Republic of the Philippines ENERGY REGULATORY COMMISSION San Miguel Avenue, Pasig City IN THE MATTER OF THE APPLICATION FOR APPROVAL OF THE ANNUAL REVENUE REQUIREMENT AND PERFORMANCE INCENTIVE SCHEME IN ACCORDANCE WITH THE PROVISIONS OF THE RULES FOR SETTING DISTRIBUTION WHEELING RATES (RDWR), COMMISSION CASE NO. 2010- RC Angeles Electric Corporation Applicant. ------------------------------------------------------------------------- APPLICATION COMES NOW, applicant Angeles Electric Corporation through the undersigned counsel, and unto this Honorable Commission, most respectfully states; that: 1. Applicant is a corporation duly organized and existing under and by virtue of the laws of the Philippines, with principal office at Don Juan D. Nepomuceno Ave. corner Teresa Ave, Nepo Mart Complex, Angeles City where it may be served with summons and other legal processes, represented in this instance by its President, Engr. Geromin T. Nepomuceno, Jr., of legal age, Filipino, married, and with office address also at Don Juan D. Nepomuceno Ave. corner Teresa Ave, Nepo Mart Complex, Angeles City 2009. Herein applicant is the exclusive franchise holder issued by Congress of the Philippines to operate an electric light and power services in the City of Angeles in the Province of Pampanga. 2. Applicant will enter Performance-Based Regulation at the fourth entry point, as originally described in Annex B of Commission Resolution No. 12-02 Series of 2004 Adopting a Methodology for Setting Distribution Wheeling Rates, dated December 10, 2004, and later amended by the Energy Regulatory Commission (Commission) to make provision for four entry points. The application submitted to the Commission is for the approval of the Annual Revenue Requirement and Performance Incentive Scheme required for the Second Regulatory Period described in the amended Rules for setting Distribution Wheeling Rates (RDWR) for Privately Owned Distribution Utilities entering Performance Based Regulation (Fourth Entry Point) issued by the Commission on June 22, 2009. This Second Regulatory Period commences on October 1, 2011 and terminates on September 30, 2015.
2a. Applicant proposes the Annual Revenue Requirement and Performance Incentive Scheme values thus approved to form the basis of the Commission s determination of the X-factor, P 0 -factor and the Maximum Annual Prices that will apply to the applicant and on which it will base its rate setting for the Second Regulatory Period. 3. Applicant has prepared its proposal as contained in this application in accordance with the conditions described in the afore-mentioned RDWR and in the implementing guidelines issued by the Commission in its Position Paper on the Regulatory Reset for the October 2011 to September 2015 Regulatory Period for Privately Owned Distribution Utilities subject to Performance Based Regulation, dated June 22, 2009 (Position Paper). The application submitted to the Commission made use of the methodology described in the RDWR, the Position Paper and applied the financial spreadsheet model titled Commission-MODEL-4TH ENTRY-V1.0.xls (Price-Cap Model) that was provided to the applicant by the Commission. 4. The proposed Annual Revenue Requirement is based on the Building Block calculation described in the afore-mentioned RDWR, with the exclusion of corporate income tax, as set out below for each Regulatory Year and for which the applicant is seeking the immediate approval of the Commission: Table 1. Annual Revenue Requirement as per Building Block approach Building Block Proposed revenue requirement per Regulatory Year (PhP) 2012 2013 2014 2015 Operating and maintenance 197,257,516 207,018,906 217,557,379 229,535,274 expenditure Taxes, levies & duties (other than 3,447,759 2,949,810 3,329,834 3,533,655 corporate tax) Regulatory depreciation 83,677,891 89,917,549 94,044,904 98,688,151 Return on capital 243,396,906 264,315,016 281,047,193 284,780,489 TOTAL REVENUE REQUIREMENT 527,780,072 564,201,281 595,979,310 616,537,569 Note : All values are in nominal terms The meaning and application of these parameters are as described in the afore-mentioned RDWR. Corporate income tax has been discontinued as a building block for the Second Regulatory Period following an approach by various Regulated Entities in this regard and consultation on the resulting changes to the RDWR. This rule change (and others approved by the Commission) was published in the ERC document titled Performance Based Regulation of
