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Republic of the Philippines
DEPARTMENT OF ENERGY

Department Circular __0C2008-11-0005 .¢

DIRECTING THE PHILIPPINE ELECTRICITY MARKET CORPORATION TO CONDUCT
LIVE DISPATCH “FREE-FOR-ALL” OPERATIONS AS PART OF THE PREPARATIONS
FOR THE LAUNCH OF THE COMMERCIAL OPERATIONS OF THE
WHOLESALE ELECTRICITY SPOT MARKET (WESM) IN THE VISAYAS GRID

WHEREAS, the Department of Energy (the "DOE”") is mandated under Section 30 of
Republic Act No. 9136, otherwise known as the “Electric Power Industry Reform Act of 2007"
or “EPIRA,” to establish the Wholesale Electricity Spot Market (the “WESM") that would
facilitate a transparent, competitive and reliable market for electricity;

WHEREAS, the DOE launched the commercial operations of the WESM in the Luzon Grid
on 23 June 2006 through Department Circular No. 0C2006-06-0008, “Declaring the
Launching of the Wholesale Electricity Spot Market (WESM) in the Luzon Grid and the
Terms and Conditions for the Commencement of the Full Commercial Operations of the
WESM:;*

WHEREAS, said Circular further specified that one of the requirements for the launch of the
Visayas WESM is the submission to DOE by the Philippine Electricity Market Corporation
{the “"PEMC’) of a Certification that the Visayas Trial Operations Program inclusive of the
Limited Live Dispatch and the “Free-for-All Operations has substantially been completed and
its operational acceptance are in accordance with the requirements of the WESM Rules;

WHEREAS, the Visayas Trial Operations Program is in the final stage with the recent PEMC
conduct of a Live Dispatch Operation (LOO) without financial settlement that involves the
implementation by the System Operator of the dispatch schedules generated in the WESM
Market Management System (the "MMS") but that these schedules are being managed
through scripted bids and offers prepared by PEMC;

WHEREAS, the DOE deems it necessary that the LDOs shall adequately prepare the
trading participants to effectively trade in the WESM and that there is adequate and sufficient
exposure and experience by the trading participants in actual electricity trading;

WHEREAS, the completion of the LDO is a pre-requisite, among others, for the declaration
of commercial operations of the WESM in the Visayas;

NOW, THEREFORE, premises considered, the DOE hereby declares as follows -

Section1. implementation of the Final Phase of the Live Dispatch Operations
(LDO) in the Visayas Grid. The PEMC is hereby directed to implement the final phase of
the Live Dispatch Operations in the Visayas Grid with non-scripted bids and offers in
accordance with this Circular.

Section 2. Objectives. The conduct of the non-scripted bids and offers are geared
towards achieving the following -

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Energy Center, Merritt Rd, Fort Bonifacio, Taguig City, Metro Manila 1201 Philippines
Tel. Nos.: Trunkline (632)840-1401; Telefax (632) 840.2067; (632) 840-2138; (632) 840-4244; Fax (632) 840-1731; Hotline (632) 840-2130
Website: www.doe.gov.ph E-mail: info@doe,.gov.ph
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a)

b)

Enhance the readiness of the trading participants to participate in the WESM by
affording the opportunity to perform electricity trading based on actual market
environment, and

Enable the end-to-end of testing of all market systems for scheduling, dispatch,
pricing, metering and settlements, including the interfaces between PEMC and
the TransCo's Systems Operations (the “System Operator”) and Metering
Services Group.

Section 3, Coverage. This Circular shall apply to the following WESM Participants:

a)
b)
c)

Section 4.

Generation Companies
TransCo/System Operator and Meter Service Group
Distributian Utilities

Guidelines and Conditions for Implementation. PEMC will conduct the

LDO in accordance with the following -

a)

5)

C)

dq)

e)

f)

g)

The actual Live Dispatch Operations will be implemented for a minimum period of
one (1) week or seven (7) consecutive days. The actual dates shall be
determined by PEMC in consultation with the DOE. PEMC shall give prior notice
of the actual dates to all participants at least one (1) week prior to the start date.

