ENERGY REGULATORY COMMISSION ERC Case No. 2015... · ENERGY REGULATORY COMMISSION SanMiguelAvenue, PasigCity, 1590 ENERGY CORPORATION ... no conferences ... (GR. No. 171624, December

Republic of the Philippines ,ENERGY REGULATORY COMMISSION

San Miguel Avenue, Pasig City,

1590 ENERGY CORPORATION(1590 EC),

Petitioner,

Respondent.x~-----------------------x

. PHILIPPINEMARKET(PEMC),

-versus-

ELECTRICITYCORPORATION

ERC CASE NO. 2015-064 MC

•

NOTICE OF PUBLIC HEARING

TO ALL INTERESTED PARTIES:

Notice is hereby given that on October 7, 2015, 1590 Energy, Corporation (1590 EC) filed a petition for dispute resolution (with prayerfor cease and desist order) against the Philippine Electricity MarketCorporation (PEMC).

In the said petition, 1590 EC alleged, among others, the following:

. 1. . 1590 EC is a domestic corporation duly organized andexisting under the laws of the Republic of the Philippines,with business address at Unit 107, 1st Midland OfficeCondominium Building, Gamboa Street, Legaspi Village,Makati City. It is represented in this case by its VicePresident for External Affairs, Mr. Juan Eugenio L. Roxas, acopy of his authority is attached to the Petition as Annex "A"and made an integral part thereof;

ERC CASE NO. 2015-064 MCNOTICE OF PUBLIC HEARING/October 19,2015Page 2 of 28

2. Respondent PEMC is a non-stock, non-profit corporation dulyorganized and existing under the laws of the Republic of thePhilippines, with office address at the 18th Floor, RobinsonsEquitable Tower, ADB Avenue, Ortigas Center, Pasig City. Itis represented by its President, Ms. Melinda L. Ocampo;

RELEVANT FACTS

3. 1590 EC is a registered Wholesale Electricity Spot Market(WESM) Member and Trading Participant under thegeneration company category and is classified as ascheduled generation company. It is the operator of BauangDiesel Power Plant (BDPP) that is located in Bauang, LaUnion.

3.1 BDPP comprises of twenty-one (21) diesel engines witha total maximum dependable generating capacity ofone hundred ninety (190) MW. These engines havebeen running for around nineteen (19) consecutiveyears, and two (2) of the engines have since been de-commissioned because of catastrophic mechanicalfailures;

4. In the span of three (3) months in the early part of the year2014, 1590 EC received three (3) Preliminary Notices ofInvestigation (PNI) from the Enforcement and ComplianceOffice (ECO) of PEMC for the Possible Non-Compliance ofthe Must-Offer Rule (MaR) of WESM Rules from December26,2013 to March 25,2014.

4.1 On March 17, 2014, 1590 EC received the PNI forPEMC-ECO Case No. 2014-0068 for the billing periodsof December 26,2013 to January 25,2014;

4.2 On April 3, 2014, 1590 EC received the PNI for PEMC-ECO Case No. 2014-0132 for the billing period January26, 2014 to February 2014;

4.3 On May 7, 2014, 1590 EC received the PNI for PEMC-ECO Case No. 2014-0068 for the billing period ofFebruary 26, 2014 to March 25, 2014;

ERC CASE NO. 2015-064 MCNOTICE OF PUBLIC HEARING/October 19, 2015Page 3 of 28

5. In compliance with the directives of the PNls, 1590 ECsubmitted its written justifications thereto. But, these letterslimit the opportunity to discuss and explain the technicalproblems;

6. As stated in the ECO's Investigation Report, no conferencesor ocular inspections were conducted for these cases \

7. However, despite the lack of exhaustive due process, ECOfound that 1590 EC was in violation of the MOR for thirty-seven (37) intervals as stated in the Investigation Report:

"7.1 With the foregoing assessment, ECO finds1590 EC in breach of WESM Rules Clauses3.5.5.1 and 3.5.5.2 in relation to Appendix A1.1in respect to the transactions of Bauang DPP in37 intervals on 28 December 2013, 29 December2013, 19 January 2014, 2 February 2014, 22February 2014, 25 February 2014, 16 March2014 and 23 March 2014.2"

A copy of the Investigation Report is attached to thePetition as Annex "B" and made an integral partthereof;

8. Thereafter, 1590 EC received a "Notice of Financial Penalty"dated August 4, 2015 notifying that the PEM Board approvedthe imposition of a financial penalty against 1590 EC forviolation of the MOR for thirty-seven (37) intervals. The totalpenalty imposed amounts to Three Million Seven HundredThousand Pesos (PhP3,700,000.00);

9. Sometime in September 2015, 1590 EC received from PEMCits Billing Statement No. NW-000540 dated September 22,2015 (Billing Statement) for the imposition of financial penaltyin relation to its findings in PEMC-ECO Case No. 2014-0068,PEMC-ECO Case No. 2014-0132 and PEMC-ECO Case No.2014-0068;