Privately Owned Electricity Distribution Utilities : Modifications to the Rules for Setting Distribution Wheeling Rates (RDWR) dated June 22, 2009. 5. The afore-mentioned Annual Revenue Requirement is based on a proposed rolled-forward value of the applicant s Regulatory Asset Base as described below. The opening value of the Regulatory Asset Base for 2011 is based on the value of the Regulatory Asset Base on June 30, 2009, as valued by the Commission and communicated to the applicant, suitably amended to a September 30, 2011 value in accordance with the method described in the RDWR. Table 2. Summary of proposed Rolled-forward Regulatory Asset Base (RAB) ITEM PhP for Regulatory Year 2012 2013 2014 2015 Opening value of RAB 1,564,788,970 1,652,397,290 1,842,266,835 1,873,974,876 plus Capital Expenditure 162,223,734 270,782,461 116,236,813 105,059,702 minus Regulatory Depreciation on 83,677,891 89,917,549 94,044,904 98,688,151 asset base at start of Second Regulatory Period minus Regulatory Depreciation on 9,062,477 9,004,632 9,516,132 10,040,132 capital expenditure incurred during the Second Regulatory Period Closing value of RAB 1,652,397,290 1,842,266,835 1,873,974,876 1,890,386,560 AVERAGE VALUE OF RAB 1,608,593,130 1,747,332,063 1,858,120,856 1,882,180,718 Note : All values are in nominal terms 6. For the calculation of the above-mentioned Annual Revenue Requirement and Rolledforward Regulatory Asset Base, as instructed by the Commission, applicant has applied the preliminary values for the parameters presented below: Table 3. Input values provided by the Commission Parameter Date instructed Preliminary value adopted by Commission Construction work in progress factor (CWIP factor) 10/26/2009 For substation projects : 4.20% For other projects : 2.98% P 0 -factor 0 PhP/kWh X-factor -.0740 Valuation of the applicant s regulatory PhP 1,531,339,529 asset base as at June 30, 2009 Working-capital proportion 6.85% The meaning and application of these parameters are as described in the afore-mentioned RDWR. 7. In calculating the afore-mentioned Annual Revenue Requirement for the Second Regulatory Period, the applicant made use of the estimated Philippine Consumer Price Index, United
States of America Consumer Price Index and Philippine Peso/United States dollar exchange rate figures below (figures provided for calendar years and converted to regulatory years): Table 4a. Forecast Change in the Consumer Price Index for the Philippines 2010 2011 2012 2013 2014 2015 Calendar Year 3.6% 4.2% 4.0% 4.0% 4.0% 4.0% Regulatory Year 4.2% 4.1% 4.0% 4.0% 4.8% Data source : Bangko Sentral ng Pilipinas Table 4b. Forecast Change in the Consumer Price Index for the United States of America 2010 2011 2012 2013 2014 2015 Calendar Year 0.7% 1.3% 1.6% 1.9% 1.9% 1.9% Regulatory Year 1.4% 1.8% 2.4% 2.7% 2.8% Data source : Bangko Sentral ng PIlipinas Table 4c. Forecast PhP/US$ Exchange Rate (average for the year) Quarter ending 2010 2011 2012 2013 2014 2015 Calendar Year 49.00 51.00 49.00 49.00 49.00 49.00 Regulatory Year 47.43 47.00 46.75 46.55 46.50 Data source : Bangko Sentral ng Pilipinas 7a. For the purposes of the initial and subsequent annual price resets during the Second Regulatory Period as required in terms of the RDWR, the applicant will update the aforementioned Consumer Price Indices and foreign exchange rates with actual values in accordance with the RDWR and will use such updated values for the price resets. 8. The afore-mentioned Annual Revenue Requirement is in part based on a proposed rate of return of 15.01% per annum. This rate of return corresponds with the Regulatory Weighted Average Cost of Capital allowed in terms of the Commission s Final Determination on the price control arrangements for utilities entering Performance Based Regulation at the third entry point. The applicant recognizes that the Commission will revise the actual Weighted Average Cost of Capital that will apply in its Final Determination of the price control arrangements for the Second Regulatory Period for the fourth entry group and that this may differ from the figure used in this Revenue Application. 9. Allowance has been made in accordance with the RDWR to include assets used beyond their standard lives in the Regulatory Asset Base, at a value equal to 5% of their optimized replacement cost. 10. The proposed Capital Expenditure included in the afore-mentioned calculation of the Rolledforward Regulatory Asset Base is as demonstrated below: Table 5. Proposed Capital Expenditure (per regulatory year)
ITEM NOMINAL PESO Capex Category 2011 2012 2013 2014 2015 A REGULATED DISTRIBUTION SERVICES ASSETS A1 Regulated Distribution Services Assets Network assets Land and Land Rights (Distribution Purposes) Structures and Improvements 2,124,757 Station Equipment Power transformers Switchgear Protective equipment Metering & control equipment Communications equipment Other station equipment 66,092,278 2,708,890 18,758,446 4,109,773 28,299,467 Poles, Towers and Fixtures - Distribution 21,908,389 21,022,244 33,312,033 23,103,001 33,128,264 Overhead Conductors and Devices - Distribution 19,181,144 24,959,641 29,830,266 21,384,794 23,701,310 Underground Conduits Distribution Underground Conductors and Devices - Distribution Distribution Transformers Power Conditioning Equipment 33,788,521 46,433,857 54,679,445 42,261,876 10,349,066 31,425,635 Meters, Instruments and Metering Transformers - Distribution Information technology Equipment (distribution) 12,072,938 4,571,412 Regulated Entity Property on Consumer's Premises Street Lights and Signal Systems Laboratory Equipment 4,143,276 A2 Regulated Distribution Services Assets Non-network fixed assets Land and Land Rights (non-network) Structures and Improvements (non-network) 1,699,805 2,529,772 Office Furniture and Equipment Transportation Equipment 19,694,371 5,528,347 Stores Equipment Tools, Shop and Garage Equipment Laboratory Equipment 1,327,760 1,437,370
