=== dc2006-11-0013-pages-1.ppm === Republic of the Philippines DEPARTMENT OF ENERGY Department Circular No. Dez006 = 1-0 WY Adopting Further Amendments to the WESM Rules Whereas, Rule 8.6.10 of the Wholesale Electricity Spot Market Rules (WESM) Rules provide for the approval by the Department of Energy (DOE) of proposals for any changes in the WESM rules upon the endorsement by the Board of Directors of the Philippine Electricity Market Corporation (PEM Board): Whereas, on June 29, 2006, July 18, 2006 and July 27, 2006, the Interim Rules Change Committee approved a resolution endorsing for approval by the PEM Board changes in the WESM Rules pertaining to the provisions on the powers of the PEM Board, design and promulgation of penalties, submission of bilateral contract data, payment to trading participants, and composition of the rule change committee; Whereas, after discussion, the PEM Board resolved on August 9, 2006 and September 27, 2006 to approve for endorsement to the DOE the aforementioned 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. WESM Rules 1. Incorporation of Clause 1.4.5.2 (f) and (g) to read — (f): Approve and promulgate Market Manuals, including amendments and revisions thereto; and {g) Issue resolutions or advisories on any matter related to the WESM. 2. Incorporation of Clause 1.6.3 to read — 1.6.3 Design and Promulgation of Penalties The Market Surveillance Committee (MSC) will design and promulgate the penalty levels and the appropriate range of penalties, for breaches and non-compliance of WESM Rules, anti-competitive behavior, and abuse of market power. === dc2006-11-0013-pages-2.ppm === The MSC will conduct consultations with the Rules Change Committee and the PEM Board in its formulation of the penalty levels and appropriate range of penalties. The penalty scheme and any changes made by the MSC will be published in the Market Information Website and a copy furnished to the PEM Board and the Rules Change Committee. The MSC _ shall speci the date when the penalties become effective, which shall in no case be earlier than the date of its publication. The penalty scheme will be reviewed by the MSC annually. The amount of the financial penalty shall be determined in consideration of: the circumstances in which the Breach occurred: the severity of the Breach; the duration of the Breach and the rate of recurrence; Per > the extent_to which the Breach was caused by inadvertence, negligence, or its deliberateness: 5. the actions of the party upon becoming aware of the Breach; 6. whether the party disclosed the matter to the MSC or ECO on its own accord or only when prompted to do so; 7. whether the party complied with all preventive actions or remedial measures prescribed by the ECO; 8. any benefit that the party obtained or expected to obtain as a result of the Breach; 9. the impact of the Breach on other WESM Members and the WESM as a whole; and 10. other factors as the ECO or PEM Board considers appropriate. 3. Clause 3.13.1.1 (6) is further amended to read — (6) Identify the counter party to the bilateral contract and the party that will pay the line rental trading amount associated with the bilateral contract quantity submitted: provided, however, that in case only one of the bilateral counter parties is registered as a Direct WESM Member, that WESM Member shall be the party that will pay the line rental to the Market Operator, and === dc2006-11-0013-pages-3.ppm === 4. Clause 3.14.7 is further amended to read — After the Market Operator is to be paid under clause 3.14.6 and in accordance with the schedule set in the billing and setilements timetable, the Market Operator shall pay to each WESM Member tn cleared funds the settlement amount (if any) stated to be payable in that WESM Members final statement. The maximum total payment which the Market Operator is required to pay in respect of any billing period is equal to the aqgregate of - a) the total payments actually received from WESM Members in accordance with clause 3.14.6; plus b) the total amount that the Market Operator is able to actually draw from the prudential security of the defaulting WESM Members in accordance with clause 3.15, if one or more WESM Member is in default; plus c) other sources of funds which the PEM Board may approve to be the paid to the WESM members if the total amount drawn from_the_ prudential security deposit of the defaulting WESM members _is insufficient to cover the defaulted amounts. lf it becomes necessary for the Market Operator to draw upon the prudential security of a defaulting WESM Member in accordance with clause 3.15, the corresponding payments to the WESM Members entitled to be paid shall be made only after the Market Operator is actually able to draw on_ the prudential security but not later than the date specified in the billing and settlement time table. If the total payments actually received or drawn from the prudential security by the Market Operator for a_particular billing period is insufficient to pay for the total amounts payable to the WESM Members, the total payments received and_ drawn shall be distributed and paid to the relevant WESM Members in proportion to the amount payable to them for that billing period. The shortfall shall be paid upon collection from _the 7 defaulting WESM Member but not later than the date specified in the billing and settlement time table. === dc2006-11-0013-pages-4.ppm === 5. Clause 8.2.3 is amended to read — Each member of the Rule Change Committee shall: a) Be appointed by the PEM Board in consultation with industry participants; and b) For the sectoral member or other groups, not be a member of the PEM Board. 6. Ciause 8.2.4 is amended to read — The PEM Board may terminate the appointment of any person appointed to the Rule Change Committee at any time if: AK (c) The person ceases to represent the sectoral qroup or other groups, or the company to which he has been appointed; or 7. The definition of Market Manual under Chapter 11 is incorporated to read — Market Manuals. A manual of specific procedures, systems or protocols for the implementation of the WESM Rules B. Separability Clause lf for any reason, any section or provision of this Department Circular is declared unconstitutional or invalid, such parts not affected shall remain in full force and effect. C. Effectivity This Department Circular shail take effect immediately following its publication in two (2) newspapers of general circulation. | Energy Center, Fort Bonifacio, Taguig City, Metro Manila, @Y November 2006 aphael P.M Lotifla Secretary