Barangay Bucana of
El Nido Feeder (at 3
periods) and 5
kilometers at
Barangay Corong
Corong
PD- Line Conversions to RFSC/Other 1,245 2,718 3,963
CR-03 Three Phase from Income
Rizal, Taytay & Roxas
Distribution Stand
Alone Systems
SD-S- Single phase primary RFSC/Other 7,632 4,881 5,738 4,485 3,195 25,840
01 line will be installed to Income
the areas with existing
long secondary lines
and service drop
wires.
 ERC Case No. 2016- RC
Application for Approval of the Five (5)-Year CAPEX Projects
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SD-S- Encasement and RFSC/Other 535 565 1,064 565 565 3,292
02 protection of meters Income
into one (1) enclosure.
RI-Ol This projects involves RFSC/Other 8,174 8,174 8,174 8,174 8,174 40,872
the installation of Income
additional
sectionalizing
equipment and
devices to different
distribution systems.
SL-01 This project entails the RFSC/Other 8,700 8,700 8,700 8,700 8,700 43,500
replacement of ageing Income
kilowatt-hour meters,
routinely complaints
from customers and
meter readers such as
not-moving, creeping,
no display, broken
glass cover, burned
and inaccurate
meters.
SL-02 Installation of RFSCIOther 8,540 9,776 10.748 11,513 12,175 52,752
Amorphous Metal Income
Distribution
Transformers.
SL-03 Installation of RFSC/Other 1,021 1,021
photocell to existing Income
street lights in
replacement to
manual switch.
RE Extension of NEA 371,277 66,062
distribution lines to un- Subsidy
energize 23
barangays and 208
sitios.

12.2 OTHER NETWORK REQUIREMENTS FOR ADDITIONAL/NEW

SERVICE CONNECTIONS OF CUSTOMERS

Amount Per Year of Implementation

Other Network Fund (PhP in million) Total
Requirements Source 2017 2018 2019 2020 2021 Cost
(PhP in
million)
1 Distribution NEN 4,616 4,615 4,754 4,754 5,197 23,935
Transformers BankLoan
2 Low Voltage NEN 6,784 7,124 7,138 7,463 7,787 36,296
Distribution Line BankLoan
3 Metering Equipment NEN 17,190 18,548 19,783 19,230 20,306 95,057
Accessories and BankLoan
Service Drops
4 Procurement of poles, NEA 18,312 18,312 36,624
______ kilowatt-hour meters, /BankLoan
 ERG Gase No. 2016- RC
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distribution
transformers and other
line hardware for buffer
stocks for emergency
response in the
rehab i litation/restoration
of distribution lines.

12.3 NON-NETWORK ASSETS

Amount Per Year of Implementation
Non-Network Fund (PhP in million) Total
Assets Source 2017 2018 2019 2020 2021 Cost
(PhP in
million)
I Land and Land RFSC/Other 1,400 16,000 3,000 900 21,300
Rights Income

2 Structures and RFSC/Other 1,800 17,700 10,300 5,000 5,000 39,810

Improvements Income

3 Transportation RFSC/Other 6,975 12,660 17,690 17,155 14,987 69,467

Equipment Income

4 Laboratory and RFSC/Other 5,399 956 2,802 2,100 2,158 13,415

Miscellaneous Income
Equipment
5 Tools, Shop, Safety RFSC/Other 7,953 6,857 7,528 6,886 7,730 36,953
Gadgets and Income
Garage Equipment
6 Information System RFSC/Other 9,995 821 3,685 1,775 962 17,238
Equipment Income