1 Page 8, Section 2.6 of ECO's Investigation Report

2 Section 7.1, Page 24 of the ECO's Investigation Report attached to the Petition as Annex "6"

ERC CASE NO. 2015-064 MCNOTICE OF PUBLIC HEARING/October 19,2015Page 4 of28

9.1 The Billing Statement had a due date of October 26,2015;

10. Following its receipt of the Billing Statement, on September24, 2015, 1590 EC filed with PEMC an "Urgent Request forReconsideration on the Financial Penalty" (Reconsideration).The Reconsideration sought for a review and reconsiderationof thirty-one (31) intervals out of the thirty-seven (37)intervals;

11. Considering that 1590 EC is disputing the propriety of theimposition of financial penalty for thirty-one (31) intervals forthe alleged violation of the MOR, 1590 EC is invoking thepower and authority of the Commission through this Petition;

12. As of the filing of this Petition, the Billing Statement against1590 EC has not been recalled or suspended as a result ofthe Reconsideration, and therefore, remains to be due onOctober 26, 2015;

13. There is, therefore, an urgent and necessary need for aCease and Desist Order to be issued immediately pendingthe final resolution of the Petition. And after trial on themerits, to make permanent the Cease and Desist Order;

ISSUES TO BE RESOLVED

1590 EC submits the following issues to be resolved by theCommission:

I. WHETHER OR NOT THERE IS SUFFICIENT BASIS TOHOLD 1590 EC LIABLE FOR VIOLATION OF THE MUSTOFFER RULE (MOR) FOR THIRTY-ONE (31) TRADINGINTERVALS.

II. WHETHER OR NOT THERE IS VALID GROUND FOR THEISSUANCE OF A CEASE AND DESIST ORDER PENDINGFINAL RESOLUTION AND AFTER FINAL RESOLUTIONOF THE PETITION.


Authority of the CommissionOver the Petition for DisputeResolution

14. At the outset, it is important to lay the basis for invoking thepower of the Commission to take cognizance of this Petition;

15. The power and authority of the Commission to takecognizance of this Petition flows from its function underParagraphs (c) and (r), Section 43 of Republic Act No. 9136,otherwise known as the "Electric Power Industry Reform Actof 2001" (EPIRA), which provides:

"Functions of the ERC. - The ERC shall promotecompetition, encourage market development,ensure customer choice and discourage/penalizeabuse of market power in the restructuredelectricity industry. Towards this end, it shall beresponsible for the following key functions in therestructured industry:

xxx xxx xxx

(c) Enforce the rules and regulations governing theoperations of the electricity spot market and theactivities of the spot market operator and otherparticipants in the spot market, for the purpose ofensuring a greater supply and rational pricing ofelectricity;

xxx xxx xxx

(r) In the exercise of its investigative and quasi-judicialpowers, act against any participant or player in theenergy sector for violations of any law, rule andregulation governing the same, including the rules oncross-ownership, anti-competitive practices, abuse ofmarket positions and similar or related acts by anyparticipant in the energy sector or by any person, asmay be provided by law, and require any person orentity to submit any report or data relative to anyinvestigation or hearing conducted pursuant to this Act";


16. Moreover, under Section 43 (u) of the EPIRA, theCommission has original and exclusive jurisdiction over allcases involving disputes between and among participants orplayers in the energy sector:

"The ERC shall have the original and exclusivejurisdiction over all cases contesting rates, fees,fines and penalties imposed by the ERC in theexercise of the abovementioned powers,functions and responsibilities and over all casesinvolving disputes between and amongparticipants or players in the energy sector."(Emphasis ours)

17. This principle necessarily springs from the specialcompetence that the Commission has, as recognized in SFHomes, Inc. and Philippine Waterworks and ConstructionCorp. vs. Manila Electric Company (GR. No. 171624,December 6, 2010):

"Presently, the ERC has original and exclusivejurisdiction under Rule 43 (u) of the EPIRA overall cases contesting rates, fees, fines andpenalties imposed by the ERC in the exercise ofits powers, functions and responsibilities, andover all cases involving disputes between andamong participants and players in the energysector. Section 4 (0) of the EPIRA ImplementingRules and Regulation provides that the ERC"shall also be empowered to issue such otherrules that are essential in the discharge of itsfunctions as an independent quasi-judicial body.

xxx

Administrative agencies, like the ERC, aretribunals of limited jurisdiction and, as such,could wield only such as are specifically grantedto them by the enabling statutes. In relationthereto is the doctrine of primary jurisdictioninvolving matters that demand the specialcompetence of administrative agencies even if


the question involved is also judicial in nature."(Emphasis ours)

18. Since the authority of the Commission to grant the provisionalrelief is established, the next pivotal question to be answeredis whether or not there is sufficient basis to impose thefinancial penalty for thirty-one (31) trading intervals on 1590EC',

19. 1590 EC submits that the answer is in the negative;

/. There is no sufficient basis tohold 1590 EC liable for thefinancial penalty for thirty-one(31) trading intervals:

I-A. 1590 EC did not violatethe MOR for thirty-one (31)trading intervals.

20. In the Investigation Report of ECO, the following wereenumerated as the elements for a breach of the WESMRules pertaining to the submission of the generation offers:

I. The trading participant is a scheduled generationcompany and the power plant in question is ascheduled generating unit.

