On the Energy Regulatory Commission (ERC) Evidentiary Hearing last October 24, 2017, ZAMSURECO-I General Manager & Chief Executive Officer Jose Raul Saniel reported before the Honorable Commission that the 8-MW power supply contract with San Miguel Consolidated Power Corporation (SMCPC) is viewed to stabilize ZAMSURECO-I’s supply in the projected increase of energy requirements of Zamboanga Peninsula.

In his expository presentation, GM/CEO Saniel said that the economic activities of Mindanao are observed to be very dynamic. “Zamboanga Peninsula’s contribution to the growth in Mindanao is around 4 to 5% which are driven by industrial and service developments. These energy-driven businesses require sufficient long-term power.” GM Saniel said.

The power supply situation in Mindanao also urged the Management team and Board of Directors to enter into a power supply contract with SMCPC wherein NPC PSALM, which supplies the bulk of electricity in Mindanao, has drastically reduced its
energy allocation to electric cooperatives including ZAMSURECO-I. “One of the major reasons why we entered a power supply contract with SMCPC is to offset the capacity that has been reduced from PSALM’s power plants.” GM Saniel said.

GM Saniel said that SMCPC’s 8-MW capacity is a necessity for long-term supply aimed to eliminate power supply deficiency. The recent power supply agreement with SMCPC augments the 8.19-MW deficiency of ZAMSURECO-I which will now add to 7.34-MW from NPC-PSALM, 15-MW from ThermaMarine and 12-MW from Therma South totaling into an aggregated supply of 42.34-MW supply of the Cooperative. “We do not want to experience power curtailments again. We want to ensure
because this is our mandate to provide reliable sufficient power supply to our member-consumers.” GM Saniel said.

On procurement process, GM Saniel presented during the hearing that ZAMSURECO-I complied with all government regulations issued by the Department of Energy (DOE) and Energy Regulatory Commission (ERC) on Competitive Selection Process (CSP).

The ZAMSURECO-I BAC conducted a CSP held last February 9, 2016 and published the notice of invitation to bid to prospective bidders twice to the national and local public. As a result, GM Saniel said that BAC declared failure of bidding as only one (1) qualified bidder, who is SMCPC, that submitted a proposal. On March 1, 2016, BAC issued Resolution No. 10 which resorts to direct negotiation with SMCPC for the procurement of the 8-MW electric energy. The technical working group on power supply invited SMCPC for a meeting and deliberation on the features of SMCPC’s offer and made its endorsement to the Board of Directors. The Board of Directors then issued B.R. No. 26 authorizing its Board President to sign into the power supply contract. On March 14, 2016, ZAMSURECO-I and SMCPC executed the power supply contract subject to joint application. “Nag-umpisa tayo sa proseso.” GM Saniel said.

The main consideration made was San Miguel Consolidated Power’s capability to provide power immediately as their coal-fired power plant is currently operational in Malita, Davao. ZAMSURECO-I also put into consideration the SMCPC rate structure which entitles the Coop to a discount premium depending on its collection and payment performance.

EDP/ISD Manager Azucena Lagura discussed the salient features of the contract that includes a term of 10 year-supply of an 8-MW contracted capacity from its commercial operation date. EDP/ISD Lagura said that in the duration of the contract, the SMCPC will be granting a prompt payment discount (PPD) and collection efficiency discount which differs from other power supply contracts.

“One of the important factors being considered is the rate to be charged to ZAMSURECO-I out of the capacity to be supplied. Its rate impact to member-consumers underwent careful simulation and review .” said EDP/ISD Manager Azucena Lagura.

EDP/ISDM Lagura said that the rates to be charged to ZAMSURECO-I under the contracted capacity covers the generation costs only. Based on the contract, ZAMSURECO-I shall pay the contract charges which consists 2 major components — capacity fee and energy fee. The capacity fee is composed of capital recovery fee of Php 1,386.8021 and fixed operation and maintenance fee of Php 383.8079 per kilowatt with a total of Php 1,770.61 per kilowatt. The energy fee consists of 2 sub-components which are the variable operations and maintenance of 0.2831 centavos per kilowatt hour and fuel fee of 1.6566 per kilowatt hour a total of 1.9397 per kilowatt hour.