7 Communication RFSC/Other 866 734 634 627 677 3,539

Plant and Income
Equipment

8 Office Furniture RFSC/Other 2,693 1,184 1,812 1,032 1,017 7,738

and Equipment Income

B. GAPITAL EXPENDITURE PROJEGT TYPE

Project Project Title Project Type

Gode
SS5-01 Installation of 5 MVA Substation at Barangay Power Quality
Manalo, Puerto Princesa City
555-02 Installation of 5 MVA Substation at Barangay Power Quality
Montible, Puerto Princesa City
SA-Ol Installation of Advance Communication Safety
System for Substations
PD-CR -01 1 Construction of three-phase primary line going Capacity
 ERC Case No. 2016- RC
Application for Approval of the Five (5)-Year CAPEX Projects
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to SM Mall.
PD-C-01 Uprating of Existing Primary Conductors of Capacity
Narra Feeder 2
PD-C-02 Uprating of Existing Primary Capacity
Conductors of El Nido Distibution Line
PD-PQ-01 Installation of Automatic Voltage Regulator Power Quality
PD-PQ-02 Single to Three Phase Line Conversion from Power Quality
Barangay San Rafael to Barangay Langogan,
Puerto Princesa City
PD-CR -02 Single to Three Phase Line Conversion from Capacity
Barangay Villa Libertad to Barangay Bucana,
El Nido and Sitio Logadia to Sitio Bobolungan,
Corong Corong, El Nido
PD-CR -03 Line Conversions to Three Phase from Rizal, Capacity
Taytay & Roxas Distribution Stand Alone
Systems
SD-S-01 Installation of Primary Lines to Overextended Safety
Secondary Lines and Service Drop Wires
SD-S-02 Meter Encasement and Protection Safety
RI-Ol Installation of Additional Sectionalizing Reliability
Equipment & Devices
SL-01 Replacement of Old and Defective Kilowatt- System Loss
hour Meters
SL-02 Installation of Amorphous Distribution System Loss
Transformers
SL-05 Installation of Photo switch for Street Lights System Loss
RE Extension of distribution lines to un-energize Rural
23 barangays and 208 sitios. Electrification

The CAPEX Project may either be for:

a. Safety;

b. Capacity (including customer requirements);

C. Power Quality;

d. Reliability improvements above performance

standards; and

e. System loss reduction above performance standards.

JUSTIFICATIONS OF THE CAPEX PROJECTS

13. The Network CAPEX Projects are intended to address

safety, power quality and reliability of the distribution system
of the Applicant.

Project Justification
Installation of 5 The project will primarily address and mitigate the voltage
MVA Substation at violations (under voltage and voltage unbalance) of San Jose
 ERC Case No. 2016- RC
Application for Approval of the Five (5)-Year CAPEX Projects
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Barangay Manalo, Feeder which has a total length of 91 kilometers 13.2 kV

Puerto Princesa primary distribution line from the existing switchyard.
City
The voltage level at the farthest part of the line which is
Barangay Langogan is 136.39 volts at phase B. The voltage
variation in phase A is 0.691 per unit (bus ID PPSJ0754), in
phase B is 0.539 per unit (bus ID PP5J2656) and in phase C
is 0.654 per unit (bus ID PPSJ0749), with an unbalance
voltage of 6.878% at farthest end of the three phase line.
Relevant map and diagram is presented in Annex H.

Several pension houses, hotels and water park are

connected in this feeder and for long are experiencing low
voltage power which could not utilize most of their motorized
equipment and even some of the lightings.

Installation of 5 The project will primarily address and mitigate the voltage
MVA Substation at violations (under voltage and voltage variations/imbalance) of
Barangay Iwahig Feeder which has an existing total length of 35.84
Montible, Puerto kilometer 13.2 kV primary distribution line from the existing
Princesa City switchyard.

The voltage level at the farthest part of the line which is

Barangay Mangingisda is 184.45 volts. The voltage variation
in phase A is 0.891 per unit, phase B is 0.876 per unit and
phase C is 0.802, with an unbalance voltage of 5.983%.

The primary line of Iwahig feeder will lengthen upon

energization of the ongoing construction of 40 kilometer three
phase lines going to three (3) barangays at west coast of
Puerto Princesa City. This line extension project is a
government funded project, Barangay Line Enhancement
Program of National Electrification Administration. This
additional length will aggravate the violation in voltage
variations.
Installation of All the power suppliers in Palawan Grid are all Independent
SCADA Network Power Providers (IPPS) contracted by PALECO.
for Palawan Grid Consequently, starting March 2015, NPC-SPUG has already
transferred to PALECO the responsibility for generation
dispatch in Palawan Grid. This is pursuant to Section 7.1.3.1
of the ERC Resolution No. 15 Series of 2013, A Resolution
Adopting the Philippine Small Grid Guidelines, "The
Distribution Utility shall be the System Operator since they
are the off-taker of the generator.

