Republic of the Philippines

ENERGY REGULATORY COMMISSIO

San Miguel Avenue, Pasig City

IN THE MATTER OF THE

APPLICATION FOR
APPROVAL OF THE POWER
SUPPLY AGREEMENT (PSA)
BETWEEN MANILA ELECTRIC
COMPANY (MERALCO) AND
SAN BUENAVENTURA
POWER LTD. CO. (SBPL)

ERC CASE NO. 2014-076 RC

MANILA ELECTRIC COMPANY

(MERALCO) AND SAN
BUENAVENTURA POWER
LTD. CO. (SBPL),
Applicants.
)(- - - - - - - - - - - - - - - - - - - - - - )(
ORDER

Before the Commission for resolution are the motions of Manila

Electric Company (MERALCO) and San Buenaventura Power Ltd.
Co. (SBPL) to treat certain documents as confidential information as
contained in the following pleadings:

1. The "Motion for Leave to Supplement Petition for

Intervention Dated June 3, 2014" filed on June 3, 2014 by
SBPL;

2. The "Pre-trial Brief with Motion for Confidential Treatment

of Information and Documents" filed on July 25, 2014 by
SBPL;

3. The "Compliance (With Motion for Confidential Treatment

of Information)" filed on August 18, 2014 by MERALCO;

4. The "Compliance with Motion for Confidential Treatment

of Information and Documents" filed on August 20, 2014
by SBPL;
ERC CASE NO. 2014-076 RC
ORDER/October 15, 2014
Page 2 of 12

5. The "Opposition (To MERALCO's Motion for Confidential

Treatment of Information and SBPL's Motion for
Confidential Treatment of Information and Documents)"
filed on September 11,2014 by PMR;

6. The "Motion to Admit Attached Reply" filed on September

17, 2014 by SBPL; and

7. The "Reply (To PMR limited Co.'s Opposition)" filed on

September 23, 2014 by MERALCO.

In its opposition, PMR alleged, among others, that:

1. The documents sought to be treated as confidential by

MERALCO and SBPL should not be considered as such
and should be made available to it and that it needs
copies of said documents for it to fully prepare for the
hearings;

2. While it respects and appreciates the sensitive nature of

the contents of the offers of suppliers to MERALCO and
the forecasted demand-supply situation for 2010 to 2025
and the suppliers and the capacity provided and to be
provided by them, MERALCO has the burden of showing
that it has complied with its "obligation to supply electricity
in the least cost manner to its captive market, subject to
the collection of retail rate duly approved by the ERC"
pursuant to Section 23 of the Electric Power Industry
Reform Act of 2001 (EPIRA). It believes that said
obligation will not be met if SBPL is unable to warrant that
it can permanently share the facilities of Quezon Power
Plant;

3. If SBPL has to construct its own facilities, then, SBPL's

rates should remain lower than the offers of the other
suppliers. It believes that SBPL's rates would be higher
than the offers of the other suppliers;

4. The estimated costs of constructing separately each of

the shared facilities are only hypothetical cost estimates
which have not had the benefit of cost validation and
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ERC CASE NO. 2014-076 RC

ORDER/October 15, 2014
Page 3 of 12

discussion with potential suppliers. Thus, it is

inconceivable how it would reflect SBPL's investments,
business operations, calculations, investment, pricing
model and financial trade secrets;

5. The detailed rate comparison is a matter of computation

and it is essential information that is material to the
central subject matter of the proceedings - the rates in
the PSA;

6. The breakdown of the O&M costs is material to the

determination of the reasonableness of the rates in the
PSA. By this time, MERALCO is already well aware that
the O&M cost component is one of the components that
the Commission usually looks into;

7. The Financial Model is determinative of the rates in the

PSA. Without disclosure of the Financial Model, the
consumers cannot be expected to definitively determine
whether the rates in the PSA are reasonable;

8. The Draft EPC Contract and the Bid Evaluation Report

are part of the costs of the SBPL Plant, which affect the
rates in the PSA. It is in the public's and the
Commission's respective interests to know whether the
cost of the construction is not overpriced but reasonable
and in accordance with industry standards;

