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Republic of the Philippines
DEPARTMENT OF ENERGY

DEPARTMENT CIRCULAR NO. DC 2O|8- 06- 0OIF

ADOPTING FURTHER AMENDMENTS TO THE WHOLESALE ELECTRICITY
SPOT MARKET (WESM) RULES AND MARKET MANUALS
(Transitory Provisions for the Implementation of WESM in Mindanao)

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
including its Market Manuals shall be undertaken in accordance with the provisions
of Chapter 8 thereof;

WHEREAS, on 04 May 2017, the DOE declared the launching of WESM in
Mindanao and provided transition guidelines through Department Circular No.
DC2017-05-0009;

WHEREAS, on 02 February 2018, the Philippine Electricity Market Corporation
(PEMC) presented to the Rules Change Committee (RCC), during the latter's 137%
RCC Meeting, the Proposed Amendments to the WESM Rules and WESM Manuals
regarding Transitory Provisions for the Pre-Integration of WESM Mindanao;

WHEREAS, the PEMC’s proposal aims to add transitory provisions specifying that
Luzon-Visayas and Mindanao will be treated as independent settlement regions in
the WESM until the Luzon-Visayas and Mindanao grids are physically
interconnected;

WHEREAS, on 05 March 2018, the RCC approved the publication of the said
proposal in the WESM website to solicit comments from market participants and
other interested parties;

WHEREAS, on 06 April 2018, the RCC during its 139" RCC Meeting deliberated on
the said proposal giving due course to the comments received from market
participants and the DOE, which thereafter, provisionally approved the proposal as
amended;

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 25 April 2018, the RCC finalized and approved the proposal for
endorsement to the PEM Board through RCC Resolution No. 2018-01;

WHEREAS, on 03 May 2018, after due evaluation and deliberation, the PEM Board
during its 134° PEM Board Meeting approved for endorsement to the DOE the
above stated RCC proposal;

WHEREAS, on 09 May 2018, the PEM Board-approved amendments to the WESM
Rules and its Market Manuals were submitted to the DOE for final approval, in
compliance with Chapter 8 of the WESM Rules;

WHEREAS, the DOE considers the said PEM Board-approved proposals consistent
with the objectives of the WESM and adopted the same with minor revisions;

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

Section 1. Amendments to the WESM Rules. The following provisions in the
WESM Rules promulgated by the DOE through Department Circular No. DC2016-
10-0014 for the enhancements to WESM design and operations are hereby
amended:

(a) New Clause 10.5 under Transitory Provisions is added to read as —
“10.5 PRIOR TO INTERCONNECTION OF MINDANAO

The following provisions shall be applicable until the Mindanao grid has been
interconnected with the Luzon and Visayas grids as declared by the DOE.

For this chapter, the Luzon and Visayas grids shail be considered as one
settlement region and the Mindanao grid as another settlement region.”

(b) New Clause 10.5.1 under Prior to Interconnection of Mindanao is added to
read as —

“10.5.1 Submission of Bilateral Contract Data for Energy
When submitting bilateral contract data in accordance with Clause 3.13.1, a
selling Trading Participant may only submit data for buying Trading

Participants with market trading nodes in the same settlement region.”

(c) New Clause 10.5.2 and its sub-clauses under Prior to Interconnection of
Mindanao are added to read as —

“10.5.2 Treatment of Remaining Settlement Surplus
10.5.2.1 The Market Operator shall calculate the net settlement surplus

provided under Clause 3.13.12.1 separately for each settlement region.

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10.5.2.2 The net settlement surplus of each settlement region shall be utilized
for or flowed back to the Trading Participants from each settlement region in
accordance with the approved relevant Market Manuals and regulatory
issuances.”

(d) New Clause 10.5.3 and its sub-clauses under Prior to Interconnection of
Mindanao are added to read as —

“40.5.3 Payment to Trading Participants

10.5.3.1 The Market Operator shall calculate the maximum total payment
provided under Clause 3.14.7 separately for each settlement region.

10.5.3.2 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.”

(e) New Clause 10.5.4 under Prior to Interconnection of Mindanao is amended to
read as — .

“40.5.4 Administered Price

During instances when market suspension or market intervention is declared
for the whole system, the Market Operator shall calculate administered prices
provided under Clause 6.2.3 for each settlement region separately in
accordance with the ERC-approved methodology.”

Section 2. Amendments to the WESM Market Manual on Billing and Settlement.
The following provisions in the Billing and Settlement Manual are hereby amended:

(a) Section 5.2.4 under Payment of Settlement Amount is amended to read as —

“5.2.4 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.
Prior to the interconnection of the Mindanao grid with the Luzon and Visayas
grids, total payments actually received or drawn from the prudential security
shall be determined and distributed separately for each settlement region. For
this purpose, the Luzon and Visayas grids shall be considered as one
settlement region and the Mindanao grid as another settlement region.”