Existing Scheme at Load Dispatch Center:

1. Communication with power plant operators and
substation tenders VHF radio and cellular phones.
-

2. Monitoring of parameters and status of power plants and

substation - power meters which can only for power
 ERC Case No. 2016- RC
Application for Approval of the Five (5)-Year CAPEX Projects
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plants in Puerto Princesa City (PPC), no monitoring

means for power plants outside PPC.
3. Control of Panels Manual switching Operation
-

This project is expected to ensure the security, quality power

and reliability of the entire grid with the availability of real-
time monitoring system. The incidents of power interruptions
and total blackout in the grid due to untimely instruction of
system operators to the plant operators will be eliminated.
And tripping of the automatic circuit reclosers (ACR5) in the
distribution system will be reduce, since the system operator
can direct plant operators in every critical conditions.
Installation of The exiting lines along the location of SM Mall is a three-
three-phase phase line built in 1974. Since then not all the poles have
primary line going been replaced as well as the conductors and other line
to SM Mall hardware. Considering the age of the existing lines and the
load requirement of SM Mall, lines will be rehabilitated and
additional three-phase line will be constructed to make a
double circuit for the efficient supply requirement of SM Mall
and other consumers connected.
The expected energy sales from SM Mall is 13,140,000 kWh
per annum.
Upgrading of 10 This is to prevent the overloading of the conductors due to
kilometer primary load growth. The existing line is designed and constructed in
conductors from 1983 which has a primary conductor of ACSR #1/0 with a
ACSR #1/0 to carrying capacity of 4427 kW. Based on the forecast, the
ACSR 336.4 MCM existing conductors will be overloaded by 2020 having
of Narra Feeder 2 expected demand of 4432.

This project is expected to reduce system loss by more or

less 0.19%
Upgrading of This is to prevent the overloading of the conductors due to
primary conductors load growth. The existing line is designed and constructed in
of El Nido Feeder 1993 which has a primary conductor of ACSR #1/0 with a
from ACSR #1/0 to carrying capacity of 4427 kW. Based on the forecast, the
ACSR 336.4 MCM existing conductors will be overloaded by 2019 having
expected demand of 5156.
This project is expected to reduce system loss by more or
less 0.05%
Installation of Most feeders and the stand alone distribution systems of
Automatic Voltage isolated mainland and island municipalities are all directly fed
Regulators (AVR5) or connected to the generations at 13.2 W. Thus, the lines
which are all more than 20 kilometers, in general has
problem in voltage level and balance. Voltage profiles are
presented in Annex F. Installation of AVRs to these long lines
will increase the voltage level in the middle or far end of the
lines.
Single to Three The long single phase line creates unbalance phase currents
Phase Line and phase voltages in San Jose feeder which usually results
Conversion from to tripping of feeder breaker when there is fault in one line.
 ERC Case No. 2016- RC
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Barangay San The installation of additional two-phase line will correct the
Rafael to unbalance phase current and improve voltage imbalance. In
Barangay the future, this will also accommodate potential large load
Langogan, Puerto customers with three-phase connection requirement since
Princesa City the area is potential for resort hotels.

This will also expected to reduce system loss estimated at

5,535 kWh on its first year and improve reliability thru
balance currents and voltages.

Single to Three The line conversion to Barangay Villa Libertad and portion of
Phase Line Barangay Pasadena are required to meet the connection
Conversion from requirement of Ayala Corporation. The expected demand of
Barangay Villa Ayala Corporation is initially 1.5 MW and will increase by 2.5
Libertad to
MW per year with an expected maximum demand of 15 MW.
Barangay Bucana,
El Nido and Sitio The expected additional sales per year is 10.950,000 kWh.
Logadia to Sitio
Bobolungan Aside from this, the long single phase line creates unbalance
Corong Corong, El in phase currents which usually results to tripping of feeder
Nido breaker when there is fault in one line.
Line Conversions The main purpose of this project is to accommodate the
to Three Phase at three-phase connection requirement of government facilities
Rizal, Taytay & and other commercial customers. The conversion of this
Roxas Stand lines will also refurbish the existing lines which is
Alone Distribution deteriorated. This will also serve as tapping of the future line
Systems extension of unenergized barangays of the respective
distribution system.

Installation of This project will address the following problems:

Primary Lines to 1. Violation to the technical and safety standards of the
Overextended PEC considering the hazards to the public due
Secondary Lines multiple octopus-connections and long service drop
and Service Drop wires that hangs on trees and service poles that will
Wires not last for long period; and,
2. Service drop wires traversing private lots.
3. Renew the_deteriorated_lines.
Meter Encasement There are areas with more than five connections tapped in
and Protection one pole where respective meters were mounted, which
happen to be non-compliance with the prescribed 1.50
meters mounting height in Article 11 of Magna Carta for
Residential Customers and Section 2.11.1 of ERC
Resolution No. 2, Series of 2010 - A Resolution Adopting the
Amendments to the Distribution Services and Open Access
Rules (DSOAR).