II. The generating unit had available capacity for thetrading interval under investigation. That is, it was noton scheduled or forced outage or, if the capacity of theunit is derated or reduced, it is due only to any of theallowable constraints. The allowable or permissiblelimitations or constraints are as follows -

a. Outage of the unit, either scheduled or forced; or

b. Derated capacity due to anyone of the followingallowable constraints -


I. Technical constraints which includeplant equipment-related failure andambient temperature; or

ii. Hydro constraints which pertain tolimitations on the water elevation or turbinedischarge and MW output of a hydro-electric power plant; or

III. Geothermal constraints which refer tocapacity limitation of geothermal powerplants due to steam quality, steam pressureand temperature variation, well blockageand limitation on steam and brine collectionand disposal system. Steam quality refersto chemical composition, condensable andnon-condensible gases;

III. There were no valid generation offers or the validgeneration offers submitted for the generatingunit for any trading interval of each trading daywas less than the unit's maximum availablecapacity for that trading interval. If the tradingparticipant is providing ancillary services undercontract with the System Operator, the combinedoffers and the ancillary services scheduled by theSystem Operator was less than the unit'smaximum available capacity. The ancillaryservices schedules are considered in lieu ofreserve offers while reserves are not yet traded inthe WESM.

IV. If an offer is cancelled, the cancellation was not apermissible cancellation under Section 4.5,Appendix A.1 of the WESM Dispatch ProtocoI3."(Emphasis ours)

21. 1590 EC submits that the second element is absent. In thethirty-one (31) trading intervals, SDPP suffered reducedcapacity due to technical constraints;

3 Page 12 of the Investigation Report of the ECO, attached to the Petition as Annex "8"


22. In its Investigation Report, ECO summarized the allegedbreaches of the MOR by 1590 EC in the following table4:

Case Trading Date/Interval Capacity Not NumberNumber Offered, MW of Breach

28 December 2013 /01OOHPEMC-ECO to 1100H 10 11Case No. 29 December 2013/2100H2014-0068 to 2400H 10 4

19 January 2014/2100H to2400H 10 42 February 2014/2200H to

PEMC-ECO 2400H 10 3Case No. 22 February 2014/2200H to2014-0132 2400H 10 3

25 February 2014/2200H to2400H 10 3

PEMC-ECO 16 March 2014/2200H toCase No. 2400H 10 32014-0198

23 March 2014/0100H to0600H 10 6TOTAL 37

23. In its Reconsideration, 1590 EC explained that the deviationsof ten (10) MW were due to the technical problems andmaintenance works on its generating units;

24. The following are the detailed justifications for the deviationsof ten (10) MW during the thirty-one (31) trading intervals:

December 28,2013 [eleven tlj) intervals from 0100H to 1100H]

25. For December 28, 2013, 1590 EC was charged for violationof the MOR for eleven (11) intervals from 0100H to 1100H fornot offering ten (10) MW of its maximum available capacity ofone hundred ninety (190) MW;

4 Page 24 of the Investigation Report of the ECO, attached to the Petition as Annex "8"


26. The relevant portion of the Investigation Report regarding thesame reads:

"28 December 2013. The offer for intervals0100H to 1100H of 28 December 2013 were180MW. However, the day-ahead declarationsent on 27 December 2013 notified that on thefollowing day, 28 December 2013, the facility isavailable at 190MW with 19 units online. This isconsistent with the night shift plant operator logsfor 27 December 2013 which reported that therewere 19 units available during the entire nightshift (i.e., 19:00H of 27 December 2013 to07:00H of 28 December 2013). The number ofavailable units was only reduced to 18 units at12:00H of 28 December 2013 due toreplacement of horizontal bellows for Unit E16.No explanation was given by 1590 EC and theECO also found no further data on record thatwould explain the discrepancy between the offersfor intervals 0100H to 1100H and the day-aheaddeclared capability."

27. Based on the plant's logbook entries for the Night Shift ofDecember 27, 2013, the following maintenance activitieswere performed on the respective engine at the midnight ofDecember 27,2013 (i.e. first hour of December 28,2013):

"2400H Station Servicexxx xxxE13 - B6 Replacement of Liner/Piston due toH20 leak on air waste gateE14 - Check engine foundation boltsE17 - Retightened engine block bedplate. FixingboltsS"

28. Among the foregoing maintenance activities, it was Engine13's activity that caused the negative variance of ten (10)MW. While the entry in the logbook was lumped at thebeginning of the shift (i.e. starting at 2400H), the activities onEngine 13, lasted from 0100H to 0524H where the samelogbook entry reads:

5 Copy of the relevant Plant Logbook page is attached to the Petition as Annex "C"


"E13 -Idle/Nominal Test Conducted - OK6"

29. The foregoing activity is further logged in a separatemaintenance logbook with the following entry:

"Replace liner piston at En. 13 @ cyl B6 due toH20 leak @air waste gate? xxx"

30. In addition, Day Shift Logbook of December 28, 2013 readsthat after the activities on Engine 13 that ended on 0524H,Engine 16 had work performed on it at 0700H. Unfortunately,the activity was lumped with other station service activities at1200H. The entry reads:

"2400H Station Servicexxx xxx(1) E 16 - Replacement of Horizontal Bellowsafter silencer(2) E 24 - Replace B7 crankcase door(3) E 22 - T/C "A" Drain Line InspectionS"