(b) New Section 9.1.9 under Declaration for Energy Transactions is added to
read as —

“9.1.9 Prior to the interconnection of the Mindanao grid with the Luzon and
Visayas grids, a selling Trading Participant may only declare bilateral contract

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data for buying Trading Participants from the same settlement region. A
selling Trading Participant and a buying Trading Participant shall be deemed
to be from the same settlement region if both Trading Participants have
market trading nodes from the same settlement region. In addition, the market
trading nodes specified under Section 9.1.2(a) and 9.1.2(c) should be in the
same settlement region as the selling and buying Trading Participants. For
this purpose, the Luzon and Visayas grids shall be considered as one single
settlement region and the Mindanao grid as another settlement region.”

Section 3. Amendments to the WESM Market Manual on Price Determination
Methodology. The following provisions in the Price Determination Methodology
Manual are hereby amended:

(a) New Section 10.3 under Amendment, Publication and Effectivity is added to
read as —

“10.3 PROVISIONS PRIOR TO INTERCONNECTION OF MINDANAO

For WESM settlements to reflect the actual physical transactions in Luzon,
Visayas, and Mindanao, calculations and procedures on administered price
determination methodology and net settlement surplus as_ identified in
Appendix D shall be performed per settlement region until the interconnection
of Luzon/Visayas and Mindanao.”

(b) New Appendix D in connection with the provisions prior to interconnection of
Mindanao is added to the Market Manual on Price Determination Methodology,
and presented as Annex to this Circular.

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 15 days following its complete
publication in at least two (2) newspapers of general circulation and shall remain in
effect until otherwise revoked.

Issued this June 2018 at the DOE, Energy Center, Rizal Drive, Bonifacio Global
City, Taguig City, Metro Manila.

a /
FONSOG’ CUS!
\ Secretary

Kepunllc or ne #nulippines
DEPARTMENT OF ENERGY
IN REPLYING PLS. CITE:

HE

JUN 26 2018
om | pM | Ranuhlic nf the Philinninac
DC 201g - 06- 0017- Adopting Further Amendments To The Wholesale Electricity Spot Market (WESM) Rules And

Market Manuals (Transitory Provisions for the Implementation of WESM in Mindanao)

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ANNEX

APPENDIX

APPENDIX D — PROVISIONS PRIOR TO INTERCONNECTION OF MINDANAO

SECTION 1 SCOPE ]

1.1 For this Appendix, the Luzon-Visayas settlement region shall refer to the combined Luzon
and Visayas grids while the Mindanao settlement region shall refer to the Mindanao grid.

1.2 This appendix specifies the relevant calculations under the administered price
determination methodology under Section 7 that will be performed per settlement region
prior to the interconnection of the Mindanao grid to the Luzon and Visayas grids’.

1.3. This appendix specifies the relevant calculations used to determine and allocate the net
settlement surplus under Section 9 that will be performed per settlement region prior to the
interconnection of the Mindanao grid to the Luzon and Visayas grids?.

1.4 Other calculations provided in Section 7 or Section 9 that do not appear in this appendix
will be applied as provided in those Sections even prior to the interconnection of the
Mindanao grid to the Luzon and Visayas grids.

SECTION 2 GENERATOR ENERGY ADMINISTERED PRICE

2.1. In reference to Section 7.2.6, when a generator resource does not have fina/ nodal energy
_ dispatch prices in the preceding four (4) most recent similar trading days and similar
dispatch intervals, the energy administered price for that generator resource for a dispatch
interval shall be calculated considering the positive snapshot quantities during the same
dispatch interval of generator resources from the same settlement region (Luzon/Visayas

or Mindanao) as the subject generator resource.

SECTION 3 CUSTOMER ENERGY ADMINISTERED PRICE

J

3.1. In reference to Section 7.3.1, the energy administered price for all customer resources for
a dispatch interval shall be calculated considering the positive snapshot quantities of all
generator resources and snapshot quantities of all customer resources from the same
settlement region (Luzon/Visayas or Mindanao).

‘WESM Rules Clause 10.5.4
2 WESM Rules Clause 10.5.2

Price Determination Methodology Page 1 of 2
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ANNEX

SECTION 4 CALCULATION OF NET SETTLEMENT SURPLUS

4.1

4.2

4.3

44

Price Determination Methodology

In reference to Section 9.2.1, the net settlement surplus amount shall be calculated per
dispatch interval and settlement region (Luzon/Visayas or Mindanao) using the total
amounts to be collected and paid from the same settlement region.

In reference to Section 9.4.2, the amount to be returned to a Trading Participant for a
settlement interval shall be equal to the ratio of the Trading Participant's loss and
congestion charges to the total loss and congestion charges of all Trading Participants in
the settlement region where the subject Trading Participant is located, multiplied by the
total net settlement surplus amount for the same settlement region.

In reference to Section 9.4.2 (c), the line loss and congestion price for a dispatch interval
for each resource shall consider the lowest aggregated marginal loss cost and marginal
congestion cost within the same settlement region.

In reference to Section 9.4.3, when the noda/ energy dispatch prices of all resources in a
settlement region in a dispatch interval were not determined using the market dispatch
optimization model in accordance with WESM Rules Clause 3.6, the net settlement
surplus for that settlement region for that dispatch interval shall be allocated to customer
resources within the same settlement region on a pro-rata basis depending on each
customer resource’s share in the total gross energy settlement quantity, as determined
under WESM Rules Clause 3.13.6, of all customer resources from that settlement region.

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