This will eliminate many service drop wires in the pole which
is prone to short circuit
Installation of This project will help improve system reliability by shortening
Additional the lines to be affected in case of line faults, therefore
Sectionalizing decrease number customers affected. Generally, these
 ERC Case No. 2016- RC
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Equipment & devices and equipment can:

Devices a. reduce the restoration time and outages coverage;
b. allow faults to be quickly detected and the fault
information to be analysed;
c. fast isolation of faults, thereby reducing damage to the
system;
d. allows temporary faults to clear without experiencing a
sustained interruption;
e. isolates temporary faults preventing extensive
outages;
f. improve system coordination; and
systematic series of switching operations, to isolate a certain
section of overhead line.
Replacement of The result of the initial implementation of the Meter In
Kilowatt-hour Service Testing Programs found that almost all lots are over
Meters the criteria for the number of non-conforming meters
therefore need replacement. Instead of spending much on
the testing, massive replacement of old meters is
programmed.

This project is estimated to reduce system loss by 632,000

kWh in a year or 0.20% of the total system loss.
Installation of Though the average system loss of PALECO is 10.98% for
Amorphous Metal the past seven (7) years, which is below 13%, cap set by
Distribution ERC, PALECO still aims to reduce its system loss. Based on
Transformers the 2015 segregated system loss, 1.43% is from the DT no
load loss. Thus, PALECO programmed to start the
replacement of the in-service DTs, from silicon steel core to
amorphous metal core.

This project is estimated to reduce system loss by 61,000

kWh in a year or 0. .02% of the total system loss.
Installation of Most of the individual streetlights usually installed in
Photo Cell for barangay roads are manually switch to on and off by the
Street Lights nearest consumer. These days, people have become too
busy and has no time to switch off the street lights on
daytime. In agreement with the city government who is
paying the streetlight energy consumptions, streetlights with
manual switch are billed at 12 hours usage hence,
contributes losses in the system if not switch off. With the
light sensor of the photocell, the street lights will
automatically switch on and off and the manual operation of
the streetlights will be reduced.

A more detailed justifications per project is prepared in the

prescribed project justification template, a copy of which is hereto
attached as Annex "E'.
 ERC Case No. 2016- RC
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SOURCES OF FUNDS FOR THE CAPEX PROJECTS

14. The total estimated cost of PALECO 's CAPEX Projects for
CYs 2017-2021 is PhP1,161,818,240.00;

15. In the implementation of the proposed CAPEX projects,

PALECO intends to secure a loan in the amount of
PhP289,128,34, from the National Electrification
Administration or Bank, and from the latter only if better
interest rates and better terms are offered;

16. Other capex projects and requirements will be funded thru

PALECO's Reinvestment Fund for Sustainable Capex and
Other Income and government subsidy thru National
Electrification Administration as presented in Capex Project
Financing Plan in Annex L;

17. The implementation of the proposed CAPEX Projects shall

yield an indicative rate impact of PhPO.0934/kWh, computed
as follows:

RATE IMPACT CALCULATION

2017 2018 2019 2020 2021 TOTAL
Forecasted EnergySales, KWh 249,188.172 269,040.931 289,178,915 309,729,189 330,637,513 1,447,772,720
RFSC Balance Beg. Php, Excess (Shortfall) 52,891,536 20,897.323 (34.422.906) (68,991391) (114,002,843) 52.891,536
Cash Inflows:
RFSC Mnual Collection Php0.28191Kwh) 10.245.582 75,842,638 81,519.536 81,312,658 93.206.715 408,127,130
RFSC Annual Collection_(per_rate_impact)
Mnual lnme on Leased Properties 1.000.000 1.000,000 1.000,000 1.000,000 1.000.000 5.000.000
From Share Capital 7,000,000 7,000,000 7,000,000 7.000,000 7,000,000 35.000,000
Loan Pro00eds from Finandal Institutions, Php
(indusive of Permit Fee) 56,861,765 41,021854 59.333,522 69.604,970 32,854,474 265,686.584
Total Cash Inflows, Php 135,107,346 130.864,492 148,853,058 164.917.629 1 134,071,189 713.813,714
AvailableCashforCapexProjeds 187,998,882 151,761.815 114,430,153 95,926,238 20,068,346 766.705,250