9. The Management Services Agreement is most likely a

notarized document and by virtue of its notarization, it has
become a public document. Thus, PMR and the public
have the right to access the information in the said
agreement notwithstanding the alleged confidentiality
clause. Even assuming that the same is truly confidential,
the Commission is empowered to make an exception
thereto;

10. The Draft O&M Agreement is only a draft agreement.

Hence, whatever information is in the same is still
contingent and may still be changed. Thus, whatever
fees of the service provider are stated therein are still not
final. Consequently, there is absolutely no basis to
consider the same confidential;
"

ERC CASE NO. 2014-076 RC

ORDER/October 15, 2014
Page 4 of 12

11. Assuming that the Commission finds the documents

submitted by MERALCO and SBPL proprietary and thus,
confidential in nature, it submits that the right of the public
to transparent and reasonable prices of electricity should
take precedence; and

12. It prayed that the Commission: a) deny MERALCO's

"Motion for Confidential Treatment of Information"; b)
deny SBPL's "Motion for Confidential Treatment of
Information and Documents"; and c) require MERALCO
and SBPL to furnish PMR with copies of the information
and documents sought to be treated as confidential.

In its reply to PMR's opposition, SBPL alleged, among others,

that:

1. The documents it sought to be treated as confidential are

trade secrets because if they are released to other
parties, particularly other generation companies, the latter
would have an undue advantage over it;

2. It derives economic value from such information being

generally unknown and not readily accessible to the
public. There is no doubt that the confidential information
is also valuable to competitor-generators and to allow the
disclosure of the same would cripple its business, and
place it at an undue advantage;

3. It has an actual, valuable proprietary interest to protect

with respect to the subject information. A failure to
safeguard the confidential nature of such documents
would have a chilling effect on free and fair competition,
contrary to the policy espoused in the EPIRA;

4. The draft EPC Contract, which is still being negotiated, is

confidential as the disclosure thereof may negatively
impact the on-going negotiations with the preferred EPC
Contractor;

5. The Management Services Agreement contains a

confidentiality clause which it is bound to respect;

J
"

ERC CASE NO. 2014-076 RC

ORDER/October 15, 2014
Page 5 of 12

6. The draft O&M Agreement is confidential notwithstanding

that the same is not yet final. Not only does the contract
provide for the fees of the service provider, the terms
thereof may change if the document is released to the
public; and

7. The. Bid Evaluation Report should not be disclosed

considering that the EPC Contract is still being negotiated
and its price and the terms and conditions thereof would
be affected by the disclosure of the other bid offers. It
contains details on the bids of the other bidders who
made their bid submissions with the understanding that
the same would be held in strict confidence.

In the foregoing motions, MERALCO and SBPL prayed that the

contents of the following documents be treated as confidential
information:

A. SBPL'S DOCUMENTS

1. Debt to Equity Ratio;

2. Project Cost;

3. Weighted Average Cost of Capital (WACC);

4. Financial Term Sheet;

5. Project Cash Flows and Financials;

6. Cost Analysis;

7. Operating Expenses Breakdown;

8. Breakdown of Project Cost;

9. Estimated cost of constructing separately each of

the shared facilities, access roads, coal jetty,
conveyer, stacker/reclaimer and storage areas, ash
disposal area, administrative building, staff house,
workshop, maintenance facilities and other facilities; .
'.
ERC CASE NO. 2014-076 RC
ORDER/October 15, 2014
Page 6 of 12

10. Detailed rate comparison between the delivered

price using the proposed rates under the PSA and
the delivered price considering the estimated
generation rates should SBPL construct the shared
facilities;

11. Breakdown of Fixed and Variable Operations and

Maintenance (O&M) costs, including estimated cost
per component of the Reimbursable Cost Payment;

12. Soft copy of the Financial Model used in the

computation of the proposed rates;

13. Draft Engineering, Procurement and Construction

(EPC) Estimates and Contracts for the construction
of the power plant;

14. Bid Evaluation Report leading to the selection of

SBPL's EPC Contractor;

15. Management Services Agreement for SBPL's

Power Plant;

16. Draft Operations and Maintenance Agreement for

SBPL's Power Plant; and

17. Summary of the Indicative Financing Terms to

Energy Regulatory Commission for the San
Buenaventura Power Plant Project in Quezon
Province, Philippines issued by the Hong Kong
Shanghai Banking Corporation dated May 30,2014.