ITEM NOMINAL PESO Capex Category 2011 2012 2013 2014 2015 Information Systems Equipment (non-network) 408,509 1,285,478 1,739,218 1,161,395 1,675,867 Power-operated Equipment Communication Plant and Equipment Miscellaneous Equipment A3 Regulated Distribution Services Assets Materials and supplies (including spares) A4 Regulated Distribution Services Assets Transferred Subtransmission Assets Subtotal A 75,286,563 134,764,128 251,066,945 100,789,904 89,931,075 B DISTRIBUTION CONNECTION SERVICES ASSETS B1 Distribution Connection Services Assets Network assets Poles, Towers and Fixtures (Customer) Overhead Conductors and Devices (Customer) Underground Conduits (Customer) Underground Conductors and Devices (Customer) Distribution Transformers (Customer) Information technology Equipment (Connection) B2 Distribution Connection Services Assets Non-network fixed assets Land and Land Rights (non-network) Structures and Improvements (non-network) Office Furniture and Equipment Transportation Equipment Stores Equipment Tools, Shop and Garage Equipment Laboratory Equipment Information Systems Equipment (non-network) Power-operated Equipment Communication Plant and Equipment Miscellaneous Equipment B3 Distribution Connection
ITEM NOMINAL PESO Capex Category 2011 2012 2013 2014 2015 Services Assets Materials and supplies (including spares) C C Subtotal B REGULATED RETAIL SERVICES ASSETS Regulated Retail Services Assets Meters, Instruments & Metering Transformers (Consumer Consumption Metering) 8,938,161 17,898,200 14,673,664 15,446,908 15,128,627 Land and land rights Structures and improvements Office Furniture and Equipment Transportation Equipment 9,561,406 5,528,347 Stores Equipment Tools, Shop and Garage Equipment Laboratory Equipment Information Systems Equipment Communication Plant and Equipment Miscellaneous Equipment Subtotal C 8,938,161 27,459,606 20,202,011 15,446,908 15,128,627 TOTAL 84,224,724 162,223,734 271,268,956 116,236,813 105,059,702 10a. The above-mentioned proposed Capital Expenditure is increased from current levels for the following reasons: The increases reflect new capital expenditure required for the following purposes: To meet growing energy demand specifically in the central part of the franchise area, increased customer numbers, service quality and performance measurement improvements Compliance to DENR-EMB Administrative Order No. 1, Series of 2004 (Chemical Control Order on Polychlorinated Biphenyls) Replacement of ageing or obsolete equipment. 11. The proposed Operating & Maintenance Expenditure included in the afore-mentioned calculation of the Annual Revenue Requirement is as demonstrated below: Table 6. Proposed Operating & Maintenance Expenditure (per regulatory year)
Opex Category and Sub-category Nominal PhP 2011 2012 2013 2014 2015 A REGULATED DISTRIBUTION SERVICES A1. Distribution: Operation Operation supervision & engineering 12,994,134 13,773,839 14,357,314 14,931,607 15,528,871 Contractor services 10,371,004 10,977,384 11,689,590 12,157,174 12,643,461 Load dispatching 5,194,154 5,505,908 5,739,148 5,968,714 6,207,462 Structures 0 0 0 0 0 Substations 7,791,231 8,258,862 8,608,721 8,953,070 9,311,193 Overhead conductors & devices 107,949 111,889 116,532 121,193 126,041 Underground cables & devices 0 0 0 0 0 Streetlighting and signal systems 0 0 0 0 0 Metering (distribution network) 0 0 0 0 0 Rents 902,189 1,229,557 1,487,058 1,667,892 1,871,701 Information technology (distribution network) 602,850 624,854 650,786 676,817 703,890 Miscellaneous 126,712 131,337 136,787 142,259 147,949 A2. Distribution: Maintenance Maintenance supervision & engineering 13,073,978 13,856,597 14,443,507 15,021,248 15,622,098 Contractor services 0 0 0 0 0 Structures 0 0 0 0 0 Substations 16,044,914 16,935,974 17,650,677 18,356,704 19,090,972 Overhead lines & Devices 7,415,643 6,470,920 6,739,461 7,009,039 7,289,401 Underground cables & devices 0 0 0 0 0 Streetlighting and signal systems 20,187 88,620 92,298 95,990 99,830 Distribution transformers 49,643 34,464 35,895 37,330 38,824 Information technology (distribution network) 96,247 52,105 54,267 56,438 58,695 Metering (distribution network) 316,259 299,707 312,145 324,631 337,616 Miscellaneous 63,586 50,847 52,957 55,076 57,279 A3. Administrative & General Company Management Costs 534,674 1,932,234 2,012,421 2,092,917 2,176,634 Admin & general salaries 14,101,691 15,574,637 16,241,796 16,891,468 17,567,127 Office supplies & expenses 1,270,440 2,336,960 2,433,943 2,531,301 2,632,553 Information technology (admin & general) 114,374 149,997 156,222 162,471 168,970 Outside services employed 4,423,190 4,584,639 4,774,900 4,965,896 5,164,531 Property insurance 2,640,008 2,736,370 2,849,928 2,963,925 3,082,482 Injuries & damages 15,568 16,136 16,806 17,478 18,177 Employee pension & benefits 9,612,481 10,123,632 10,727,388 11,349,121 11,874,650 Regulatory liaison & compliance 246,325 711,302 1,307,404 333,668 407,665 Rents 966,563 1229,557 1,379,596 1,546,541 1,871,701 Maintenance of office & general plant 3,943,626 7,449,962 8,079,521 8,539,719 10,024,435 Officers allowance & benefits 0 0 0 0 0 Travel 3,831,299 4,326,742 5,044,226 6,606,251 7,728,263 Training 488,857 506,701 527,728 548,838 570,791