Cash Outflows:
CAPEX Requirement:
Funded by Loans: -

NewCapex 56,438,476 46,671,615 58,891,833 69,086,819 32.619.825 263,708,769

Funded byRFSC: -

Newcapex 91,056,868 110.846,999 91,554.475 95.990.895 71,321,074 460770,310

CAPEX Debt Sereice -

NewCapex 6.484,516 11,846.888 18,613.283 26.551.034 63.495.722

Old Loans 18,500,000 21 .000,000 20,000.000 25000,000 24.000,000 108500.000
ERC Permit Fee, Php (0.75%) 1,106,215.08 1.181.391.10 1,128,347.31 1,238,08286 779,556.74 5,433.593
Total Cash Outflows, Php 167,101.559 186,184,721 183,421,543 209,929,080 155.271,490 901,908,394
RFSC Balance Ending, Php Excess (Shortfall) I20,897.323 (34.422.906) I (68,991.391) (114.002,843) (135.203,144) (135,203,144)
Icess(Shoall) on RFSC, Php/Kwh 1 0.0639 J (0.1279) (0.2386) (0.3681) (0.4089) (0.0934)
 ERC Case No. 2016- RC
Application for Approval of the Five (5)-Year CAPEX Projects
Paae 14 of 19

If sales will increase at 10% higher than forecast, rate impact will
be PhPO.05931kWh
Overall Indicative Rate Impact of the 2017-2021 Capex Projects
bales atltr'. IlignerInen 1- ortoast, Ste Interest

2017 2018 2019 2020 2021 TOTAL

Forecasted Energy sales. KWh 274104,789 295,945.024 318,096 7807 340,102,108 363,701.264 1,592,549,992
RFSC Balance Beg. Php, Excess (Shortfall) 52,891,536 21,921,881 (19.814 7084) (46,230,615) (82 7510,801) 52,891,536
Cash Inflows:
RFSC Annual Collection @Php02819.t<wti) 77 1 210,140 83,426,902 89,671,490 96,043,924 102527,366 448,939,843
RFSC Annual Collection_(per rate_impact)
Annual Income on Leased Properties 1,000 7000 1,000,000 1,000,000 1.000,000 1,000,000 5,000,000
From Share Capital 7,000,000 1,000,000 7,000,000 7,000,000 7,000,000 35,000,000
Loan Proceeds from Finandal Institutions, Php
(indusive of Permit Fee) 58,861 765 47,021 .854 59,333,522 69,604,970 32,864,474 265,666,584
Total Cash Inflows, Php 142,131,905 138,448,756 157,005,012 173,646,894 143,391,860 754,626,427
Available Cash for Capex Projects 195,023,440 166,370,637 137,190,928 127,418,279 60,881,059 807.517,963

Cash Outflows:
CAPEXRequirement:
Funded by Loans: -

NewCapex 56,438,476 40,671,815 58,891,633 69,086,619 32,619,825 283 7708,769

Funded by RFSC: -

NewCapex 91,056,868 110,846,999 91,554,475 95,990,695 71,321,074 460,170,310

CAPEX Debt Service -

NewCapex 67484,516 11,646,886 18,613,283 26,551,034 63,495,722

Old Loans 18,500,000 21,000,000 1 20,000,000 25,000,000 24,000,000 108,500,000
ERC Permil Fee, Php(O.75%) 1,108,21506 1,181,391.10 1,128,347.31 1,238,08286 779,550.74 5,433,593
TotalCashoutfiows, Php 167.101,559 186,184,721 163,421,543 209,929,060 155,271,490 901,908 7394
Mn
RFSC Balance Ending, Php Excess (Shortfall) 27,921,881 (19,814,064) (46,230,615) (82.510,601) (94,390,431) (94,390,431)
IExcess(Shortfall) on RFSC, 0,1019 (0.0670) (0.1453) (0.2422) (0.2595) (0.0593)

Assumptions:

1. Income on teased properties provided at PIM annually.

2- Loan proceeds are released at the beginning or the year.
3. Sales forecast is based on the technical department's projections using linear regression averaging at 7.56% growth rate annually.
4-Loans are availed of at 0% interest, payable in IS years with 1 year grace period

If sales will decrease at 10% lower than forecast, rate impact will
be PhPO.1351/kWh
Overall Indicative Rate Impact of the 2017-2021 Capex Projects
aaies at lute Lower man Forecast, 05 IntereSt

