ORIGINAL COP)

Republic of the Philippines

ENERGY REGULATORY COMMISSION
Pacific Center Building, San Miguel Avenue
Ortigas Center, Pasig City

IN THE MATTER OF THE 9th

APPLICATION FOR THE TRUE-UP -

ADJUSTMENTS OF FUEL AND 2;

PURCHASED POWER COSTS C-
C

(TAFPP), AND FOREIGN

EXCHANGE-RELATED COSTS
(TAFxA) UNDER THE RULES FOR /9 -

THE AUTOMATIC RECOVERY OF

MONTHLY FUEL AND
PURCHASED POWER COSTS
AND FOREIGN EXCHANGE-
RELATED COSTS BY THE
NATIONAL POWER
CORPORATION, AS AMENDED,
12019-049 ,

ERC CASE NO. 2019-

POWER SECTOR ASSETS

AND LIABILITIES MANAGEMENT üIi/O,tt'ô
CORPORATION (PSALM),
Applicant
P"'Ari. L2C-(c

a' 4 -/q
APPLICATION

Applicant POWER SECTOR ASSETS AND LIABILITIES

MANAGEMENT (PSALM) CORPORATION, through the
undersign.ed counsel and unto this Honorable Commission, most
respectfully states that:

1. Applicant PSALM is a government-owned and controlled

corporation created by yirtue of Republic Act No. 9136 or the "Electric
Power Industry Reform Act of 2001" (EPIRA), with principal office
address at 24/F Vertis North Corporate Center 1, Astra corner Lux
Drives, North Avenue, 1105 Quezon City.
9 Tate-Up Appilcanon, flfFVU = VHUikgepc
TAF4A = FxA, 1
frVVUJpew
- 2

2. The instant application is being filed by PSALM pursuant

to Section 4(e), Rule 3 of the Implementing Rules and Regulations of
the EPIRA (EPIRA-IRR), Rule 6 of the Energy Regulatory Commission
(ERC) Rules of Practice and Procedure, and Article V of ERC
Resolution No. 19, Series of 2009 entitled "A Resolution Adopting the
Rules for the Automatic Recovery of Monthly Fuel and Purchased
Power Costs and Foreign Exchange-Related Costs by the National
Power Corporation (NPC)", as amended by ERC Resolution No. 25,
Series of 2009 (ACRM Rules).

3. Article V of the ACRM Rules requires the submission of an

application for the TAFPPC and TAFxA at least every twelve (12)
months in order for the ERC to verify the recovery of fuel and
purchased power costs adjustments (FPPCA) and foreign exchange-
related cost adjustment (FxA) by comparing the actual allowable costs
incurred for the period with the actual revenues for the same period
generated by the fuel and purchased power costs components under
the Basic Generation Charge 1 (BGC) and the FPPCA and FxA under
the monthly ACRM.

4. The BGC is an ERC-approved generation rate imposed by

NPC/PSALM for the sale of electric energy to its customers with
Transition Supply Contract (TSC) or Contract for the Supply of Electric
Energy (CSEE).

5. The existing BGC, pegged at CI 2007 test period, was

provisionally approved by the ERC pursuant to Orders dated 16
February 2009 and 23 March 2009 under Case No. 2009-004 RC2,
broken down as follows:

Table 1: Basic Generation Charge per Component

Provisional Approval issued by the ERC on 16 February 2009 and 23 March 2009 under ERC Case No.
2009-004 RC
2 In the Matter of the Application for the Proposed New Basic Generation Rates for Luzon, Visayas and
Mindanao Grids with Prayer for Provisional Authority
PageR, ERC Order dated 14 December 2009 under ERC Case No. 2008-0 19 RM in relation to ERC
Resolution 19, as amended
Page II, ERC Order dated 14 December 2009 under FRC Case No. 2008-019 RM in relation to ERC
Resolution 19, as amended
5 Other components are NPC's 0&M costs, depreciation and return on rate base
911 True-Up Application)
C 0'
FPPCAMP - FPPCAL.U O, - FPPCApeso 3
TAFXA = - FxA

6. Considering that the BGC is pegged at CI 2007 costs, to

enable NPC/ PSALM to reflect the current year's actual/ allowable fuel
and purchased power costs (PPC) in accordance with prevailing
market prices and capture the change in generation mix brought about
by privatization of PSALM's generating assets and Independent
Power Producer (IPP) contracts, the ERC approved the
implementation of the Fuel and Purchased Power Cost Adjustments
(FPPCA) under the Automatic Cost Recovery Mechanism (ACRM)
Rules.