31. Thus, the ten (10) MW deficiency in the capacity offered forthe intervals from 1200H to 0524H of December 28, 2013was due to the downtime of Engine 13, which is equivalent toten (10) MW of capacity. Immediately thereafter, or from0700H to 11OOHof December 28, 2013, the deficiency of ten(10) MW was due to the replacement of horizontal bellows;

December 29,2014 [four ~ intervals from 2100H to 2400Hl

32. 1590 EC was found to have breached the MaR for four (4)intervals of December 29, 2014;

33. Relevant portion of the Investigation Report of ECO reads:

• Ibid

7 Separate Plant Maintenance Logbook, attached to the Petition as Annex "C-1"

8 Copy of the relevant logbook page is attached to the Petition as Annex "C-2"


"6.4.4.3. 29 December 2013. Offers for the daywere at 170 MW for each trading interval. Day-ahead plant capability sent through emailmessage on 28 December 2013 notified that on29 December 2013 the facility is available at 170MW with 17 units online and that there are twoengines that are on corrective or preventivemaintenance. But by 18:00H of 29 December2013, maintenance activity on one of theengines, E16, was completed raising the numberof available units back to 18. Given the time thatthe availability of the engine was recorded, theoffers starting interval 2100H could have beenadusted to increase the same from 170 MW to180 MW9."

34. On December 29, 2013 (at the start of day shift at 0700H),seventeen (17) units available and three (3) units wereunavailable. The lumped entries in the Day Shift PlantLogbook on December 29, 2013 provides as follows:

"E34 - A6/B1/B3 Liner/Piston Replacement c/oMech'110"

35. The maintenance work on Engine 34 continued until 1310Hof December 30,2013 (or shortly after midnight of December29, 2013). This is proven by the test run conducted onEngine 34, as shown by the following logbook entry onDecember 30, 2013:

"1310H - E34: Idle/Nominal Test Run for 5minutes11"

36. Moreover, this is supported by the internal Maintenance WorkOrder Form No. 4809 for Engine 34 which is attached to thePetition as Annex "0-2" for reference;

9 Section 6.4.4.3, Page 20 of the Investigation Report of ECO attached to the Petition as Annex "8"

10 Copy of the relevant Plant Logbook page is attached to the Petition as Annex "D"

11 Copy of the relevant Plant Logbook page is attached to the Petition as Annex "D-1"


January 19, 2014 [four ~ intervals from 2100H to 2400Hl

37. For January 19, 2014, 1590 EC was found to have violatedthe MaR for four (4) intervals from 2100H to 2400H for adeviation of ten (10) MW of its available capacity;

38. The specific findings of ECO is stated in its InvestigationReport as:

"6.4.4.4 19 January 2014. The offer for allintervals 19 January 2014 were at 180MW. Thisis consistent with the declaration sent on 18January 2014 that on 19 January 2014, thefacility is available at 180MW with 18 units onlineand that there is one engine that is on correctiveor preventive maintenance. While the day shiftoperator log for the same day initially reported at07:00H the availability of only 18 units becauseof replacement of lube oil cooler plates for UnitE26, the number of available units was broughtback to 19 when maintenance activity wascompleted at 18:00H. Thus, the offers startinginterval 2100H could have been alreadyadjusted."

39. Based on the plant logbook entry for the night shift of January.19, 2014, a waste gate inspection was conducted on Engine32 from 2100H to 2400H, But this activity was lumped at theend of 2400H as follows:

"2400HxxxActivities:(1) Engine 32 - Waste gate inspection "A" (NoH20 leak found)12xxx xxx"

40. Likewise, this is supported by the internal Maintenance WorkOrder Form No. 0235 for Engine 32 which is attached to thePetition as "Annex E-1'",

12 Copy of the Plant Logbook Entry of January 19, 2014 is attached to the Petition as Annex "E"


February 2, 2014 [three @ intervals from 2200H to 2400H]

41. It was found that for three (3) consecutive intervals startingfrom 2200H to 2400H of February 2, 2014, 1590 EC did notoffer ten (10) MW of capacity. The relevant port of ECO'sInvestigation Report reads:

"6.4.4.5. 02 February 2014. For all intervals of02 February 2014, the offers were 180MW. Thisis consistent with day-ahead plant capabilitynotified through email message sent on 01February 2014 which notified that on 02 February2014, the facility is available at 180MW with 18units online and that there is one engine that ison corrective or preventive maintenance.However, the day shift plant operator log for 02February 2014 recorded that there were 19 unitsavailable at 19:00H prior to shift turnover to nightshift. The same number of units available wasalso reported at 07:00H the following day prior toturn-over to shift turn-over (Le., turn-over to theday shift plant on 03 February 2014). This meansthat the offers starting interval 2200H of 02February 2014 could have been already adjustedto reflect the change in availability13."