2017 2018 2019 2021 TOTAL

PorecastedEneySaIes, KWh 224,267,555 242,136,838 260,261,024 70 297,573,762 1,302,995,448
RFSC Balance Beg. Php, Excess(Shortfall) 52,891.536 13,872.765 (49.031.728) 166) (145,494,884) 52,891.536
Cash Inflows:
RFSCAnnu8I Collec6onPhp0.2819Mwh) 63,221,024 66,258,375 73,367,563 393 83,886,043 367.314,417
RFSC Annual_Collection_(per rate_impact) ___
Annual Income on Leased Properties 1,000,000 1,000,000 1.000,000 000 1,000.000 5,000,000
F rom Share Capital 7,000,000 7,000,000 7.000,000 t7,OOO,000
000 7,000,000 35,000,000
Loan Proceeds from Finsndal Institutions, Php
(inclusive of Permit Fee) 56,861,765 47,021,854 59.333,522 970 32,864,474 265,686,584
Total Cash Inflows, Php 128,082,788 123,280,229 1 140,701,105 156,186,363 1 124,750,517 673,001,001
Available Cash for CapexProjects 160,974,324 137.152,9931 91,669,377 64,434,196 1 (20,744,367) 725,892,537

Cash Outftows:
CAPEX_Requirement:
Funded by Loans:
NewCapex 56,430,476 45,671,815 50,891,833 69,086,019 32,619,825 263,708,769
Fundedby RFSC:
NewCapex 91.056,868 110.846,999 91,554.475 95,990,895 71,321,074 460,770,310
CAPEX Debt Service
NewCapex 6,484,516 11,846,888 16,613.283 26,551,034 63.495,722
Old Loans 1 16,500,000 21,000,000 20,000,000 25,000.000 24,000,000 108.500,000
ERC PerniliFee, Php(0.75%) 1 1,106,215.08 1.181,391.10 1,128,341.31 1,238,082.86 779,55(.74 5,433,593
Total Cash Outflows, Php 1 167,101,559 186,184,721 183,421,543 209,929,080 155.271,490 901,906,394
RFSC Balance Ending, FThp Excess (Shortfall) 13,872,765 (49.031,728) (91,752.166) (145,494,884) (176.015.857) (176.015,857)
IExcess(Shortfall) on RFSC, PhpMwh 0.0619 (0.2025) (0.3525) (0.5219) (0.5915) (0.1351)
 ERC Case No. 2016- RC
Application for Approval of the Five (5)-Year CAPEX Projects
Page 15 of 19

If there is an additional increase in rate base, rate impact will be

PhPO.0950/kWh;
Overall Indicative Rate Impact of the 2017-2021 Capex Projects
Interest at 8.5%

2017 2018 2019 2020 2021 TOTAL

Forecasted EnergySates, KWh 249,186,172 269,040,931 289.178.915 309,729,189 330.637.513 1,447,772,720
RFSC Balance Beg. Php, Excess (Shortfall) 52,891,536 20,897.323 (34,656,699) (69.652.313) (115.334.8501 52,891.536
Cash Inf)ows:
RFSCMnuaICoiledlon0Php0.2819fl(wh) 70,245,582 75,842.638 81,519,536 87,312,658 93,206.715 408,127,130
RFSC Annual Collection(per rate Impact)
Annual Inome on Leased Properties 1,000,000 1,000,000 1,060,000 1,000,000 1,000,000 5,000,000
From Share Capital 7,000,060 7,000,000 7,000,000 7,000,000 7,000,000 35,000,000
Loan Preds from Finandal Institutions, Php
(Industve of Permit Fee) 56.861,765 47,021854 59.333.522 69,604.970 32,864,474 265,686,584
Total Cash Inflows, Php 135,107,346 130,864,492 1 148,853,058 164,917,629 1 134,071,189 713,813,714
AvallableCashforCapexProleds 187.998,882 151,761,615 1 114,196,359 95,265.316 18,736.339 766,705,250

Cash Outflows:
CAPEX Requirement:
Funded by Loans: -

NowCapex 56,438,476 48,671,815 58.891.833 69,086,819 32.619.825 263,708,769

Funded by RFSC: -

NewCapex 91,056,868 110,846,999 91,554,475 95,990,895 71,321,074 460,770,310

CAPEX Debt Service -

NewCapex 6,718,309 12,274,017 19,284,368 27,508.308 65,785,002

Old Loans 18,500,000 21,000,000 20.000,000 25,000.000 24,000,000 108,500,000
ERC Permit Fee, Php (0.75%) 1,106,215.08 1,181,391.10 1,128,347.31 1.238,082.86 779,556.74 5,433,593
Total Cash Outflows, Php 167.101,559 186,418.514 183,848,672 210,600,165 156,228,763 904,197,674
RFSC Balance Ending, Php Excess (Shortfall) 20,897,323 (34,656,699) (69,652,313) (115,334,850) (137,492,424) (137,492,424)
Excess(Shorlfall) on RFSC, Phpfl(wh 0.0839 (0.1 288) (0.2409) (0.3724) (0.4158) (0.0950)