7. Further, the ERC set the base foreign exchange rate (FX)
covering the principal portion of debt at PhP 44.0494/USD 6. Since the
FX varies at the time of debt payment, the ERC allowed an adjustment
under the ACRM to cover FX fluctuations (FxA).

8. Similar to the BGC, cost adjustments namely the FPPCA

and the FxA are collected from regular TSC/CSEE customers via i)
Monthly ACRM and ii) ACRM True-up Adjustments, by virtue of the
ACRM Rules.

9. With the effectivity of the ACRM Rules on 27 February

2010, fifteen (15) days after its publication in a newspaper of general
circulation in the Philippines, PSALM implemented the ACRM Rules
starting March 2010 billing period and calculated the monthly FPPCA
and FxA, or the Monthly ACRM, using economic indices to reflect the
movement in the fuel, purchased power, and foreign exchange-related
costs. This Monthly ACRM was however set to zero (0) beginning June
2016 billing period in the Luzon, Visayas and Mindanao Grids in
accordance with ERC Order dated 28 June 2016.

10. Article V of the ACRM Rules requires the submission of an

application for the TAFPPC and TAFxA (collectively referred as
ACRM True-Up Adjustments), at least every twelve (12) months, in
order for the ERC to verify the recovery of FPPCA and FxA by
comparing the actual allowable costs incurred for the period with the
actual revenues for the same period generated by the FCB and PPCB
under the BGC and the FPPCA and FxA under the Monthly ACRM.

11. Since the implementation of the ACRM Rules, PSALM

filed before the ERC annual petitions for TAFPPC and TAFxA, details
are as follows:

6 Page 12, ERC Order dated 14 December 2009 under ERC Case No. 2008-0 19 RM
gm True-Up AppllcationWPPC = FPFCAa tpe FPPCA 110g FPPCApOSD W
6
TAFxA = FxA a txc - FxA

0.4046% 1.9517% 100%

Table 3: TSC/CSEE Energy Sales Ratio
21. Attached as Annex "B" is the TSC/CSEE Energy Sales
Ratio for January- December 2018 based on Annex "B-i", the Monthly
Energy Sales per Plant (TSC/ CSEE and WESM).

II. TRUE-UP ADJUSTMENT OF FUEL AND PURCHASED

POWER COSTS (TAFPPC)

22. Pursuant to Article V, Section 4 of the ACRM Rules,

PSALM determined the TAFPPC based on the following formula:

TAFPPC = FPPCA afpc

- FPPCA billed
- FPPCA peso

where:

TAFPPC = True-up Adjustment of Fuel and Purchased Power

Costs, in PhP
FPPCAafppc = Actual allowable fuel and purchased power costs for
the test period, in PhP
FPPCAbIIIed = Fuel and purchased power costs billed through the last
ERC-approved base rate for the test period, in PhP
FPPCApes0 = Recovered/billed fuel and purchased power costs
monthly from customers under the ACRM, in PhP

A. First Component of the TAFPPC: FPPCAafppc

23. FPPCAafpp c refers to the Actual Allowable Fuel and

Purchased Power Costs covering the test period January to December
2018.

24. There were no Allowable Fuel Costs (AFC) considered in

the calculation of FPPCA. In the Luzon Grid, considering that Malaya
Thermal Power Plant (MTPP), the only remaining fuel-based plant,
was not used to supply the energy requirement of TSC/CSEE
customers in view of its designation as Must-Run Unit (MRU) in the
Wholesale Electricity Spot Market (WESM) in accordance with the
Department of Energy (DOE) Circular No. DC2014-01-003, its fuel
costs were not considered in the Luzon Grid's AFC and the TAFPPC.
9 True-Up App1icationPPC = FPPCApPc — FPPCAhHR. - FPPCAQ
TAFXA = FxA21 FxA { ,
- 7

25. In the Visayas and Mindanao Grids, PSALM has no

remaining fuel-fired plants. Thus, AFC for both Grids is likewise zero
(0).

26. Allowable Purchased Power Costs (APPC) of the following

IPPs, based on ERC's approval of the IPP contracts, that supplied
energy to TSC/CSEE customers during the test period were
considered in the calculation:

LUZON VISAYAS MINDANAO

Ampohaw- ERB Case No. I ERB Case
Hedcor 9343 Leyte A Mt. Apo I No. 98-54
ERC Case No. and B ERC Case
Casecnan BRB Case Mt. Apo II
2001 -457 (Unified No. 2001-714
No. 98-55
Caliraya- Leyte Bulk
BRC Case No. Portion) Mindanao ERC Case
Botocan -

2007-159 RC Coal No. 2001-811

Kalayaan
Table 4: IFFs supplying TSC/CSEE Customers

27. In accordance with the ERC directives, APPC corresponds

to whichever is lower between the actual purchased power costs (PPC)
paid to the IPPs vis-a-vis calculated PPC based on the ERC approval
of the IPP contracts.