Opex Category and Sub-category Nominal PhP 2011 2012 2013 2014 2015 Water and Electricity 193,660 10,555,542 10,993,594 11,433,337 11,890,671 Miscellaneous 419,356 501,552 522,366 543,261 564,991 WESM compliance (applicable to 0 Regulated Distribution Services) Market fees Registration fees Metering fees Billing & settlement fees Administration fees Costs for the PEM board, committees & working groups Market management software & upgrades Provision and maintenance of security 0 0 0 0 Subtotal A 117,973,060 141,138,827 149,234,984 156,101,374 164,878,926 B DISTRIBUTION CONNECTION SERVICES B1. Connection Services: Operation Operation supervision & engineering Contractor services Structures Substations Overhead connections & devices Underground cables & devices Consumer installations Information technology (connection assets) Miscellaneous B2. Connection Services: Maintenance Maintenance supervision & engineering Contractor services Structures Substations Overhead connections & devices Underground cables & devices Consumer installations Distribution transformers Information technology (connection assets) Miscellaneous B3. Administrative & General Admin & general salaries Office supplies & expenses Information technology (admin & general) Outside services employed Property insurance
Opex Category and Sub-category Injuries & damages Nominal PhP 2011 2012 2013 2014 2015 Employee pension & benefits Regulatory liaison & compliance Rents Maintenance of office & general plant Officers allowance & benefits Travel Training Water and Electricity C Subtotal B 0 REGULATED RETAIL SERVICES 0 0 0 0 Administration and General Salaries 20,444,169 23,509,025 24,505,459 25,485,678 26,505,105 Office supplies & expenses 1,236,479 1,281,611 1,334,797 1,388,189 1,443,717 Outside services employed 5,064,278 7,749,880 7,568,922 8,161,848 8,551,666 Property insurance 161,834 167,741 174,702 181,690 188,957 Injuries & damages 0 0 0 0 0 Employee pension & benefits 4,179,697 4,512,128 4,758,373 5,249,759 5,531,314 Regulatory liaison & compliance 568,663 686,453 298,458 324,745 303,480 Rents 5,898,387 6,244,354 6,642,747 7,056,656 7,496,653 Maintenance of office & general plant 783,957 1,209,415 1,094,745 1,274,477 1,323,138 Officers allowance & benefit 290,164 300,755 313,236 325,766 338,796 Travel 556,843 2,066,814 2,446,489 2,894,351 3,427,081 Training 87,338 139,035 144,805 150,597 156,621 Water and Electricity 102,307 106,042 110,442 114,860 119,454 Planning, installation and maintenance of consumer metering installations 373,067 1,277,942 1,133,948 1,188,589 1,185,527 Consumer Meter Reading Expenses 0 0 0 0 0 Information technology (retail related) 557,010 577,341 601,301 625,353 650,367 Consumer Records, Billing and Collection Expenses 3,126,923 3,338,289 3,581,132 3,836,108 4,109,239 Bad debts 2,654,038 2,750,912 2,865,074 2,979,677 3,098,864 Information and Instructional 200,951 Advertising Expenses 230,229 209,290 217,662 226,368 Energy trading expenses (excluding 0 energy purchases) 0 0 0 0 Miscellaneous consumer services 0 expenses 0 0 0 0 Subtotal C 46,315,384 56,118,689 57,783,922 61,456,005 64,656,348 TOTAL 164,288,444 197,257,516 207,018,906 217,557,379 229,535,274 11a. The above-mentioned proposed Operating and Maintenance expenditures are increased from current levels because the current levels do not reflect the normal expenditure levels in order to maintain the desired service that is necessary in the business.
11b. That the proposed increase in operating and maintenance expenditure is as a result of increased inputs required to service the growing asset base and of inflationary pressures. 12. The proposed expenditure on Taxes, Levies & Duties (other than corporate income tax) included in the afore-mentioned calculation of the Annual Revenue Requirement is as demonstrated below: Table 7. Summary of proposed Taxes, Levies & Duties (other than corporate income tax) expenditure (per Regulatory Year) Nominal PhP 2011 2012 2013 2014 2015 Levies 750,862 750,862 233,581 607,382 791,564 Duties 0 0 0 0 0 Other taxes 12,550,346 2,696,897 2,716,229 2,722,452 2,742,090 TOTAL 13,301,208 3,447,759 2,949,810 3,329,834 3,533,655 12a. The above-mentioned proposed taxes, levies & duties (other than corporate income taxes) expenditure are increased from current levels for the following reasons: That the taxes, levies and duties (other than corporate income tax) figure