42. But, based on the Night Shift Plant Logbook entry forFebruary 2, 2014, it is reflected that there was an activityconducted on Engine 32 which reads:

"2400Hxxx xxx(2) E32 - replacement of horizontal bellow A6/A7(Gas leak)14"

43. Unfortunately, the logging of the activity has been lumpedunder 2400H, under the heading "Activities" instead of beinglogged from intervals 2200H to 2400H. Nonetheless, thesupporting internal Maintenance Work Order Form No. 34215

13 Section 6.4.4.5, Page 20 of the Investigation Report of ECO attached herein as Annex "6"

14 Relevant page of the logbook is attached as Annex "F"

15 Attached herein as Annex "F-1"


amplifies the logbook entry when it provides that the workwas really performed from 2100H to 2400H;

44. The corrective maintenance work performed on Engine 32caused the ten (10) MW deficiency in the offered capacity forthese intervals;

March 16, 2014 [three rn intervals from 2200H to 2400H}

45. It was found that for three (3) successive intervals from2200H to 2400H of March 16, 2014, 1590 EC did not offerten (10) MW of capacity. This is reflected in the ECOInvestigation Report:

"6.4.4.8. 16 March 2014. The offers for allintervals 16 March 2014 were at 180MWconsistent with the email message sent on 15March 2014 which notified that on 16 March2014, the facility is available at 180MW with 18units online and that there is one engine that ison corrective or preventive maintenance.Meanwhile the night shift operator log for 15March 2014 reported at 07:00H (prior to shiftturnover to the 16 March 2014 day shift) theavailability of only 18 units because replacementof lube oil cooler plates for Unit E21. After theleak test, maintenance activity for Unit E21 wascompleted and the number of available units wasback to 19 when it was reported at 19:00H of 16March 2014 (day shift). Given the time that theavailability of 19 units was reported, the offersstarting intervals 2200H of 16 March 2014 couldhave been changed. However, the offerssubmitted were unchanged at 180MW16."

46. But, based on the Plant Logbook entries, correctivemaintenance works were permitted on two (2) engines:

16 Section 6.4.4.8, Page 21 of the ECO Investigation Report, attached to the Petition as Annex "8"


"2400Hxxx xxxActivities:Xxx xxx(2) E22 - Rectify oil leak at Moatti Filter FittingsXxx xxx(4) E16 - Rectify oil leak at cyl. Lubrication #1Drive Shaft17 ••

47. The internal Maintenance Work Order Form No. 82818 forEngine 22 corroborates and amplifies that from 2100H until2230H 1590 EC plant operations "the hydraulic motor wasreplaced." However, the entries were lumped under"Activities" right below 2400H;

48. But, the internal Maintenance Work Order Form No. 81919 forEngine 16 corroborates and amplifies that 1590 EC plantoperations "replaced oil seat at drive shaft" from 2230H until2400H;

49. Based on the Maintenance Work Order Form Numbers 828and 819, from 2100H until 2400H corrective maintenanceworks were performed on two (2) engines (i.e. Engine 22 andEngine 16) in succession. Thus, these justify that 1590 ECwas not able to offer ten (10) MW from 2100H until 2400H asa result of the successive corrective maintenance workperformed;

March 23, 2014 r~) intervals from 0100H to 0600H}

50. During these six (6) successive intervals on March 23, 2014starting from 2400H to 0600H, Bauang Plant offered onehundred eighty (180) MW or ten (10) MW less than themaximum available capacity of one hundred ninety (190)MW:

"6.4.6. 23 March 2014. For interval 0100H to0600H of 23 March 2014, the offers were 180

17 Relevant page of the logbook is attached to the Petition as Annex "G"

,. Attached to the Petition as Annex "G-1"

19 Attached to the Petition as Annex "G-2"


MW. This is consistent with the day-ahead plantcapability sent through email message on theday before, 22 March 2014 which notified that on23 March 2014 the facility is available at 180 MWwith 18 units online and that there is one enginethat is on corrective or preventive maintenance.The plant operator logs, however, shows thatthere were 19 units online at the start of the nightshift at 19:00H, 22 March 2014 up to shift turn-over time at 07:00H, 23 March 2014. It was onlyat 07:00H, 23 March 2014 (day shift) that oneengine (E17) was first reported to be out. Noexplanation was given by 1590 EC and the ECOalso found no data or information that wouldexplain the discrepancy in the day-aheaddeclaration and the plant availability as recordedin the operator logs as these were prepared byplant personnel that have actual knowledge ofthe actual state of operations of the powerplaneo."

51. Based on the Plant's Logbook entries, during these six (6)successive intervals on March 23, 2014 starting from 0100Hto 0600H, the following maintenance activities wereperformed on the respective engines:

"2400H Station Service/Parameter Rdngs:Xxx xxxMaintenance Activites:E17 - Lube oil cover plates - replacementE13 - [ineligible] Lubricator oil leak (back job)-Replaced oil seal (1 piece)0510H S123-oil/Fuel RecirculationAir Blower Conducted21"

52. Among the foregoing maintenance activities, it was theactivity on Engine 17 that caused the negative variance of ten(10) MW in the offered capacity for the six (6) intervals.Again, the activities were lumped at the beginning of the shift(i.e. starting at 2400H). But, the activities, specifically onEngine 17, lasted from 0100H to 0600H;

20 Section 6.4.6. Page 22 of the ECO Investigation Report attached to the Petition as Annex "8"

21 Relevant page of the logbook is attached to the Petition as Annex "H"

'-",


53. This fact can be confirmed by the succeeding entry in thelogbook which describes the plant on "stand by" as of 0700H:

"0700H Turn-over22Plant on Stand Bl3"

54. Thus, the ten (10) MW deficiency in the capacity offered forthese intervals was due to the downtime of Engine 13, whichis equivalent to ten (10) MW of capacity;

