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Republic of the Philippines
DEPARTMENT OF ENERGY

DEPARTMENT CIRCULAR NO. DC20!7- 04 - 00064
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ADOPTING FURTHER AMENDMENTS TO THE WESM RULES AND MARKET
MANUALS

WHEREAS, Sections 30 and 37(f) of the Electric Power Industry Reform Act (EPIRA)
provides that the DOE, jointly with the electric power industry participants, shall
establish the Wholesale Electricity Spot Market (WESM) and formulate the detailed
rules governing the operations thereof;

WHEREAS, on 28 June 2002, the DOE, with the endorsement of the electric power
industry participants, promulgated the WESM Rules through Department Circular No.
DC2002-06-003:

WHEREAS, any changes, amendments, and modifications to the WESM Rules shall
be undertaken in accordance with the provisions of Chapter 8 thereof:

WHEREAS, on 25 March 2015, the Rules Change Committee (RCC) received the
Aboitiz Power Corporation's proposed amendments to the WESM Rules and WESM
Market Manuals on the Management of Must-Run and Must-Stop Units and the
Administered Price Determination Methodology;

WHEREAS, the abovementioned proposal aimed to set a timeline for the filing of
claims to ensure transparency in the settlement process and efficient operation of
the WESM;

WHEREAS, on 08 April 2015, the Rules Change Committee (RCC) during its 99*"
RCC Meeting discussed the said proposal, which thereafter approved its publication
in the WESM website to solicit comments from market participants and other
interested parties;

WHEREAS, on 03 June 2015, the RCC during its 1015* RCC Meeting deliberated on
the proposal giving due course to the comments received from market participants;

WHEREAS, during the said deliberation, the Power Sector Assets and Liabilities
Management Corporation (PSALM) expressed its disagreement to the proposed
timeline of two (2) months within which generators may file claims for additional
compensation concerning Must-Run Units;

WHEREAS, during the 113th RCC meeting held on 27 April 2016, PSALM submitted
its counter-proposal to the RCC regarding the abovementioned timeline for claiming
additional compensation;

WHEREAS, on 07 July 2016, the RCC during its 116° RCC Meeting further
reviewed and finalized the proposal, which thereafter approved its endorsement to
the PEM Board;

Energy Center, Rizal Drive, Bonifacio Global City, Taguig City, Metro Manila, Philippines
Tels.: (Trunks) 840-1401 to 40; Fax 840-2067; 840-2236; 840-2067 (Domestic); 632-840-2173; 632-840-2236; 632-840-2067
(International)

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WHEREAS, on 10 November 2016, after due evaluation and deliberation, the PEM
Board during its 120" PEM Board Meeting approved for endorsement to the DOE
the above stated RCC proposed amendments to the WESM Rules and Market
Manuals particularly on the Management of Must-Run and Must-Stop Units and the
Administered Price Determination Methodology;

WHEREAS, on 23 November 2016, the above stated amendments to the WESM
Rules and Market Manuals were submitted to the DOE for final approval, in
compliance with Chapter 8 of the WESM Rules:

WHEREAS, the DOE reviewed the said PEM Board-approved proposal, and deems
it appropriate and consistent with the WESM Rules and the objectives of the WESM:
and

NOW THEREFORE, pursuant to its authority under the EPIRA, WESM Rules, the
DOE hereby adopts, issues, and promulgates the following amendments to the
WESM Rules and relevant Market Manuals:

Section 1. Amendments to the WESM Rules. The following provisions in the
WESM Rules are hereby amended:

Clause 3.5.13.1 under Overriding Constraints is amended to read as -

“3.5.13.1 Subject to Clause 3.5.13.3, the System Operator may require the
Market Operator to impose constraints on the power flow, 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.

XXX XXX XXX

The System Operator shall advise the Market Operator of the actions it has
taken in relation to the foregoing, including but not limited to information
necessary for the proper settlement of affected generating units, and the
Market Operator shall publish the said information no later than one (1) week
from the relevant trading day. For proper settlement of must-run units and
must-stop units, Trading Participants shall review the information and notify the
Market Operator of any discrepancies no later than two (2) weeks from the date
of publication, otherwise the information contained in the report shall be
deemed final for use in the settlement of must-run units and must-stop units.

The procedure and process for claiming additional compensation, contesting
the claims, and timeline for approval/disapproval of claims, including the
consequences thereof, among others, are determined in the relevant Market
Manuals.”

Section 2. Amendments to the WESM Market Manual on Management of Must-

Run and Must-Stop Units. The following provisions in the Management of Must-
Run and Must-Stop Units are hereby amended:

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DC4o}7 - 04-00%; Adopting Further Amendments to the WESM Rules and Market Manuals
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(a) Section 9.3.2 under Calculation of MRU Settlement Amounts is amended to read
as -

“9.3.2 Additional Compensation

A Trading Participant which has complied with dispatch instructions as MRU
may be entitled to additional compensation. Additional compensation is
allowed in cases where the Trading Participant submits sufficient proof that the
MRU settlement amount calculated in accordance with this Manual is not
sufficient to cover the following costs that are incurred in complying with the
MRU call —

Xxx XXX XXX

The affected Trading Participant will submit to the Market Operator a claim
for additional compensation with supporting documents justifying the
requested additional compensation. The claim for additional compensation
shall be filed within one (1) year from the time the affected Trading
Participant complied with dispatch instructions as MRU. Any claims not filed
within such period shall be deemed waived.

The Market Operator shall inform the requesting Trading Participant of the
approval or disapproval of the claim within fourteen (14) working days from
receipt of the complete documents from the Trading Participant. Any claim
not decided within fourteen (14) working days shall be deemed approved and
shall be allocated and billed immediately in the succeeding billing period.

A non-exhaustive list of required documents to be submitted by Trading
Participants to support the claim for additional payment as MRU is herein
provided in Appendix B.”

(6) Appendix B is incorporated in this Market Manual to read as -
“APPENDIX B.

Non-Exhaustive List of Required Documents in Filing Claims for Additional
Compensation:

1. Certified correct Fuel Consumption and Inventory Report

2. Purchase Invoices, Official Receipts and other supporting
documents

3. ERC approved rate or List of Variable Operation and Maintenance Costs
supported by photocopies of invoices/receipts”

Section 3. Amendments to the WESM Market Manual on Administered Price
Determination Methodology. Pursuant to DOE Circular No. DC2015-07-0013
entitled “Adopting Further Amendments to the WESM Rules (Procedure for Changes
to the WESM Rules and Market Manuals),” the WESM Market Manual on
Administered Price Determination Methodology presented as “Annex A” to this
Circular is hereby approved and adopted.

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DC2M-04-b0Oy Adopting Further Amendments to the WESM Rules and Market Manuals

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Section 4. Separability Clause. If for any reason, any section or provision of this
Circular is declared unconstitutional or invalid, such parts not affected shall remain
valid and subsisting.

Section 5. Effectivity. This Circular shall take effect after fifteen (15) days following
the completion of their publication either in the Official Gazette or two (2) newspapers

of general circulation in the Philippines, and shall remain in effect until otherwise
revoked.

Issued this March 2017 at the DOE, Energy Center, Rizal Drive, Bonifacio

Global City, Taguig City, Metro Manila. ‘ .
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DC2017- Uy -0@4 Adopting Further Amendments to the WESM Rules and Market Manuals