If there is a decrease in rate base, rate impact will be

PhPO09I 8IkWh;
Overall Indicative Rate Impact of the 2017-2021 Capex Projects

2017 2018 2019 2020 2021 TOTAL

Forecasted Energy Sales, KWh 249,188,172 269,040,931 289,178,915 309.729,189 330.637.513 1.447.772.720
RFSC Balance Beg. Php, Excess (Shortfall) 524891536 20,897,323 (34,194,007) (68,344,304) (112,698,720) 52,891,536
Cash Inflows:
RFSCAnnuaI Collection Php0.2819/lcwh) 70,245,582 75.842.638 61.519,538 87,312 4658 93,206.715 408,127130
RFSC AnnualCollection(per rateImpact)
Annual Inceme on Leased Properties 1.000.000 1.0004000 1.000.000 1,000.000 1.000.000 5.000.000
From Share Capital 7,060,000 7 1 000 1 000 7,000.000 7.006,000 7 4000.000 35,000,000
Loan Proceeds from Finandal Institutions, Php
(tndusive of PermIt Fee) 56,861,765 47,021.854 59,333,522 69.604.970 32.884,474 265,688.584
Total Cash Inflows, Php 135,107,340 130,884,492 1 148,853,058 164,917,629 134,071,189 713,813.714
Available Cesh for Capes Pro4eas 187,998,882 151.761.815 1 114,659,052 96,573,324 21.372.469 766,705,250

Cash Outflows:
CAPEX Requirement:
Funded by Loans:
New Capes 56,438,476 46,671,815 58.891,833 69,088,819 32,619.825 263,708,789
Funds by RFSC: -

New Capes 91,056,868 110.846.999 91.554.475 95.990.895 71.321.074 460.770.310

CPJ'EX Debt Service -

NewCapex 6.255.617 11.428.701 17,956,247 25,613,800 63,495.722

Old Loans 18,500.000 21,000,000 20,000.000 25,000,000 24,000,000 108,500,000
ERC Permit Fee, Php (0.75%) 1.108.215.08 1.181.391.10 1.128,347.31 1.238.082.88 779,558.74 5.433,593
Total Cash Outflows, Php 1 167,101,559 185,955,822 183.003,356 209.272,044 154,334,258 899,667,037
RFSC Balance Ending, Php Exccss(Shoclfall) 1 20,697,323 (34,194,007) '(68,344,304) (112,698,720) (132,981,767) (132,961,787)
Excass(Shortfafl) on RFSC, Phpflcwh 0.0839 (0.1271) (02363) (0.3639) (04021) (0.0918)

17. PALECO submitted the following documentary requirements

in support of this Application, copies of which are hereto
attached as annexes:

a. Gantt Chart Schedule of the proposed CAPEX Projects

as Annex "F";
 ERC Case No. 2016- RC
Application for Approval of the Five (5)-Year CAPEX Projects
Page 17 of 19

publication of the Application, excluding its annexes, in a

newspaper of general circulation within its franchise area;

19. PALECO submitted the following documents to prove the

foregoing compliances: a) Affidavit of Service executed by
Ms. Nerisa S. Regal, Polity Advocacy Officer and Regulatory
Compliance Officer, and the first page of the Application
bearing the stamp "RECEIVED", copies of which are
attached hereto as Annexes "N" and "0", respectively; b)
Affidavit of Publication executed by the Editor, and the
original copy of the newspaper showing the published
Application, copies of which are attached hereto as Annexes
"P" and "Q", respectively;

20. Prior to the filing of this Application, a pre-filing conference

with the concerned staff of the Honorable Commission was
conducted pursuant to Section 4, Rule 6 of the ERC Rules of
Practice and Procedure for purposes of determining
completeness of the supporting documents attached
herewith;

ALLEGATIONS IN SUPPORT OF THE PRAYER FOR

PROVISIONAL AUTHORITY

21. Public interest and necessity requires the immediate

implementation, without delay, of the subject CAPEX
Projects in order to ensure continuous, safe and reliable
electric service, and compliance with safety and
performance standards of its distribution system. Moreover,
the immediate implementation of these projects will avert
possible emergency situations and at the same time,
address the forecasted growth in the electricity demand of its
member-consumers;

22. Thus, pending final approval, there is an urgent need for a

provisional authority for PALECO immediately implement its
proposed CYs 2017-2021 CAPEX Projects.