On the basis of actual energy delivered, the monthly payment computed based on the formula: The monthly contract charges equals the capacity charges for the month and energy charges of the month.

EDP/ISDM Lagura presented the conditions of the contract wherein ZAMSURECO-I may avail of the prompt payment discount equivalent to 1% of the total of capacity and energy charges and other components of the current power bill except WESM charges and replacement power

costs if any, provided that the Cooperative has no arrears from its previous power billings. ZAMSURECO-I must also meet the criteria of submitting all BIR tax certificates, full payment of power bill on time and compliance of other
policies and procedures as may be required by SMCPC subject to prior notification.

Considering that ZAMSURECO-I sustained its 100% collection efficiency for the past eleven (11) years, EDP/ISD Manager Lagura said that the ZAMSURECO-I will be expecting to have a 20 centavos per kilowatt hour discount provided that ZAMSURECO-I has met the conditions: has no outstanding obligations from previous power bills , has submitted a copy of its monthly financial statistical report, collection efficiency report, audited financial statements and duly accomplished collection efficiency discount form.

On the rate impact, EDP/ISDM Lagura discussed the analysis and simulations made based on projected energy purchases for 2016. “As what GM Saniel said, ZAMSURECO-I signed the contract sometime March 2016 so we based also the computation for the rate impact in 2016 using its DDP projections.” EDP/ISDM Lagura said.

To create a rate impact analysis, EDPM/ISDM Lagura presented 3 scenarios using its existing power suppliers’ ERC approved rates in 2016 based on the following data: PSALM’s generation charge for the month of February 2016, ERC-approved rate of Mapalad Power Corporation (MPC), TSI and TMI’s approved rate for the year.

Scenario 1 on actual billing from its power supplies revealed a blended generation rate of Php 4.1897 per kWh for February 2016. Scenario 2 assumes SMCPC is not supplying capacity to ZAMSURECO-I wherein the simulation utilized the forecasted average monthly energy purchased in 2016. The calculation resulted in a proposed generation mixed rate of Php 5.0485 per kilowatt hour. Scenario 3 assumes SMCPC supplying 8-MW to ZAMSURECO-I that showed a proposed mix generation
result of Php 5.1284 centavos per kWh.

Presenting the analysis and simulation, an expected rate increase of PhP 0.0799 centavos per kWh is said to impact the consumers’ billing statement from the power supply contract with SMCPC.

To analyze its impact to its end-consumers, EDP/ISDM Lagura presented a sample billing computation for a residential customer consuming a monthly consumption of 100-kilowatt hours. Utilizing first the existing blended rate of PhP 4.1897 would result in Php 418.97 per month whereas applying the proposed generation mixed rate without SMCP’s supply of Php 5.0485 per kWh would give Php 504.85 per month. The existing blended rate versus the rate without SMCPC’s supply will generate into an increase of Php 85.88 per month.

Another sample billing computation on residential customers consuming 100-kWh was made to gather the rate impact of the said power supply contract. The said existing blended rate of PhP 4.1897 per kwh in comparison with the proposed generation mixed rate, now with SMCPC’s supply to ZAMSURECO-I of PhP 5.1284 per kwh, will generate into an increase in the residential customer’s monthly bill of PhP 93.87 per month on the generation charge in particular.

Applying both, a residential customer with 100- kWh consumption is expected to have an increase of only (Php 512.84 per month less Php 504.85 per month) PhP 7.99 only per month on his/her generation charges. The increase of Php 7.99 inversely results in a decrease of power shortage which is viewed to stabilize power supply, to lessen brownouts and reduce customer complaints.

The ERC Hearing was held at ZAMSURECO-I Central Office and was presided by Atty. Imelda Myra Hagad, ERC’s Hearing Officer with ERC Clerk of Commission Atty. Maria Adela Ching. ZAMSURECO-I Board of Directors, Management Team, employees, MSEAC, media partners and other stakeholders also attended the hearing.

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