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Republic of the Philippines
DEPARTMENT OF ENERGY

Department Circular No. DC2006-05-0006,,

Adopting Further Amendments to the WESM Rules

Whereas, Rule 8.6.1 Of the Wholesale Electricity Spot Market (WESM) Rules
provide for the approval by the Department of Energy (DOE) of proposals for
any WESM rules changes upon endorsement by the PEM Board;

Whereas, on December 20, 2005, the Interim Rules Change Committee has
approved a resolution endorsing for approval before the PEM Board changes in
the WESM Rules pertaining to the provisions on the over-riding constraints and
the determination of market prices;

Whereas, after discussion, the PEM Board has resolved on January 19, 2006 to
approve for endorsement to the Department of Energy (DOE) the abovestated
changes to the WESM Rules;

NOW THEREFORE, pursuant to its authority under the WESM Rules, the DOE
hereby issues, adopts and promulgates the following amendments to the WESM
Rules.

A. Amendments to the WESM Rules

1. Rule 3.5.13.1 is amended to read -

Subject to clause 3.5.13.3, the System Operator may require the
Market Operator to impose constraints on the power flow,
demand, energy generation of a specific facility in the Grid to
address system security threat, to mitigate the effects of a system
emergency, or to address the need to dispatch generating units to
comply with systems, regulatory and commercial tests
requirements. The System Operator may also relax existing
constraints or system requirements on power flows, demand,
energy generation and reserves if the Market Operator is unable
to produce a feasible dispatch schedule.

The System Operator, in consultation with the Market Operator
and the Trading Participants, shall develop the criteria and
procedures for dispatch of generating units that are required to
run as a result of the imposition or relaxation of constraints stated
in the preceding paragraph, and the manner for compensating said
units.

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2. Rule 3.5.13.2 is amended to read -

in situations where offers are structured in such a way that
provision of any level of reserve services prohibits the simultaneous
provision of very low or high levels of generation, the System
Operator may also recommend to the Market Operator that
constraints should be imposed or relaxed so as to allow generating
systems to operate in a range which allows increase of either
reserve allocation or energy generation, as appropriate, having
regard to:

(a) The commercial interests of Trading Participants; and

(b) Market priorities and objectives, as reflected by the relevant
market prices for energy and reserves in the relevant reserve
region.

3. Rule 3.10.5 is amended to read -

In the event where no ex-ante prices can be determined or
communicated within the timeframe specified by the timetabie, or
the calculated prices are believed to be in error, as a result of load
shedding, occurrence of constraint violation coefficients, or for any
other reason:

a) The Market Operator may, as soon as possible after the end of a
trading interval, issue a pricing error notice, in which case, the
ex-post quantities and the ex post prices determined according to
clause 3.10.7 shall also serve as ex-ante quantities and ex-ante
prices. If no ex-post prices can be determined or the
calculated prices are believed to be in error as a result of the
imposition or relaxation of constraints pursuant to clause
3.5.13.1, the Market Operator shall re-run the Market
Dispatch Optimization Model.

B. Effectivity

These amendments shall be effective fifteen (15) days following its publication
in two (2) national newspapers of general circulation.

LG M. Lotilla

Secretary
Metro Manila, Philippines, May _S , 2006

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