28. Considering that Leyte A and B (Unified Leyte) are now

dedicated to supplying the Visayas Grid energy requirements, APPC
of Unified Leyte (UL) was pegged at PhP1.45/kWh base energy rate
(BER) plus inflation factor (IF) in line with the ERB Decision dated 27
December 1999 under Case No. 98-55. The APPC of Unified Leyte (UL)
is calculated by determining the capacity administered by PSALM
during the period over the total contracted capacity of the plant (440
MW) multiplied by the total APPC. PSALM awarded the 200 MW UL
capacity to its IPP Administrators (IPPA)/Strips Owners on 26
December 2014. During 2017, PSALM terminated the IPPA
Administration Agreement with Good Friends Hydro Resources
Corporation, PHINMA Energy Corporation and FDC Utilities, Inc.
effective 10 August 2017, 04 September 2017, and 04 September 2017,
corresponding to the awarded strips equivalent to 20 MW, 40 MW and
40 MW, respectively, increasing by 100 MW the capacity being
administered by PSALM.

29. Further, out of the Total APPC, only the portion used to
supply the Regular TSC/CSEE customers is considered in the
TAFPPC. This is derived by multiplying the Total APPC of the grid by
the TSC/CSEE Energy Sales Ratio.
 W
r True-Up App/lea tionWPPC = FPPCA ~ pc - FPPCAbm1a - FPPCAESO 8
TAFxA = FxAg f 0 FxA. 0
-

30. The FPPCAafppc is the sum of AFC and APPC, as

summarized below:

Table 5: Actual Allowable Fuel and Purchased Power Costs

31. The schedule of Allowable Fuel and Purchased Power

Costs per Grid TSC/CSEE Share is hereto attached as Annex "C".
-

B. Second component of the TAFPPC: FPPCAb1Lld

32. is the Fuel and PPC billed to TSC/CSEE

FPPCAbjlled
customers through the ERC-approved base rate. Fuel cost billed is
calculated by multiplying Regular TSC/CSEE Energy Sales (in kWh)
with the FCB (in PhP/kWh) of the provisionally approved BGC, while
the PPC billed is derived by multiplying Regular TSC/CSEE Energy
Sales (in kWh) with the PPCB (in PhP/kWh) of the provisionally
approved BGC.

33. Below are the fuel and purchased power cost components
of the provisionally-approved BGC used in the calculation:

Table 6: Fuel and PPC Component

34. The summary of FPPCAbIIIed is shown below:

Table 7: Fuel and Purchased Power Costs Billed under the 8CC

Based on Provisional Approval of the BGC dated 16 February 2009 and 23 March 2009 under OW Case No.
2009-004 RC and ERC Order dated 14 December 2009 under ERC Case No. 2008-0 19 RM.
9 11 True-Up Apphbat/on,WPPC a W
FPPCAtiuerj - FPPCApo
TAFXA = FxAair - FxA. 0
9

C. Third component of the TAFPPC: FPPCAPCSO

35. FPPCApes0 refers to the recovered or billed fuel and PPC

adjustment from TSC/CSEE customers through the monthly ACRM.
Considering that PSALM has ceased billing the monthly FPPCA and
FxA beginning June 2016 billing period in the Luzon, Visayas and
Mindanao Grids pursuant to the ERC Order dated 28 June 2016, the
FPPCApes0 is equivalent to zero (0) for all Grids.

D. TOTAL TAFPPC

36. Following the formula approved by the ERC in Article V

of the ACRM Rules, the TAFPPC for Luzon, Visayas, and Mindanao
grids covering the test period, January to December 2018, are as
follows:

Table 8: True-Up Adjustment of Fuel and Purchased Power Costs

37. Attached hereto as Annex "D" is the monthly computation
of the above TAFPPC.

III. TRUE-UP ADJUSTMENT OF FOREIGN EXCHANGE-

RELATED COSTS (TAFxA)

38. In accordance with Article V, SectionS of the ACRM Rules,

PSALM shall calculate the TAFxA based on the following formula:

TAFxA = FXA a fxc - FxApeso

where:

TAFxA = True-up Adjustment of Foreign Exchange-

Related. Costs, in PhP
FXAaixc = Actual Foreign Exchange-Related Costs for the
test Period, in PhP
FxApes o = Recovered/billed Foreign Exchange-Related
Costs from Customers under the monthly ACRM, in
PhP
 True-Up ApplicatiL
TAFXA = FXAa ixc - FxA 0
10

A. First Component of TAFxA: FxAafxc

39. FXAaixc is calculated as the difference between: 1) principal

debt payments made during the test period converted into Peso using
the actual exchange rate at the time of payment and 2) principal
payments during the same period converted to Peso using the ERC-
approved base foreign exchange rate of Ph244.0494/USD.