SBPL asserts that said documents contain valuable non-public

information, data and insight on its financials which would accordingly
reflect its investments, business operations, calculations, investment,
pricing model and financial trade secrets. The data do not normally
form part of the information which is disclosed or is required to be
disclosed to other government agencies. The information is also not
generally available to the public and is not yet available or in the
possession of the Commission on a non-confidential basis from a
source that, to its knowledge, has lawfully acquired such information
on a non-confidential basis.

The third parties equipped with the information would be able to

determine the assumptions utilized for the financial model of SBPL.
Its development costs were determined after rigorous studies of the
"

ERC CASE NO. 2014-076 RC

ORDER/October 15, 2014
Page 7 of 12

demands of the project and were strategically formulated. The

disclosure of these confidential information would thus be prejudicial
to SBPL.

It would be dangerous to publicize the draft EPC Contract

considering that it is still being negotiated. The price and the terms
and conditions therein would be affected by the disclosure of the
other bid offers. The report contains details on the bids of the other
bidders who submitted their bids in confidence,

With respect to the Management Services Agreement, it is

bound by the confidentiality clause under Section 14 (p) thereof. The
confidentiality of this document is highlighted by the fact that the
same details the fees to which the service provider is entitled.

The draft Operations and Management Agreement is still in the

process of being finalized and, likewise, details the fees to which the
service provider is entitled and is, therefore, confidential in nature.

B. MERALCO'S DOCUMENTS

1. Suppliers who submitted offers to it, including a summary

of their offers; and

2. Actual and forecasted demand-supply situation for the

years 2010 to 2025, including the suppliers and the
capacity provided and to be provided.

MERALCO asserts that said documents contain information

which are commercially sensitive nature and the power suppliers who
made the offers requested confidential treatment of the same. On the
other hand, the demand-supply situation contains information which
are commercially sensitive nature and the same falls within the
bounds of valuable proprietary interest under "trade secrets" which
are entitled to protection under the Constitution, statutes and rules
and regulations.

The Commission resolves to PARTIALLY GRANT MERALCb

and SBPL's motions for confidential treatment of certain documents.
Accordingly, the foregoing documents are considered as confidential
information, EXCEPT the following:
ERC CASE NO. 2014-076 RC
ORDER/October 15, 2014
Page 8 of 12

1. Debt to Equity Ratio;

2. Project Cost;

3. WACC;

4. Breakdown of Project Cost;

5. Estimated cost of constructing separately each of the

shared facilities, access roads, coal jetty, conveyer,
stacker/reclaimer and storage areas, ash disposal area,
administrative building, staff house, workshop,
maintenance facilities and other facilities;

6. Detailed rate comparison between the delivered price

using the proposed rates under the PSA and the
delivered price considering the estimated generation rates
should SBPL construct the shared facilities;

7. Breakdown of Fixed and Variable O&M costs, including

estimated cost per component of the Reimbursable Cost
Payment;

8. Management Services Agreement for SBPL's Power

Plant; and

9. Summary of the Indicative Financing Terms to Energy

Regulatory Commission for the San Buenaventura Power
Plant Project in Quezon Province, Philippines issued by
the Hong Kong Shanghai Banking Corporation dated May
30,2014.

In the case of Garcia v. Board of Investments\ the Court held

that trade secrets and confidential. commercial and financial
information are exempt from public scrutiny. This is reiterated in
Chavez v. Presidential Commission on Good Government? where the
Court enumerated the kinds of information and transactions that are

1177 SCRA 374 (1989)

2299 seRA 744 (1998)

"

ERC CASE NO. 2014-076 RC

ORDER/October 15,2014
Page 9 of 12

recognized as restrictions on or privileges against compulsory

disclosure, thus:

"The drafters of the Constitution also unequivocally

affirmed that, aside from national security matters and
intelligence information. trade or industrial secrets
(pursuant to the Intellectual Property Code and other
related laws) as well as banking transactions (pursuant to
the Secrecy of Bank Deposits Act) are also exempt from
compulsory disclosure. "

The Commission considers the foregoing documents as

confidential information as they contain confidential, commercial and
financial information, which are considered as trade secrets of
MERALCO and SBPL, upon which they have proprietary interests.