include provision for increased levies, increased property taxes required by the local government, and increased registration fees. 13. The proposed Depreciation included in the afore-mentioned calculation of the Annual Revenue Requirement, including an allowance for assets intended to be disposed of during the Second Regulatory Period after allowing for any potential income from the sales of such disposed assets, is as demonstrated below. These values include depreciation on the applicant s Regulatory Asset Base as at the start of the Second Regulatory Period, as well as depreciation on those assets proposed to be acquired during the Second Regulatory Period. Table 8. Summary of proposed Depreciation (per Regulatory Year) ITEM REAL PESO Depreciation Category 2011 2012 2013 2014 2015 A REGULATED DISTRIBUTION SERVICES ASSETS A1 Regulated Distribution Services Assets Network assets Land and Land Rights (Distribution Purposes) Structures and Improvements
ITEM REAL PESO Depreciation Category 2011 2012 2013 2014 2015 Station Equipment Power transformers Switchgear Protective equipment Metering & control equipment Communications equipment Other station equipment 4,592,695 2,890,527 1,385,823 25,203 65,705 4,592,695 2,890,527 1,385,823 25,203 65,705 4,592,695 2,890,527 1,385,823 25,203 65,705 4,592,695 2,890,527 1,385,823 25,203 65,705 4,592,695 2,890,527 1,385,823 25,203 65,705 Poles, Towers and Fixtures - Distribution Overhead Conductors and Devices - Distribution 12,164,826 6,535,166 12,164,826 6,535,166 12,164,826 6,535,166 12,164,826 6,535,166 12,164,826 6,535,166 Underground Conduits Distribution Underground Conductors and Devices - Distribution Distribution Transformers 113,580 18,930,050 182,356 113,580 18,122,246 182,356 113,580 18,143,811 182,356 113,580 18,121,143 182,356 113,580 18,882,231 182,356 Power Conditioning Equipment Meters, Instruments and Metering Transformers - Distribution Information technology Equipment (distribution) Regulated Entity Property on Consumer's Premises Street Lights and Signal Systems Submarine Cables A2 Regulated Distribution Services Assets Non-network fixed assets Land and Land Rights (non-network) Structures and Improvements (non-network) 853,850 853,850 853,850 853,850 853,850 Office Furniture and Equipment 473,760 473,760 473,760 473,760 473,760 Transportation Equipment 3,714,000 3,714,000 3,714,000 3,714,000 3,714,000 Stores Equipment Tools, Shop and Garage Equipment 406,946 406,946 406,946 406,946 406,946 Laboratory Equipment 110,025 52,831 0 0 0 Information Systems Equipment (non-network) 1,199,100 953,005 0 Power-operated Equipment 168,150 168,150 168,150 168,150 168,150 Communication Plant and Equipment 136,500 136,500 136,500 136,500 136,500 Generating Plant Petersville 11,013,820 3,652,125
ITEM REAL PESO Depreciation Category 2011 2012 2013 2014 2015 A3 Regulated Distribution Services Assets Materials and supplies 0 (including spares) A4 Regulated Distribution Services Assets Transferred 527,621 Subtransmission Assets Subtotal A 65,489,703 56,489,294 51,852,898 51,830,229 52,591,317 B DISTRIBUTION CONNECTION SERVICES ASSETS B1 Distribution Connection Services Assets Network assets Poles, Towers and Fixtures (Customer) Overhead Conductors and Devices (Customer) Underground Conduits (Customer) Underground Conductors and Devices (Customer) Distribution Transformers (Customer) Information technology Equipment (Connection) B2 Distribution Connection Services Assets Non-network fixed assets Land and Land Rights (non-network) Structures and Improvements (non-network) Office Furniture and Equipment Transportation Equipment Stores Equipment Tools, Shop and Garage Equipment Laboratory Equipment Information Systems Equipment (non-network) Power-operated Equipment Communication Plant and Equipment Miscellaneous Equipment B3 Distribution Connection Services Assets Materials and supplies (including spares) C C Subtotal B REGULATED RETAIL SERVICES ASSETS Regulated Retail Services Assets 14,053,649 14,643,902 14,643,902 14,643,902 14,364,902
ITEM REAL PESO Depreciation Category 2011 2012 2013 2014 2015 Meters, Instruments & Metering Transformers (Consumer Consumption Metering) Land and land rights Structures and improvements Office Furniture and Equipment Transportation Equipment Stores Equipment Tools, Shop and Garage Equipment Laboratory Equipment Information Systems Equipment Communication Plant and Equipment 1,520,373 1,527,997 1,527,997 1,527,997 1,527,997 Services Subtotal C 15,574,021 16,171,899 16,171,899 16,171,899 16,171,899 TOTAL 81,063,724 72,661,193 68,024,797 68,002,128 68,763,216 13a. The afore-mentioned depreciation is calculated on a straight-line basis, based on the standard asset lives approved by the Commission where these are available. 14. For the Second Regulatory Period, no Corporate Income Tax will be included in the aforementioned calculation of the Annual Revenue Requirement. 15. Forecast sales of energy, including sales to AEC itself, is forecast as follows: Table 9. Summary of forecast energy consumption (per Regulatory Year) 2011 2012 2013 2014 2015 Energy consumption (MWh) 401,071 413,197 426,364 441,016 456,440 16. The estimates of the afore-mentioned energy sales are based on the following forecast coincident, annual, sustained peak demand on the whole distribution network: Table 10. Summary of forecast peak demand (per Regulatory Year) 2011 2012 2013 2014 2015 Demand (MW) 77,806 79,919 82,692 85,534 88,525 17. The estimated price-path for the Second Regulatory Period that was determined using the afore-mentioned proposed Allowed Annual Revenue and an assumed zero X-factor and P 0 - factor is demonstrated below:
Table 11. Assumed Maximum Annual Prices for the Second Regulatory Period 2012 Regulatory year 2013 Regulatory year 2014 Regulatory year 2015 Regulatory year Maximum Annual Price (PhP/kWh) 1.1370 1.2666 1.4110 1.5835 16a. The applicant recognizes that the Commission will determine the actual X-factor and P 0 - factor after its consideration of this application for Allowed Annual Revenue and will determine the actual price-path for the Second Regulatory Period after incorporating such amendments to these proposals as the Commission deems necessary. As part of its consideration the Commission may also amend one or more of the parameters on which the calculations of the Allowed Annual Revenue are based. The actual approved price path is therefore likely to differ from that estimated above. 18. Since the Maximum Average Prices calculated under Performance-Based Regulation are not directly comparable with unbundled rates, for illustrative purposes, the applicant has prepared a comparison of its current rates for providing distribution wheeling services with those that would result from the implementation of the afore-mentioned estimated Maximum Annual Prices. This is presented below: Table 12. Comparison of estimated rates with current rates (illustrative only) Actual (2011) Illustrative Rates (2012) Illustrative Rates (2013) Illustrative Rates (2014) Illustrative Rates (2015) Customer Class Residential A Distribution (PhP/kWh) 0.6795 0.7469 0.8303 0.9090 1.0231 Supply (PhP/kWh) 0.1849 0.2158 0.2422 0.2717 0.3072 Metering (PhP/kWh) 0.08 0.11 0.12 0.14 0.16 Metering 5.00 5.00 5.00 5.00 5.00 Total PhP/kWh 0.9739 1.0953 1.2218 1.3489 1.5210 Total 5.00 5.00 5.00 5.00 5.00 PhP/customer/month Average PhP/kWh distribution wheeling rate 0.9739 1.0953 1.2218 1.3489 1.5210 GS - 1 B Distribution (PhP/kWh) 0.6898 0.7555 0.8503 0.9261 1.0675 Supply 36.12 40.09 44.58 49.68 55.81 Metering (PhP/kWh) Metering 68.95 79.39 88.57 99.06 111.67
Total PhP/kWh 1.0454 1.1194 1.2504 1.3660 1.5547 Total 105.08 119.48 133.15 148.74 167.48 PhP/customer/month Average PhP/kWh distribution wheeling rate 1.0454 1.1194 1.2504 1.3660 1.5547 GS - 2 C Distribution (PhP/kWh) 1.0166 1.0622 1.1775 1.3168 1.4637 Supply 36.12 40.09 44.58 49.68 55.81 Metering (PhP/kWh) Metering 68.95 79.39 88.57 99.06 111.67 Total PhP/kWh 1.1328 1.1890 1.3170 1.4702 1.6336 Total 105.08 119.48 133.15 148.74 167.48 PhP/customer/month Average PhP/kWh distribution wheeling rate 1.1328 1.1890 1.3170 1.4702 1.6336 GS - 2 D Distribution (PhP/kWh) 1.0563 1.1064 1.2317 1.3850 1.5400 Supply 36.12 40.09 44.58 49.68 55.81 Metering (PhP/kWh) Metering 68.95 79.39 88.57 99.06 111.67 Total PhP/kWh 1.1437 1.1973 1.3317 1.4949 1.6618 Total 105.08 119.48 133.15 148.74 167.48 PhP/customer/month Average PhP/kWh distribution wheeling rate 1.1437 1.1973 1.3317 1.4949 1.6618 GS - 4 E Distribution (PhP/kWh) 1.0784 1.1358 1.2641 1.4195 1.5851 Supply 36.12 40.09 44.58 49.68 55.81 Metering (PhP/kWh) Metering 448.54 516.41 576.16 644.37 726.40 Total PhP/kWh 1.1594 1.2040 1.3391 1.5021 1.6766 Total 484.66 556.51 620.73 694.05 782.21 PhP/customer/month Average PhP/kWh distribution wheeling rate 1.1594 1.2040 1.3391 1.5021 1.6766 GS - 5 F Primary Distribution (PhP/kW) 239.27 213.61 237.30 264.36 296.68 Distribution (PhP/kWh) 0.1939 0.2212 0.2450 0.2834 0.3199 Supply 36.12 40.09 44.58 49.68 55.81
Metering (PhP/kWh) Metering 5,369.09 6,181.61 6,896.77 7,713.27 8,695.20 Total PhP/kWh 0.7871 0.9254 1.0250 1.1829 1.3342 Total 5,405.22 6,221.70 6,941.34 7,762.95 8,751.01 PhP/customer/month Average PhP/kWh distribution wheeling rate 0.7871 0.9254 1.0250 1.1829 1.3342 GS - 5 F Secondary Distribution (PhP/kW) 239.27 327.16 363.59 405.46 455.08 Distribution (PhP/kWh) 0.1991 0.2325 0.2443 0.2703 0.3109 Supply 36.12 40.09 44.58 49.68 55.81 Metering (PhP/kWh) Metering 424.65 488.91 545.47 610.05 687.72 Total PhP/kWh 0.8293 1.0494 1.1087 1.2260 1.4039 Total 460.77 529.01 590.05 659.73 743.53 PhP/customer/month Average PhP/kWh 0.8293 1.0494 1.1087 1.2260 1.4039 distribution wheeling rate SMALL INDUSTRIALG Distribution (PhP/kW) 79.76 109.05 121.20 135.15 151.69 Distribution (PhP/kWh) 0.6589 0.9333 0.9939 1.0924 1.0537 Supply 36.12 40.09 44.58 49.68 55.81 Metering (PhP/kWh) Metering 94.22 108.48 121.03 135.36 152.59 Total PhP/kWh 1.3070 1.5365 1.6465 1.8098 1.7963 Total 130.35 148.58 165.61 185.04 208.40 PhP/customer/month Average PhP/kWh distribution wheeling rate 1.3070 1.5365 1.6465 1.8098 1.7963 LARGE INDUSTRIAL H Distribution (PhP/kW) 239.27 213.61 237.30 264.36 296.68 Distribution (PhP/kWh) 0.1743 0.1823 0.2203 0.2732 0.3049 Supply 36.12 40.09 44.58 49.68 55.81 Metering (PhP/kWh) Metering 5,369.09 6,181.61 6,896.77 7,713.27 8,695.20 Total PhP/kWh 0.7379 0.7868 0.9444 1.1627 1.2970 Total 5,405.22 6,221.70 6,941.34 7,762.95 8,751.01 PhP/customer/month Average PhP/kWh distribution wheeling rate 0.7379 0.7868 0.9444 1.1627 1.2970 FLAT