40. The FxAafxc is adjusted to reflect costs incurred only for

Regular TSC/CSEE customers. This is derived by multiplying the
Total FxAarxc with the TSC/CSEE Energy Sales Ratio. The summary of
FXAafxc for regular TSC/CSEE customers is as follows:

Table 9: Actual Foreign Exchange-Related Costs

41. The schedule, of Actual Foreign Exchange-Related Costs -

TSC/CSEE Share is hereto attached as Annex "E".

B. Second Component of TAFxA: FXAy eso

42. FxApeso refers to the recovered/ billed foreign exchange-

related costs from customers through the monthly ACRM. As stated
above, the implementation of monthly ACRM is set to zero starting
June 2016, thus, the FxA0 for Luzon, Visayas and Mindanao Grids is
zero (0).

C. Total TAFxA
43. Following the formula approved by the ERC in Article V
of the ACRM Rules, TAFxA for Luzon, Visayas, and Mindanao grids
covering the test period January to December 2018 is as follows:

Table 10: True-Up Adjustment on Foreign Exchange-Related Costs

9' True-Up AppllcationPPC = FPPCA.IPPC - FPPCAbiIIed - FPPCA P
TAFXA = FxA1,0 - FxApvqo
.S, -
11

44. Attached hereto as Annex "F" is the monthly computation

of the above TAFxA.

IV. TOTAL TRUE-UP ADJUSTMENT

45. In summary, the TAFPPC and TAFxA for the test period
January to December 2018, are as follows:

TAFPPC (11,615,993.15) 31,907,684.14 (3,271,922,654.78)

TAFxA 1,457,701.69 889,710.68 62,883,210.80

11: Total ACRM True-up Adiustment

46. Details of the above TAFPPC and TAFxA covering each

Eligible and Ineligible Plant and Independent Power Producer are
shown in Annex "C" hereof.

V. REFUND/RECOVERY TO PSALM TSC/CSEE CUSTOMERS

47. Below are the equivalent rates, in PhP/kWh, of the above

ACRM True-Up Adjustments covering a one (1) year
recovery/ (refund) period, which were derived by dividing the ACRM
True-up Adjustment amount by the 2018 Regular TSC/CSEE Energy
Sales:

Table 12: Total True-up Adjustment, in PhP/kWh

9 True-Up Application, 7P FPPC = FPPCA a pF - FPPCAta:ei - FPPCApe50
TAFXA = FxA a rxc
,C
12

48. To implement the recovery/ (refund) scheme under the

ACRM, PSALM proposes that for TSC/CSEE customers of PSALM in
2018 who have transferred thereafter to other power suppliers, it shall
directly recover/refund the TAFPPC and TAFxA True-Up
Adjustments by issuing the corresponding Debit/Credit Memo,
regardless of the expiration. For TSC/CSEE customers who are still
sourcing their power requirements from PSALM at the time of
issuance or implementation of ERC Decision/ Order on the TAFPPC
and TAFxA, the same shall be reflected in their power bill.

49. Attached hereto as Annex "H" is the Schedule of 9th

TAFPPC and TAFxA allocated per PSALM customer covering January
- December 2018 based on Annex "H-i", the Schedule of Energy Sales
per Customer.

50. In compliance with Section 4(e) of Rule 3 of the EPIRA-IRR

and ERC Resolution No. 19, Series of 2009 as amended by ERC
Resolution No. 25, Series of 2009, a copy of this instant application
(including Annexes, other documents and compact discs) was
furnished to the Sangguniang Panlungsod of Quezon City. A copy of
the Certification of Posting/Affidavit of Service is hereto attached as
Annex "I". The Petition (excluding Annexes) was also published in a
newspaper of general circulation. A copy of the Affidavit of
Publication is hereto attached as Annex "J".