23. The implementation of the foregoing CAPEX Projects for

CYs 2017-2021 will ultimately redound to the benefit of
PALECO's member-consumers in terms of continuous,
reliable and efficient power supply.
 ERC Case No. 2016- RC
Application for Approval of the Five (5)-Year CAPEX Projects
Paae 18 of 19

J JN *I

WHEREFORE, the foregoing premises considered, the Applicant

Palawan Electric Cooperative most respectfully pray that:

1. Pending trial on the merits, immediately issue a

PROVISIONAL AUTHORITY authorizing PALECO to
implement its CAPEX Projects for CY5 2017-2021;

2. After due hearing, render judgment making the approval of

the Application permanent;

3. Grant PALECO the authority to obtain a loan from NEA or

bank to finance its CAPEX projects; and

3. PALECO be allowed to recover from its members-

consumers the cost of the CAPEX Projects, updated up to
the time of the approval.

Other reliefs just and equitable under the premises are, likewise,
prayed for.

Respectfully Submitted.

Makati City for Pasig City, 8 March 2017.

Ilcoblaw...
 ERC Case No. 2016- RC
Application for Approval of the Five (5)-Year CAPEX Projects
Page 19 of 19

Counsel for PALECO:

CALIBO OLIVA AND BALBOA LAW OFFICE'

Suite 77, 7/17 Zeta Building, 191 Salcedo Street
Legazpi Village, Makati City 1229 Philippines
Voice & Fax: 02-8441686
Email: info@coblaw.ph

go
LUMEN P. BALBOA
Roll of Attorneys No. 60550
PTR No. 5942018/01-20-2017/ Makati City
IBP No. 1069272; 01/20/2017/ Quezon City
MCLE Compliance No. V-0022277; 06/14/2016
Email: lumen.balboa@coblaw.ph
LUMEN P. BALBOA

MARIA C4ftHAUTEA 2
Roll of Aft rneys No. 66585
PTR No. 5727946/07-22-2016/Makati City
IBP No. 1042173/06-09-2016/RSM
Email: carmela.hautea@coblaw.ph

'In compliance with Supreme Court Resolution dated February 17, 2015, undersigned counsel respecthilly manifest
the MCLE Compliance details of their Firm's Name Partners, as follows:

Name MCLE Compliance Number Date

Christian Gold M. Calibo V-0024052 10/19/2016
Ryan P. Oliva \L0013129 01-12-2016
Lumen Percy-Balboa V-0022277 06/14/2016

2 MCLE Compliance in the process of completion as counsel was admitted to the Bar only last year 2016.
REPUBLIC OF THE PHILIPPINES)
)S.S
PUERTO PH:NLhS4 CIT
ANNEX "B"
VERIFICATION AND CERTIFICATION

I, RIC B. ZAMBALES, of legal age, and with office address at

Palawan Electric Cooperative, Km 3.35 North National Highway,
Barangay Tiniguiban, Puerto Princesa City, Province of Palawan,
Philippines after having been sworn in accordance with law, hereby
depose and state:

That -

1. I am the General Manager of Palawan Electric Cooperative (the

"Cooperative" or "PALECO") who caused the preparation of the
foregoing Application for Approval of the Five (5)-Year Capital
Expenditure (CAPEX) Projects for the Years 2017 to 2021 with
Prayer for Provisional Authority (the "Application").

2. The allegations set forth in said Application are true and correct
based on my own personal knowledge and/or the authentic
records of the Cooperative.

3. PALECO has not commenced any other action or proceeding

involving the same issues in the Supreme Court, the Court of
Appeals, or any other tribunal or agency; to the best my
knowledge, no such action or proceeding is pending in the
Supreme Court, the Court of Appeals, or different Divisions
thereof, or any other tribunal or agency, which involve issues that
may somehow be related to those in this Application; and that, if I
should learn that a similar action or proceeding has been filed or is
pending before the Supreme Court, the Court of Appeals, or
different DMsions thereof, or any other tribunal or agency, I
undertake to promptly inform thi onorable Court within five (5)
days there from. r flflflflhi1!?nA I

N
OUN

L?R T
SUBSCRIBED AND SWORN to before me this day of
2017 at PUERTO PRINCESA UI e , affiant
- u-'HLbD NL 'J-t-i JcF6- I
exhibiting to me - issued ojj— at
fLTL! flm(?c4 cii-'/ ,-(]J
Doc. No. [1
Page No.
Book No. q7b UWTL DEC. 312017
Series of 2017.
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liw
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