55. In addition, the internal Maintenance Work Order Form No.97524 confirms the unavailability of Engine 13 for six (6)consecutive intervals because of "rep/aced L.O. coolerplates";

56. All of the above-cited thirty-one (31) intervals have technicalconstraints which include plant equipment-related failurewhich makes the second element for a breach of MORabsent;

57. Therefore, it validly justifies 1590 EC deviation of ten (10)MW and the unilateral implementation of Total FinancialPenalty is uncalled for;

I.B. In the interest of justice,the pending Reconsiderationwith PEMC should suspendthe implementation of thefinancial penalty

58. The Billing Statement threatens to impose the unilateralimplementation of the Total Financial Penalty on October 26,2015;

59. 1590 EC has filed its Reconsideration on the FinancialPenalty last September 24, 2015 with PEMC, explaining in

22 "Turn-Over" means the turning over of plant operations to the next shift

23 Same relevant page of the logbook is attached to the Petition as Annex "H"

24 Attached to the Petition as Annex "H-1"


detail the documents that 1590 EC submitted previously tothe ECO and attached relevant logbook pages andhighlighted the pertinent portion of the technical constraintsreferred in the explanation;

60. More importantly, 1590 EC requested the indulgence of thePEM Board:

"(a) Not to implement the financial penalty underBilling Statement No. NW-000540 (due onOctober 26, 2015), until the Board shall have re-evaluated the logbook entries and MaintenanceWork Forms for the thirty-one (31) intervals, and(b) Grant 1590 EC another opportunity to be ableto personally expound the foregoing andrationalize the justifications to reduce thefinancial penalty by thirty-one (31) intervals.,,25

61. By operation of law, equity and justice, the pendency of theReconsideration should stay the finality of the Notice ofFinancial Penalty and, more importantly, the implementationof the Billing Statement;

62. Applying Rule 52 of the Rules of Court suppletorily, a motionfor reconsideration stays the execution of the judgment orresolution sough to be reconsidered:

"SEC. 4. Stay of execution.-The pendency of amotion for reconsideration filed on time and bythe proper party shall stay the execution of thejudgment or final resolution sought to bereconsidered unless the court, for goodreasons, shall otherwise direct." (Emphasissupplied)

63. Therefore, the execution of the Notice of Financial Penaltyand the Billing Statement should be stayed pendingresolution of the Reconsideration;

25 Urgent Request for Reconsideration on the Financial Penalty dated September 24, 2015 attached tothe Petition as Annex "I"

ERC CASE NO. 2015-064 MCNOTICE OF PUBLIC HEARING/October 19,2015Page 20 of 28 :

64. However, as of the filing of this Petition, neither PEMC northe PEM Board issued any communication relative to theReconsideration. Thus, 1590 EC has good reason tobelieve that the Billing Statement will be implemented byOctober 26. 2015;

65. Hence, the need for the issuance of a Cease and Desist bythe pending the final resolution of this Petition;

Authority of the Commission toGrant Provisional Relief

66. The issuance by the Commission of a Cease and DesistOrder or a Temporary Restraining Order (TRO) andeventually a writ of preliminary injunction primarily finds legalbasis in Section 43 of the EPIRA, which provides:

"SEC. 43. Functions of the ERC. -The ERC shallpromote competition, encourage marketdevelopment, ensure customer choice andpenalize abuse of market power in therestructured electricity industry. In appropriatecases, the ERC is authorized to issue ceaseand desist order after due notice and hearing.Towards this end, it shall be responsible for thefollowing key functions in the restucturedindustry" (Emphasis supplied)

67. The power to issue a Cease and Desist Order by theCommission is strengthened by Section 8 of Executive Order(EO) No. 172 which expressly vested the Energy RegulatoryBoard (ERB), now Energy Regulatory Commission (ERC), asan incident to its principal function, the authority to grantprovisional relief, thus:

"SEC. 8. Authority to Grant Provisional Relief. -The [Energy Regulatory] Board may, upon thefiling of an application, petition or complaint or atany stage thereafter and without prior hearing, onthe basis of supporting papers duly verified orauthenticated, grant provisional relief on motionof a party in the case or on its own initiative,


without prejudice to a final decision after hearing,should the Board find that the pleadings, togetherwith such affidavits, documents and otherevidence which may be submitted in support ofthe motion, substantially support the provisionalorder: Provided, That the Board shallimmediately schedule and conduct a hearingthereon within thirty (30) days thereafter, uponpublication and notice to all affected parties."

68. The aforementioned provision continues to be applicable tothe Commission, having succeeded the ERB. Section 80 ofthe EPIRA specifically mentions that the applicability of theprovisions of EO 172, as amended, creating the ERB, shallcontinue to have full force and effect except insofar as theyare inconsistent with the EPIRA;

69. The Supreme Court has already reaffirmed this authority ofthe Commission to grant provisional relief in the case of BFHomes, Inc., et aI, v. Manila Electrical Company, GR. No.171624, December 6, 2010:

"Incidentally, BF Homes and PWCC seemed tohave lost sight of Section 8 of Executive OrderNo. 172 which explicitly vested on the ERB, asan incident of its principal function, the authorityto grant provisional relief, thus:

Section 8. Authority to Grant Provisional Relief.- The Board may, upon the filing of anapplication, petition or complaint or at any stagethereafter and without prior hearing, on the basisof supporting papers duly verified orauthenticated, grant provisional relief on motionof a party in the case or on its own initiative,without prejudice to a final decision after hearing,should the Board find that the pleadings, togetherwith such affidavits, documents and otherevidence which may be submitted in support ofthe motion, substantially support the provisionalorder: Provided, That the Board shallimmediately schedule and conduct a hearing


thereon within thirty (30) days thereafter, uponpublication and notice to all affected parties.

