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End DEPARTMENT OF ENERGY

DEPARTMENT CIRCULAR NO. _ 9 &/3 - 07- 002 os

DECLARING THE LAUNCH OF THE INTERIM MINDANAO ELECTRICITY
MARKET (IMEM) AND TERMS AND CONDITIONS FOR THE
COMMENCEMENT OF THE FULL COMMERCIAL OPERATIONS OF THE
IMEM

WHEREAS, Section 2 of Republic Act No. 9136, otherwise known as the “Electric
Power Industry Reform Act of 2001” (EPIRA), declares as a policy of the state to

ensure the quality, reliability, security, and affordability of the supply of electric
power;

WHEREAS, Republic Act No. 7638 or the "Department of Energy Act of 1992", as
amended by Section 37 of the EPIRA, authorized the Department of Energy (DOE) to
exercise supervision and control over all government activities relative to energy

projects and to formulate rules and regulations necessary to implement the
objectives of these laws;

WHEREAS, Section 37 (i) of the EPIRA mandates the DOE to "develop policies and
procedures and, as appropriate, promote a system of energy development incentives
to enable and encourage electric power industry participants to provide adequate
capacity to meet demand including, among others, reserve requirements";

WHEREAS, to address the power supply situation in Mindanao, the DOE undertook
public consultations and Information, Education and Communication (IEC)
Campaign on the establishment of an electricity market to encourage the transparent
and efficient utilization of all available resources to alleviate the supply deficit;

WHEREAS, on 24 May 2013 and 17 September 2013, the DOE issued Department

. Circular Nos. DC 2013-05-0008 and DC 2013-09-0020 promulgating the Interim

Mindanao Electricity Market (IMEM) Implementing Rules (the “IMEM Rules”) and
the IMEM Manuals respectively;

WHEREAS, on 12 August 2013, the Energy Regulatory Commission (ERC) issued an
Order granting the provisional authority for the IMEM price determination
methodology, subject however to the approval of an offer cap and the submission of
the finalized Dispatch Protocol;

Energy Center, Rizal Drive., Fort Bonifacio, Taguig City, Metro Manila, Philippines
Trunkline: 479-2900
Website: www.doe.gov.ph E-mail: info@doe.gov.ph

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WHEREAS, the offer cap has yet to be agreed upon by the DOE, ERC and PEMC;

WHEREAS, there is an urgent need to address the supply deficit through immediate
implementation of the IMEM for the general welfare of the Mindanao stakeholders;

WHEREAS, PEMC has commenced trial operations on 26 August 2013, and shall
conclude the same on 25 September 2013; and

WHEREAS, after assessment of the trial operations, the DOE has determined that
there is a need for the IMEM participants to fully familiarize themselves with the

daily operations of the IMEM, particularly with respect to centralized scheduling
and dispatch.

NOW THEREFORE, premises considered, the DOE declares as follows:

Section 1. Launch of the IMEM and Initial Commercial Operations. The DOE
hereby declares the launch of the IMEM and sets the initial commercial operations
on 26 September 2013.

1.1. Completion of Registration and Documentary Requirements.
Commencing 26 September 2013 until 02 October 2013, all participants
identified under clause 2.1.1.1 and clause 2.1.1.2 of the IMEM Rules
(Mandatory Participants) are hereby directed to submit an
accomplished IMEM Membership Form and Market Participation
Agreement.

Other documentary requirements provided in Section 2.5 of the IMEM
Registration Criteria and Procedures Manual shall be completed by all
participants by 15 November 2013 as a condition to the participation in
the full commercial operation of the IMEM as provided in Section 2
hereof.

1.2. Terms of Initial Commercial Operations. Beginning 03 October 2013
and until the declaration of full commercial operations in accordance
with Section 2 of this Circular, all IMEM Members shall comply with
the provisions on central scheduling and dispatch of all contracted
bilateral quantities.

The central schedule and dispatch shall be implemented in the manner
provided for in the IMEM Dispatch Protocol: Provided, That In-Day
Dispatch Instructions issued by the Mindanao System Operator shall
be in accordance with current practice for re-dispatch under the
Capacity Nomination and Dispatch Protocol dated 22 March 2013
agreed upon by Power Sector Assets and Liabilities Corporation,

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National Power Corporation, the Mindanao System Operator and
Aboitiz Power Corporation - Therma Marine, Inc. as may be
applicable.

To this end, the IMEM Operator shall ensure the smooth
implementation of the initial commercial operations by closely
coordinating with the Mindanao System Operator and IMEM
Members.

All other provisions in the IMEM Dispatch Protocol and all other
provisions in the IMEM Rules and IMEM Manuals shall be followed to
the extent practicable, provided, that full implementation of the IMEM
Rules and Manuals shall be undertaken once full commercial
operations have been declared by the DOE;

1.3. Monitoring of Energy Withdrawals. The Mindanao System
Operator, shall continue to perform its obligations under Section 2 of
DOE Department Circular No. 2012-03-0004.

Section 2. Declaration of Full Commercial Operations. Unless otherwise declared
by the DOE, full commercial operations of the IMEM shall commence on 26
November 2013, subject to the fulfillment of the following conditions:

a) The approval of the offer cap by the DOE, ERC and PEMC; and

b) The constitution of the IMEM Governance Committee pursuant to clause
1.4.2.2 of the IMEM Rules.

Section 3. Severability. Should any provision of this Circular or any part thereof be
held to be invalid or unenforceable, such invalidity or unenforceability shall not
affect the validity or enforceability of any other provisions of this Circular.

Section 4. Effectivity. This Circular shall take effect fifteen (15) days after
publication in a newspaper of general circulation and upon publication and filing

with the University of the Philippines Law Center, Office of the National
Administrative Register.

Issued at Taguig City, Metro Manila, Philippines.

DEY.

a pba

Be CARLOS JERICHO L. PETILLA
YR a Secretary
SOE-JLP-13005243

HC A

SEP 24 9013