PRAYER

WHEREFORE, premises considered, it is most respectfully

prayed to this Honorable Commission that consistent with ERC
Resolution No. 19, Series of 2009, as amended, adopting the Rules for
the Automatic Recovery of Monthly Fuel and Purchased Power Costs
and Foreign Exchange-Related Costs by the National Power
Corporation, and Section 4 (e), Rule 3 of the Implementing Rules and
Regulations of the Electric Power Industry Reform Act, the following
Total True-Up Adjustment amounts (TAFPPC + TAFxA) per Grid and
corresponding True-up Adjustment rates (PhP/kWh) with one (1)
year refund period for the Luzon and Mindanao Grids and one (1) year
recovery period for the Visayas Grid, covering the test period January
2018 to December 2018 be APPROVED:
 w
9°' Trtic-Up Application, TAFPPC = FFPCAIIU. - FPPCAbIII- FPPCA
w
TAFxA = FxA - FxAp ew
13

The rates in PhP/kWh corresponding to the above recovery/refund

for one (1) year are as follows:

Other reliefs as may be deemed just and equitable under the premises
are likewise prayed for.

Quezon City for Pasig City, 21 June 2019.

-Signatories on the following page-

9 11I True-Up AppllcationFFPC = FPPCA 0 - FPPCAbiII,d - FPPCApESQ
TAFxA = Fxkf,. -
14

JULIU
r tt1
Gen al Counsel
IBP Lifetime No. 010574 (Antique)
MCLE Compliance No. VI - 0023624 (04-14-2019)
Roll of Attorney No. 47461

Co
P
te Legal Counsel
SANCAY

IBP o. 064 93 (01-08-19, Quezon City)

MCLE Compliance No. VI-0020686 (3-25-2019)
Roll of Attorney No. 52696

MARIA ILYN
Corporate Legal Counsel
IBP No. 064494 (01-08-19, RSM)
MCLE Compliance No. VI-0015994 (12-07-2018)
Roll of Attorney No. 58287

Corporate Attorney
IBP Lifetime No. 012817
MCLE Compliance No. V-0020703 (03-25-2019)
Roll of Attorney No. 63192

GRACIELA MONA LUMANG-GUTIERREZ

Corporate Attorney
IBP No. 064495 (01-08-19, Nueva Ecija)
MCLE Compliance No. V-0006296 (02162015)*
Roll of Attorney No. 42822

POWER SECTOR ASSETS AND LIABILITIES

MANAGEMENT CORPORATION
24th Floor Vertis North Corporate Center 1,
Astra corner Lux Drives,
North Avenue, 1105 Quezon City
Telefax No. (+632) 902-9000
Email address: [email protected]
 (Republic of the Philippines)
(Quezon City ) S.S.

VERIFICATION AND CERTIFICATION

I, IRENE JOY BESIDO - GARCIA, of legal age, married, with office address at the
Power Sector Assets and Liabilities Management (PSALM) Corporation, 24th Floor, Vertis
North, Corporate Center I, Astra corner Lux Drives, North Avenue, Quezon City, after
having been duly sworn to in accordance with law, do hereby depose and state for myself
and for PSALM, that:

(1) I am the designated President and Chief Executive Officer of the Power
Sector Assets and Liabilities Management (PSALM) Corporation with
authority to commence, initiate, sign and file the foregoing Petitions for
the Stranded Debt, Stranded Contract Costs and Ninth (9th) True-Up
Adjustment of Fuel, Purchased Power, and Foreign Exchange-Related
Costs Covering January to December 2018 Test Period, pursuant to the
Secretary's Certificates for PSALM Board Resolutions Nos. 2019-0524-01,
2019-0524-02 and 2019-0524-03 all dated 24 May 2019, respectively;

(2) I have read the Petitions and the allegations therein are true and correct
based on my personal knowledge or the authentic records available to
PSALM;

(3) I or PSALM have not commenced any other action or proceeding

involving the same issues in the Supreme Court, the Court of Appeals or
any court, tribunal, or quasi-judicial agency and, to the best of my
knowledge, no such other action or claim is pending therein; and

(4) If I or PSALM should hereinafter learn that the same or a similar action
or claim has been filed or is pending in the Supreme Court, the Court of
Appeals or any court, tribunal, or quasi-judicial agency, I shall report the
said fact within five (5) days from discovery thereof to the Honorable
Commission.

?SJ 2019, Quezon City, Philippines.

IRENE JØY $iSIDO - GARCIA

SUBSCRIBED and SWORN TO before mVU! 2 1 2011y

of June 2019, with
affiant IRENE JOY BESIDO-GARCIA presenting to me her Philippine Passport I.D. Mo.
P0087701B, issued at DFA Manila on 03 January 2019, valid until 02 January 2029, known
to me and to me known to be the same person who executed the foregoing Verification
and Certification.

NOT

Doc. No. IL
Page No.JL
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Series of 2019. ADM. NO. NP-
ATh'S. RU
fBP NO. 05
PTh NO. 88270e N.
MULE NO,
RGN BLDG. TIMOG