Participation in the LDO is mandatory for all WESM participants and shall comply
with this Circular and the guidelines, procedures and instructions of the PEMC
and the System Operator in the implementation of the LDO,

The generators will be responsible for submission of the energy offers for their
respective generation facilities in accordance with the procedures for submission
of bids and the WESM timetable. To achieve the objectives of the LDO, the
energy offers will not be pre-defined by PEMC.

The System Operator shall implement the dispatch schedules generated by
PEMC through the Market Management System. To ensure the security and
reliability of the power system, however, the dispatch implementation will be
subject to security constraints or re-dispatch instructions by the System Operator.
Market intervention may also be called by the PEMC or the System Operator if
warranted pursuant to the WESM Rules.

The resulting energy prices will not be binding on any party and will not be used
for settlements of the energy transactions during the LDO. PEMC will, however,
publish or make available the resulting prices in accordance with the publication
and information disclosure requirements and procedures in the WESM.

The energy transactions during the LDO will be settled by the trading participants
with their counterparties in accordance with their power supply contracts. The
PEMC will not be liable for compensation to or for any damages that any party
may incur as a result of the implementation of the LDO and the dispatch
schedules,

Unless otherwise provided for in this Circular, the WESM Rules and relevant
WESM manuals will apply in the implementation of the LDO. PEMC will ensure
that the relevant WESM manuals are published and made available to the trading
participants.
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h) PEMC shall formulate and implement such measures as may be warranted to
minimize disruptions as well as any adverse impact of the Visayas LDO in the
operations of the WESM in Luzon. These measures will be published and made
known to the trading participants in both Luzon and Visayas prior to the start of
the LDO.

i) In consullation with the System Operator, PEMC shall formulate the guidelines
and procedures for the implementation of the LDO as provided for in this Circular,
and conduct preparatory activities necessary to inform the participants of the
holding of the LDO. PEMC shall also ensure that the infrastructure and processes
for the timely submission of bids and publication of dispatch schedules and other
market information are in place prior to the start of the LDO.

Section 4. Participation of Luzon Trading Participants. This Circular applies to
trading participants of the WESM in the Luzon grid. All Luzon trading participants are
enjoined to cooperate and comply with the guidelines and instructions to be issued by the
PEMC or the System Operator relating to the implementation of the LDO.

Section 5. Submission of Completion Report. PEMC and the System Operator shall
submit to the DOE a report on the implementation and results of the LDO. The report shall
be submitted not later than one (1) week after the termination of the LDO,

Section6. Registration of All Electric Industry Participants. All electric industry
participants in the Visayas Grid are enjoined to register to participate in the WESM.
Pursuant to the WESM Rules clause 2.2.4.2, no person or entity may inject or withdraw
energy from the grid without being registered as a WESM member. Applications for
registration are to be submitted to the PEMC at its offices at the 9" Floor Robinsons
Equitable Tower, ADB Avenue, Ortigas Center, Pasig City. Application forms and relevant
information may be obtained from PEMC or downloaded from the Market Information

Website at httos:/Avww.wesm.ph.

Section 7, No amendment or repeal of existing laws. Nothing in this Circular shall be
construed as to amend, supplant, or repeal any of the mechanisms or institutions already
existing or responsibilities already allocated and provided for under any existing law, rule or
contract.

Section 8. Effectivity and Publication. This Circular shall be effective after fifteen (15)
days from its publication in two (2) newspapers of general circulation. The PEMC is hereby
directed to publish this Circular in the Market Information website.

This Circular shall remain in effect until otherwise revoked.

Taguig, Metro Manila, Si = 708

ANGEL® T. abies
Secretary
Department of Energy

Py ‘sence seer

SE08-008684

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