Adopting the Position Paper of DUs Entering Performance-Based Regulation for July 1, 2010-June 30, 2014 Period

December 8, 2008

ERC RESOLUTION NO. 19-08

RESOLUTION ADOPTING THE POSITION PAPER OF DISTRIBUTION UTILITIES (DUs) ENTERING PERFORMANCE-BASED REGULATION (PBR) FOR THE REGULATORY RESET PERIOD JULY 1, 2010 — JUNE 30, 2014 (3RD ENTRANTS)

WHEREAS, Section 43 (f) of Republic Act No. 9136, otherwise known as the Electric Power Industry Reform Act of 2001 (EPIRA) and 5 (a), Rule 15 of its Implementing Rules and Regulations (IRR), authorize the Commission to adopt alternative forms of internationally accepted rate-setting methodology; SDITAC

WHEREAS, on December 10, 2005, the Commission adopted a performance-based rate setting methodology for setting distribution wheeling rates of private distribution utilities embodied in a document denominated as the "Distribution Wheeling Rates Guidelines" (DWRG);

WHEREAS, under Section 7.1.2 of the DWRG, the Commission must issue a Regulatory Reset Issues Paper embodying its initial views on the issues raised by the pending Regulatory Reset Process, specifying the information required to be delivered and indicating the procedure to be undertaken by Regulated Entities for purposes of the Regulatory Reset Process;

WHEREAS, on September 5, 2008, the Commission posted in its official website at www.erc.gov.ph the Issues Paper of the following distribution utilities (DUs) entering performance based regulation (PBR) for the regulatory reset period July 1, 2010 — June 30, 2014: Cabanatuan Electric Corporation (CELCOR), Davao Light and Power Company, Incorporated (DLPC), Ibaan Electric and Engineering Corporation (IEEC), La Union Electric Company, Incorporated (LUECO), Tarlac Electric, Incorporated (TEI) and Visayan Electric Company, Incorporated (VECO);

WHEREAS, on September 10, 2008, the Commission issued a Notice of Public Consultation informing the public where they can secure a copy or access said issues paper and set the same for public consultation on October 23, 2008;

WHEREAS, in the same Notice, interested parties were directed to file their written comments/inputs on the said issues paper not later than October 3, 2008;

WHEREAS, on October 9, 2008, the Commission issued an Order resetting the public consultation to October 27, 2008;

WHEREAS, on various dates, CELCOR, DLPC, LUECO, TEI and VECO submitted their respective written comments/inputs on the said issues paper;

WHEREAS, during said public consultation, various stakeholders [private DUs, National Transmission Corporation (TRANSCO) and Philippine Chamber of Commerce and Industry (PCCI)] were present and given opportunity to manifest their respective positions on the matters or issues presented in the Issues Paper; ETHaDC

WHEREAS, the foregoing public consultations were held in preparation for issuance of the Position Paper which shall describe the position of the Commission with regard to the regulatory reset for the Second Regulatory Period following its consideration of the submissions received and issues raised during the consultation process. Said Position Paper shall embody the ratemaking policies and principles that will govern the disposition of rate applications to be filed by the entrant DUs for the Second Regulatory Period.

NOW, THEREFORE, be it RESOLVED, as the Commission hereby RESOLVES to APPROVE and ADOPT the Position Paper on Regulatory Reset process for the Second Regulatory Period hereto attached and made an integral part of this Resolution as Annex "A".

This Resolution shall take effect immediately following its publication in a newspaper of general circulation in the Philippines.

Let copies of this Resolution be furnished the University of the Philippines Law Center-Office of the National Administrative Register (UPLC-ONAR), all DUs, National Transmission Corporation (TRANSCO) and National Power Corporation (NPC).

Pasig City, December 8, 2008.

(SGD.) ZENAIDA G. CRUZ-DUCUTChairperson

(SGD.) RAUF A. TANCommissioner

(SGD.) ALEJANDRO Z. BARINCommissioner

(SGD.) MARIA TERESA A.R. CASTAÑEDACommissioner

(SGD.) JOSE C. REYESCommissioner