The aforequoted provision is still applicableto the ERC as it succeeded the ERB, by virtueof Section 80 of the EPIRA. A writ ofpreliminary injunction is one such provisionalrelief which a party in a case before the ERCmay move for." (Emphasis supplied)

70. Thus, without a doubt, the Commission is empowered by lawand jurisprudence to issue a Cease and Desist Order, whichis in the nature of a TRO and writ of preliminary injunctionunder the Rules of Court;

Grounds and Requisites forIssuance of Provisional Relief

71. A preliminary injunction is a provisional remedy that a partymay resort to in order to preserve and protect certain rightsand interests during the pendency of an action. The objectiveof a writ of preliminary injunction is to preserve the statusquo until the merits of the case can be fully heard. Statusquo is the last actual, peaceable and uncontested situationwhich precedes a controversy;26

72. Rule 1, Section 5 of the Rules of Practice and Procedure ofthe Commission provides:

"Section 5. Application of the Rules of Court. - Inthe absence of any applicable provision in theserules, the pertinent provisions of the SupremeCourt of the Philippines' Rules of Court and Ruleson Electronic Evidence may, in the interest ofexpeditious disposition of the cases pendingbefore the Commission and whenever practicableand convenient, be applied suppletorily or byanalogy."

26 The Incorporators Of Mindanao Institute Inc. And The Board Of Trustees Of Mindanao Institute Inc.,Represented By Engr. Victorioso D. Udarbe v. The United Church Of Christ In The Philippines,Acting Through Agusan District Conference United Church Of Christ In The Philippines,Represented By Rev. Rodolfo Baslot, G.R. No. 171765, March 21, 2012


73. Thus, the relevant provIsions of the Rules of Court andapplicable jurisprudence should apply;

74. Section 3, Rule 58 of the Rules of Court enumerates thegrounds for the issuance of a writ of preliminary injunction:

"Section 3 - Grounds for issuance of preliminaryinjunction. - A preliminary injunction may begranted when it is established:

(a) That the applicant is entitled to the reliefdemanded, and the whole or part of suchrelief consists in restraining the commissionor continuance of the act or acts complainedof, or in requiring the performance of an actor acts, either for a limited period orperpetually;

(b) That the commission, continuance or non-performance of the act or acts complained ofduring the litigation would probably workinjustice to the applicant; or

(c) That a party, court, agency or a person isdoing, threatening, or is attempting to do, oris procuring or suffering to be done, someacts or acts probably in violation of the rightof the applicant respecting the subject of theaction or proceeding, and tending to renderthe judgment ineffectual."

75. The entire facts and circumstances surrounding the above-mentioned threat of implementing the actual deduction/off-setting or payment of the financial penalty despite thepending Reconsideration sufficiently establish that 1590 ECis entitled to the grant of injunctive relief through the issuanceof a Cease and Desist Order;

76. The case of Hutchison Ports Philippines Limited v. Subic BayMetropolitan Authority, et al.27 provides for the requisites foran injunctive writ to be issued, viz:

27 G.R. No. 131367, August 31, 2000


"For an injunctive writ to be issued, the followingrequisites must be proven:

First. That the petitioner/applicant must have aclear and unmistakable right.

Second. That there is a material and substantialinvasion of such right.

Third. That there is an urgent and permanentnecessity for the writ to prevent serious damage."

The Requisites for the Issuanceof an Injunctive Writ are AllPresent in this Case

77. In this case, all the requisites for the issuance of an injunctivewrit are present;

78. First, 1590 EC has a clear and unmistakable right toadministrative due process;

79. It is axiomatic under the Section 1, Article III of theConstitution that:

"Section 1. No personal shall be deprived oflife, liberty or property without due process oflaw, nor shall any person be denied the equalprotection of the laws." (Emphasis supplied)

80. This case involves the right of 1590 EC to its income whichcomes well within the realm of a property right. Therefore,1590 EC has the right to due process before it is deprived ofits property right through the imposition of the financialpenalty. Thus, this right needs to be fully protected;

81. Second, the act of implementing the actual deduction/off-setting or payment of the penalty by PEMC, pending the


exhaustion of administrative and legal remedies to which1590 EC is entitled, is a material and substantial invasion ofthe latter's clear, positive and unmistakable right over theright to administrative due process;

82. The guidelines laid down in the landmark case of Ang Tibayv. Gourt of Industrial Re/ations28, due processin administrative proceedings requires compliance with thefollowing cardinal principles:

"(1) the respondents' right to a hearing, whichincludes the right to present one's case andsubmit supporting evidence, must be observed;(2) the tribunal must consider the evidencepresented; (3) the decision must have somebasis to support itself; (4) there must besubstantial evidence; (5) the decision must berendered on the evidence presented at thehearing, or at least contained in the record anddisclosed to the parties affected; (6) in arriving ata decision, the tribunal must have acted on itsown consideration of the law and the facts of thecontroversy and must not have simply acceptedthe views of a subordinate; and (7) the decisionmust be rendered in such manner thatrespondents would know the reasons for it andthe various issues involved."

