Executive Summary for Capex Application

EXECUTIVE SUMMARY

INTRODUCTION

On June 8, 2001 President Gloria Macapagal-Arroyo signed into law the Electric Power Industry Reform Act of 2001 (EPIRA) or the Republic Act 9136. It is designed to bring down electricity rates and to improve the delivery of power supply to end-users by encouraging greater competition and efficiency in the electricity industry.

Based on EPIRA, the Negros Occidental Electric Cooperative, Inc. (NOCECO) has a responsibility as a distribution utility to cater its customers’ demand without compromising the standards set by the Philippine Grid Code, Philippine Distribution Code and Philippine Electrical Code. Thus, it has to make sure that it should be able to pass the criteria for Capacity, Safety, Power Quality, Reliability and System Loss while providing dependable, efficient service to its consumers at reasonable price.

NOCECO has been operating for more than 30 years and is still continuing to grow. Over the years, changes had occurred which also has affected NOCECO’s performance as a distribution utility. Certain projects have been and should be implemented in order to provide NOCECO customers with adequate and efficient electricity.

It is stated on Section 43(f) of the EPIRA that any significant operating costs or projects investment of TRANSCO and Distribution utilities which shall become part of the rate base shall be subject to verification by the Energy Regulatory Commission (ERC) to ensure that the contracting and procurement of the equipment, assets and services have been subjected to transparent and accepted industry procurement and purchasing practices to protect the public interest.

In connection with this, ERC has set Resolution 26, Series of 2009, directing all distribution utilities to pass their 5-year Distribution Development Plan which contain the electric distribution capital projects to ERC. This capital projects found within the Distribution Development Plan will be subject to the evaluation and...