Distribution (PhP/kWh) 0.8834 0.9627 1.0979 1.3727 1.6204 Supply 36.12 40.09 44.58 49.68 55.81 Total PhP/kWh 0.9330 1.0009 1.1381 1.4150 1.6653 Total 36.12 40.09 44.58 49.68 55.81 PhP/customer/month Average PhP/kWh distribution wheeling rate 0.9330 1.0009 1.1381 1.4150 1.6653 19. The applicant proposes to adopt a Price-Linked Performance Incentive Scheme as required in terms of the RDWR. According to this Performance Incentive Scheme the applicant will be rewarded if the service performance levels of its electricity distribution business exceed the target levels proposed below, and will be penalized if the service performance level of its electricity distribution business falls below the proposed targets. This reward or penalty will be directly incorporated into the Maximum Annual Prices from the second year of the Second Regulatory Period onward. The proposed Price-linked Performance Incentive Scheme is based on the performance measures and performance targets demonstrated below. Stepped performance target levels are proposed, which will influence the size of the reward or penalty. Table 13. Summary of proposed Price-linked Performance Incentive Scheme Reward Target Penalty Performance index Units Weight Level A Level B Level C Level D Level E System average interruption frequency index (SAIFI) Number 0.20 30.27 33.28 36.29 39.30 42.31 Customer average interruption duration index (CAIDI) Minutes 0.20 25.71 30.31 34.91 39.51 44.11 Planned system average interruption duration index (SAIDI) Minutes 0.15 134.14 284.60 435.06 585.52 735.98 Probability of voltage levels falling within prescribed limits % 0.10 2 3 4 5 6 System losses % 0.05 7.82 8.16 8.5 Average time to process applications for Regulated Distribution Services Days 0.10 2 3 6 7 10 Average time to connect premises to the Regulated Distribution System Days 0.10 5 10 15 20 25 Average time to answer calls at call centre Seconds 0.10 0 0 0 0 0 {To be adapted to Applicant s own interim performance incentive scheme} 20. The applicant proposes to adopt a Guaranteed Service Level Performance Incentive Scheme as required in terms of the RDWR. According to this Guaranteed Service Level
scheme, customers will be directly compensated, in the form of reductions in their monthly electricity bills, if service performance falls below certain minimum thresholds. The thresholds and the penalties that will apply are as demonstrated below: Table 14. Summary of proposed Guaranteed Service Level Incentive Scheme Performance Measure Threshold Penalty level (PhP) Customer experiencing a total duration of sustained service interruptions in a Regulatory Year that exceeds the threshold 32 Hours 101.79 Customer experiencing a number of sustained service interruptions in a Regulatory Year that exceeds the threshold Restoration of supply to a customer after a fault on the secondary distribution network taking longer than the threshold time Customer connection not provided on the day agreed with the customer 46 Times 101.79 2.23 Hours 101.79 5 Days 101.79 20a. The applicant will be entitled to an additional revenue amount equal to 0.5% of its Annual Revenue Requirement, which is intended to be applied to the Guaranteed Service Level Scheme and can be used to either provide for penalties under the scheme, or for network or operational improvements to avoid such penalties. 21. Applicant will comply with the requirements in Section 4(e), Rule 3 of the Rules and Regulations of Republic Act No. 9136, in relation to Rule 6 of the Commission Rules of Practice and Procedure, prior to the filing of this application with the Commission. 22. In support of this application for the approval of its Allowed Annual Revenue and Performance Incentive Scheme, the applicant has attached the following required documents as described in the RDWR and the Position Paper: Table 15. Supporting Information attached Schedule Information provided A Regulatory Asset Base A1 A2 A3 Summary of the optimized depreciated replacement cost (ODRC) and the depreciated historical cost of the Regulatory Asset Base as at the initial valuation date (the Regulatory Asset Base). Summary of the optimized depreciated replacement cost and the depreciated historical cost of the Original Regulatory Asset Base as at the start of the Second Regulatory Period, with supporting calculations for indexing applied. Assets forecast to be acquired during the period between the initial valuation date and the start of the Second Regulatory Period.