"A trade secret is defined as a plan or process, tool, mechanism

or compound known only to its owner and those of his employees to
who it is necessary to confide it. The definition also extends to a
secret formula or process not patented, but known only to certain
individuals using it in compounding some article of trade having a
commercial value. A trade secret may consist of any formula.
pattern, device or compilation of information that: (1) is used in one's
business; and (2) gives the employer an opportunity to obtain an
advantage over competitors who do not possess the information.
Generally, a trade secret is a process or device intended for
continuous use in the operation of the business, for example, a
machine or formula. but can be a price list or catalogue or specialized
customer list. It is indubitable that trade secrets constitute properly
rights. The inventor, discoverer, or possessor of a trade secret or
similar innovation has rights therein which may be treated as
property, and ordinarily an injunction will be granted to prevent the
disclosure of the trade secret by one who obtained the information "in
confidence" or through "confidential relationship". 3

MERALCO and SBPL belong to a highly competitive electric

power industry. As such, the competitive nature of their business
requires them to protect the interest of their companies against
business competitors. Thus, MERALCO and SBPL need to guard
against public disclosure their trade secrets, marketing strategies,
business plans/programs, pricing model, calculations, financial
analysis and other confidential information. Otherwise, if they

3 Air Philippines Corporation v. Penswell, Inc., G.R. No. 172835, December 13, 2007
ERC CASE NO. 2014-076 RC
ORDER/October 15, 2014
Page 10 of 12

disclose said confidential information to the general public, their

business competitors may easily imitate and use the same for their
own advantage, in violation of MERALCO and SBPL's proprietary
rights, and to the serious damage and prejudice of MERALCO and
SBPL. To use the language of the Court in the Air Philippines Case,
jurisprudence has consistently recognized the private character of
trade secrets since the protection thereof is connected with economic
development or advancement of our economy as it fosters healthy
competition in trade and encourages investments in the industry.

This being the case and pursuant to Section 2, Rule 4 of the

Commission's Rules, the Commission shall continue to protect the
aforesaid documents from public disclosure by maintaining the same
as separate and apart from the records of the case and ensuring that
said documents are not divulged to unauthorized persons unless
otherwise required or directed by the order of a Court of competent
jurisdiction or by the Commission or agreed upon by the parties
concerned.

Accordingly, PMR shall not be allowed access to the said

confidential information unless it agrees to be bound by the terms of
this protective order by signing the "Undertaking" attached hereto. A
violation of the terms and conditions of this protective order shall be
subject to the imposition of administrative fines and penalties, without
prejudice to whatever legal remedies which the party in whose favor
this protective order was issued may take.

PMR should submit to the Commission its "Undertaking" not

later than three (3) days from receipt thereof. The Commission shall
furnish it a copy of the said documents upon receipt of its signed
"Undertaking".

On the other hand, the Commission perused the following

documents and found no cogent reason to consider the same as
confidential information and thus should be disclosed to the public:
Debt to Equity Ratio, Project Cost, WACC, Breakdown of Project
Cost, Estimated cost of constructing separately each of the shared
facilities, Detailed rate comparison, Breakdown of Fixed and Variable
O&M costs, Management Services Agreement and the Summary of
the Indicative Financing Terms. These documents are necessary in
the evaluation and determination of the reasonableness of the rates
to be charged to the consumers. The contents thereof will
necessarily be disclosed in the Commission's final approval of the
instant joint application. The Management Services Agreement is,
likewise, not a confidential document. The copy submitted to the
 ERC CASE NO. 2014-076 RC
ORDER/October 15,2014
Page 11 of 12

Commission does not indicate that it has been notarized. Be that as

it may, assuming that it was notarized, then, it became a public
document. Being a public document, the right of the people to have
access to such information should be recognized.

Thus, the said documents must be disclosed to those who

would ultimately be burdened or affected thereby. SBPL may have
the right to protect its proprietary or business concerns but it cannot
outweigh the paramount duty of the State to protect and uphold public
interest by ensuring "transparent and reasonable prices of electricity"
pursuant to Section 2 (c) and (f) of the EPIRA. The Commission
believes that SBPL will not be unduly prejudiced by the public
disclosure of the documents and information sought to be treated as
. confidential since there are other legal remedies available to ensure
its protection from the unauthorized use thereof..