83. Moreover, the essence of due process is to be heard and, asapplied to administrative proceedings, this means a fair andreasonable opportunity to explain one's side, or anopportunity to seek a reconsideration of the action orruling complained of29;

84. In this case, while 1590 EC submitted a written reply to theEGO's PNI, which was limited opportunity to discuss andexplain the technical problems may have led to theunfortunate imposition of the penalty for the thirty-one (31)trading intervals;

28 69 Phil 635, 1940

29 Office of the Ombudsman v. Reyes, G.R. No. 170512, October 5,2011


85. Since the PEMC-ECO cases are very technical in nature, aconference with ECO would have been in order. But therewas none;

86. As part of its right to administrative due process, 1590 ECthen filed for Reconsideration with PEMC to seek for a reviewand reconsideration of the imposition of the Total FinancialPenalty;

87. However, despite the pending "Urgent Request forReconsideration", the Billing Statement remains to beenforceable by October 26, 2015. If this be allowed, 1590EC's right to reconsider the unfavorable decision of thePEMC will be violated and its property, in the form of income,would be unduly deprived without the exhaustion of its rightto due process;

88. Third, there is an urgent and paramount necessity forinjunctive relief to prevent serious and irreparable damage to1590 EC;

89. An injury is irreparable when it cannot be adequatelycompensated in damages or which damages cannot becompensable in money or if it is of such constant andfrequent recurrence that no fair or reasonable redress can behad therefore in a court of law or where there is no standardby which the amount can be measured with reasonableaccuracy, that is, it is not susceptible of mathematicalcomputation30;

90. If PEMC will not be stopped in implementing the TotalFinancial Penalty, 1590 EC will stand to lose a hefty amountof Three Million Seven Hundred Thousand Pesos (PhP3,700,000.00);

91. It is, therefore, imperative that PEMC be immediately beenjoined from implementing the actual deduction/off-settingor payment of the financial penalty on October 26, 2015;

92. Furthermore, 1590 EC is ready and willing to post a bond insuch reasonable amount as this Commission may determine

30 PVTA v. De los Angeles, G.R. No. L-27829, August 19,1998


in its discretion, conditioned upon payment of such damageswhich may be sustained by PEMC by reason of the grant ofinjunctive relief, if this Commission should finally decide that1590 EC is not entitled to the relief prayed for; and

PRAYER

93. 1590 EC prays that this Commission:

a. Issue a Cease and Desist Order during the pendency ofthe Petition enjoining PEMC from implementing theactual deduction/off-setting or payment of the penaltyon October 26,2015;

b. Re-open the thirty-one (31) trading intervals for reviewand reconsideration; and

c. After trial on the merits, grant this Petition and find that1590 EC should not be imposed the Financial Penaltyfor the thirty-one (31) trading intervals on the groundthat it was not in breach of the MOR.

The Commission has set the said petition for jurisdictional hearing,pre-trial conference and evidentiary hearing on November 12, 2015(Thursday) at ten 0' clock in the morning (10:00 A.M.) at the ERCHearing Room, 15th Floor, Pacific Center Building, San MiguelAvenue, Pasig City.

All persons who have an interest in the subject matter of theproceeding may become a party by filing, at least five (5) days prior tothe initial hearing and subject to the requirements in the ERC's Rules ofPractice and Procedure, a verified petition with the Commission givingthe docket number and title of the proceeding and stating: (1) thepetitioner's name and address; (2) the nature of petitioner's interest inthe subject matter of the proceeding, and the way and manner in whichsuch interest is affected by the issues involved in the proceeding; and (3)a statement of the relief desired.

•••


All other persons who may want their views known to theCommission with respect to the subject matter of the proceeding may filetheir opposition to the petition or comment thereon at any stage of theproceeding before the petitioner concludes the presentation of itsevidence. No particular form of opposition or comment is required, butthe document, letter or writing should contain the name and address ofsuch person and a concise statement of the opposition or comment andthe grounds relied upon.

All such persons who may wish to have a copy of the petition mayrequest the petitioner, prior to the date of the initial hearing, that they befurnished with a copy of the petition. The petitioner is hereby directed tofurnish all those making such request with a copy of the petition and itsattachments, subject to reimbursement of reasonable photocopyingcosts. Likewise, any such person may examine the petition and otherpertinent records filed with the Commission during the usual office hours.

WITNESS, the Honorable Chairman, JOSE VICENTE B.SALAZAR, and the Honorable Commissioners, ALFREDO J. NON,JOSEFINA PATRICIA A. MAGPALE-ASIRIT, and GERONIMO D. STA.ANA, Energy Regulatory Commission, this 19th day of October, 2015at Pasig City.

ATTY. FRA IS SATURNINO C. JUANEx cutive Director III

Documents

ENERGY REGULATORY COMMISSION ERC Case No. 2015... · ENERGY REGULATORY COMMISSION SanMiguelAvenue, PasigCity, 1590 ENERGY CORPORATION ... no conferences ... (GR. No. 171624, December