Schedule A3.1 A3.2 A3.3 A5 A5.1 A5.2 A5.3 A6 A6.1 A6.2 A7 A7.1 A7.2 A8 A9 B B1 B2 B3 B4 C C1 C1.1 C1.2 C1.3 C1.4 C2 D D1 D2 E E1 Information provided - Schedule of assets to be acquired - Value of the assets to be acquired - Justification for assets to be acquired Forecast asset disposal during the period between the initial valuation date and the start of the Second Regulatory Period. - Schedule of assets to be disposed of - Value of the assets to be disposed of - Forecast income from the sale of disposed assets ODRC depreciation schedules for the Regulatory Asset Base for the period between the initial valuation date and the start of the Second Regulatory Period. - Assets included in the Original Regulatory Asset Base - Assets acquired in the lead-up to the Second Regulatory Period Historical cost depreciation schedules for the Regulatory Asset Base for the period between the initial valuation date and the start of the Second Regulatory Period. - Assets included in the Original Regulatory Asset Base - Assets acquired in the lead-up to the Second Regulatory Period Application of the construction work in progress (CWIP) factor to the Regulatory Asset Base as at the start of the Second Regulatory Period. Summary of the optimized depreciated replacement cost (ODRC) and the depreciated historical cost of the full Regulatory Asset Base as at the start of the Second Regulatory Period (the opening value of the rolled-forward Regulatory Asset Base). Financial indices forecast for Second Regulatory Period Philippine quarterly CPI United States quarterly CPI PhP/US$ quarterly exchange rate 180-Day Manila Reference Rate Forecast capital expenditure for the Second Regulatory Period Summary of capital expenditure forecasts for each year of the Second Regulatory Period - Real values, divided in PhP and US$ components - Total real values, in PhP - Total nominal values, in PhP - Justification for capital expenditure (major and minor projects) Broken down historical capital expenditure Forecast disposals during the Second Regulatory Period Value of assets to be disposed of (based on ODRC register) Forecast income from the sale of disposed assets Forecast depreciation during the Second Regulatory Period Depreciation of the opening asset base
Schedule E1.1 E1.2 E2 E2.1 E2.2 F F1 F2 G G1 G1.1 G1.2 G1.3 G1.4 G2 G3 G3.1 G3.2 G3.3 G3.4 H H1 H1.1 H1.2 H2 H2.1 H2.2 H3 I J J1 J1.1 J1.2 J1.3 J2 J2.1 J2.2 J2.3 J2.4 K - ODRC basis - Historical cost basis Information provided Depreciation of the assets forecast to be acquired during the Second Regulatory Period - ODRC basis - Historical cost basis Forecast assets used beyond standard lives Forecast addition to assets used beyond standard lives Forecast removal from assets used beyond standard lives Forecast operating & maintenance expenditure Summary of forecast operating & maintenance expenditure - Annual expenditure, divided in real PhP and US$ components - Total annual expenditure, in real PhP - Total annual expenditure, in nominal PhP - Justification for operating & maintenance expenditure forecasts Historical operating & maintenance expenditure Summary of expenditure on taxes (other than corporate income tax), duties and levies - Annual expenditure, in real PhP - Annual expenditure, in nominal PhP - Justification for expenditure - Historical taxes, levies & duties Forecast energy consumption and demand Forecast energy consumption figures (kwh) - Breakdown of consumption figures into customer classes - Supporting evidence Forecast energy demand figures (MW) - Breakdown of demand figures into customer classes - Supporting evidence Forecast customer numbers, per customer class Regulatory financial statements Performance incentive scheme details Price-linked incentive scheme - Details of scheme proposed - Proposed target levels - Supporting information & calculations Guaranteed service level scheme - Details of scheme proposed - Proposed target levels - Proposed penalty levels - Supporting information & calculations Additional information for price-cap model
Schedule K1 K2 K3 K4 Contact details for input sheets Information provided 2010 Calendar year billing & consumption data (estimate) Related business revenue for 2010 calendar year (estimate) Tax losses carried forward from 2010 and 2011 regulatory years (estimate) L Detailed calculations for Second Regulatory Period Rolled forward regulatory asset base Annual revenue requirement Corporate income tax forecasts M Forecast price-caps for the opening and subsequent years of the Second Regulatory Period Calculation of demonstrative unbundled rates 23. Applicant most respectfully requests for approval of this application to allow it to fulfill its obligations under Performance Based-Regulation and in order to avoid irreparable losses which will ultimately result in the deterioration of its services, to the damage, and prejudice of the public, in general, and its consumers, in particular.
PRAYER WHEREFORE, premises considered Angeles Electric Corporation prays, after due notice and hearing and consideration, that the application be approved and that a final authority be issued to applicant authorizing it to adopt the above Annual Revenue Requirements and Performance Incentive Scheme. Other reliefs and equitable under the premises are likewise prayed for. Pasig City, Philippines, September 22, 2010. Counsel for the Applicant THE LAW FIRM OF MANJARES & MANJARES Counsel for Angeles Electric Corporation No. 6 Saint Anne Street Provident Villages, Marikina City - by - NORBERTO C. MANJARES, III IBP O.R. No. 738997 18 January 2008 Quezon City PTR O.R. No. 9906634 18 January 2008 Quezon City Roll of Attorneys No. 41579 MCLE Compliance No. II-0011670; 25 August 2008 jcmanjaresiii@gmail.com
VERIFICATION AND CERTIFICATION and say THAT: I, GEROMIN T. NEPOMUCENO, after having been duly sworn to in accordance with law, depose 1. I am the PRESIDENT of ANGELES ELECTRIC CORPORATION (AEC), the applicantcorporation in the above-entitled case; 2. I have caused the preparation and filing of the foregoing APPLICATION; 3. I have read the same and that all the allegations contained therein are true and correct of my own personal knowledge and belief; 4. I hereby certify that AEC has not commenced any other action or proceeding involving the same issue/s with the Supreme Court, the Court of Appeals or any other tribunal or agency; 5. To the best of my knowledge no such action or proceeding involving the same issue/s is pending with the Supreme Court, the Court of Appeals or any other tribunal or agency; 6. Should I thereafter learn that an action or proceeding is pending with the Supreme Court, the Court of Appeals or any other tribunal or agency, I hereby undertake to report such fact within five (5) days with this Honorable Commission.
FURTHER AFFIANT SAYETH NONE. ------------------------------------------------------------------ GEROMIN T. NEPOMUCENO SUBSCRIBED AND SWORN to before me this 14th day of September 2010, affiant exhibited to me his Community Tax Certificate No. 07502207 issued in Angeles City on January 6, 2010 and his Tax Identification No. 103-500-026. ATTY. MARIO G. SERRANO Notary Public Until Dec. 31, 2010 PTR No. 7207139 Issued on 01.05.09 Mla. IBP #344353/ Pasig City12.09.08 Roll No. 27197 MCLE II-0013279 Doc. No. 845; Page No. 248; Book No. XXXIX; Series of 2010.