SO ORDERED.

Pasig City, October 15,2014.

FOR AND BY AUTHORITY

OF THE COMMISSION:

JOSEFINA PATRIC . MAGPALE-ASIRIT

Com issioner

~
MVA1~,~~~~

_____ ~~~~~ J
ERC CASE NO. 2014-076 RC
ORDER/October 15, 2014
Page 12 of 12

Copy Furnished:

1. Atty. Katherine Mari Garcia-Moreno

Counsel for MERALCO
7th Floor, Lopez Building,
Ortigas Avenue, Pasig City

2. Atty. Jessica Kristine Hilado

PUYAT JACINTO & SANTOS
Counsel for SBPL
5th and 1ih Floors, VGP Center (formerly Manila Bank Building)
6772 Ayala Avenue, Makati City

3. Atty. Dominic John Balane

MACEDA Law
Counsel for PMR Ltd. Co.
2604-B East Tower, Philippine Stock Exchange Center
Exchange Road, Ortigas Center, Pasig City
 Republic of the Philippines
ENERGY REGULATORY COMMISSION
San Miguel Avenue, Pasig City

IN THE MATTER OF THE

APPLICATION FOR
APPROVAL OF THE POWER
SUPPLY AGREEMENT (PSA)
BETWEEN MANILA ELECTRIC
COMPANY (MERALCO) AND
SAN BUENAVENTURA
POWER LTD. CO. (SBPL)

ERC CASE NO. 2014-076 RC

MANILA ELECTRIC COMPANY

(MERALCO) AND SAN
BUENAVENTURA POWER
LTD. CO. (SBPL),
Applicants.
x----------------------x

AFFIDAVIT OF UNDERTAKING

I, ATTY. DOMINIC JOHN B. BALANE, Filipino, of legal age

and with office address at 2604-8 East Tower, Philippine Stock
Exchange Center, Exchange Road, Ortigas Center, Pasig City, after
having been sworn to in accordance with law, do hereby depose and
state that:

1. I am the counsel for PMR limited Co. (PMR);

2. PMR is an intervenor in the instant application;

3. Manila Electric Company (MERALCO) and San

Buenaventura Power Ltd. Co. (SBPL) respectively
submitted the following documents with a prayer for
confidential treatment of the same:
,
•

a. Financial Term Sheet;

b. Project Cash Flows and Financials;

c. Cost Analysis;

d. Operating Expenses Breakdown;

e. Soft copy of the Financial Model used in the

computation of the proposed rates;

f. Draft Engineering, Procurement and Construction

(EPC) Estimates and Contracts for the construction
of the power plant;

g. Bid Evaluation Report leading to the selection of

SBPL's EPC Contractor;

h. Draft Operations and Maintenance Agreement for

SBPL's Power Plant;

I. Suppliers who submitted offers to it, including a

summary of their offers; and

j. Actual and forecasted demand-supply situation for

the years 2010 to 2025, including the suppliers and
the capacity provided and to be provided.

4. I hereby undertake that I will maintain the confidentiality of

the same in my capacity as counsel for PMR;

5. I will not disclose said confidential information to any

entity, except as may be permitted by the Commission,
and shall only use the same for the purposes for which it
was disclosed, otherwise, the Commission shall impose
administrative fines and penalties, without prejudice to
whatever legal remedies MERALCO and SBPL may
impose upon me; and
 6. I am executing this affidavit to attest to the truth of the
foregoing and for all legal purposes it may serve.

WHEREOF, I have hereunto affixed my signature this _ th

day of , 2014 in ..Philippines.

ATTY. DOMINIC JOHN B. BALANE

Affiant
•I

Republic of the Philippines)

_______ ),S.S.

SUBSCRIBED AND SWORN to before me this __ th day of

____ , 2014 in . Philippines, affiant exhibited
to me competent proof of his identity consisting of

NOTARY PUBLIC

Doc. No. --
Page No. __
BookNo. __
Series of 2014.