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Republic of the Philippines & JAN 1 © 2014 |
DEPARTMENT OF ENERGY Ios fe

DEPARTMENT CIRCULAR NO, DC2013-12-0029f

ADOPTING AN INTERIM CRITERIA FOR THE DECLARATION OF MARKET INTERVENTION
IN THE WHOLESALE ELECTRICITY SPOT MARKET

WHEREAS, Republic Act No. 9136 or the “Electric Power Industry Reform of 2001” otherwise known as
“EPIRA” declares as policy of the state, among others, to protect the public interest as it is affected by the
rates and services of electric utilities and other providers of electric power;

WHEREAS, Section 37 (f) of EPIRA mandates the Department of Energy (DOE) to, among others:
a. ensure the reliability, quality, and security of supply of electric power

b. encourage private sector investments in the electricity sector and promote development of
indigenous and renewable energy sources;

c. promote a system of incentives to encourage electric power industry participants including new
generation companies and end-users to provide adequate and reliable electric supply;

d. jointly with the electric power industry participants, establish the wholesale electricity spot
market and formulate the detailed rules governing the operations thereof: and

e. exercise such other powers as may be necessary or incidental to attain the objectives of EPIRA;

WHEREAS, pursuant to Section 30 of EPIRA, the Energy Regulatory Commission (ERC) is empowered to
suspend the operation of the wholesale electricity spot market or declare a temporary wholesale

electricity spot market failure in cases of national and international security emergencies or natural
calamities;

WHEREAS, on 28 June 2002, in consultation with the electric power industry participants, the Wholesale
Electricity Spot Market Rules (WESM) was issued, adopted, and promulgated by the DOE;

WHEREAS, Chapter 6 of the WESM Rules provides the procedures to be followed by the Market
Operator, System Operator, and WESM Participants in an emergency situation, and the citcumstances
and manner by which the ERC, through the Market Operator, may intervene or suspend the spot market;

WHEREAS, Clause 6.8 of the WESM Rules only provides as conditions for ERC to declare Market
Suspension in cases of natural calamities, or following the official declaration of a national and
international security emergency by the President of the Republic;

WHEREAS, in light of recent events, the DOE saw the need to provide for an interim measure for the
Market Operator and/or System Operator's declaration of Market Intervention in order to ensure utmost

consumer protection specially in times of critical situation of the supply of electric power that triggers
high prices in the WESM;

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

Section 1. Declaration of Market Intervention. To temper unusual price spikes in the WESM and to
protect the interest of the public, the Philippine Electricity Market Corporation (PEMC), as Market
Operator, through its President has the option to declare Market Intervention in the WESM as provided
for under Chapter 6 of the WESM Rules: Provided, That the trigger for the declaration of market
intervention exists when there is a supply emergency where electricity supply capacity shortfall, is
measured at 4 percent (4%) or below the total demand: Provided further, That the 4% trigger shall continue
to be applied until the DOE determines, through the National Transmission Corporation (TransCo), the
National Grid Corporation of the Philippines (NGCP) and the Grid Management Committee (GMC), that
anew trigger is applicable.

This abovementioned provision emphasizes that this is an option, hence notwithstanding the occurrence
of the trigger, the Market Operator, may or may not exercise Market Intervention provided herein.

Section 2. Administered Price Cap. The Administered Price Cap approved by the ERC shall continue to
be used for settlements in the trading intervals where market interventions were declared, until such time
that the PEMC has recommend a new formulae for approval of the ERC.

Section 3. Responsibility of the National Transmission Corporation. The TransCo, in consultation with
NGCP and GMC, is hereby directed to conduct a study on the triggers for the declaration of Market
Intervention in the WESM taking into consideration the impact of the actual supply-demand situation on
the WESM prices.

Section 4. Responsibility of the Philippine Electricity Market Corporation. The PEMC is hereby
directed to review the applicability of the formula for the Administered Price Methodology and as
necessary, recommend changes for consideration of the DOE. PEMC is likewise directed to cause the
filing for ERC approval of the pricing methodology as may be necessary.

Section 5. Timelines and Reportorial Requirements. All entities so mandated by this Circular shall
complete their respective deliverables within 30 (days) from the effectivity of this Circular. Provided, that
a weekly report on the developments is submitted to the DOE.

Section 6. Separability Clause. If for any reason, any section or provision of this Circular is declared
unconstitutional or invalid, such parts not affected shall remain in full force and effect.

Section 7. Effectivity. This Circular shall take into effect immediately following its publication in at least
two (2) newspapers of general circulation and shall remain in effect until otherwise revoked.

Issued this _ at the Energy Center, Bonifacio Global City, Taguig City.

—

CA S JERICHO L. PETILLA

Secretary
Republic of the Philippi
A DEPARTMENT OF ENERGY

SOE-JLP-13007416
WAAL OT
DEC 97 919

os eters mand

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