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Republic of the Philippines
eS DEPARTMENT OF ENERGY
yw “a (Kagawaran ng Enerhiya)

DEPARTMENT CIRCULAR NO._ DC 202!- 03-0007 pv

ADOPTING FURTHER AMENDMENTS TO THE WHOLESALE ELECTRICITY
SPOT MARKET (WESM) RULES AND MARKET MANUAL ON THE
MANAGEMENT OF NET SETTLEMENT SURPLUS
(Harmonization with the Energy Regulatory Commission Resolution No. 07,
Series of 2019)

WHEREAS, Sections 30 and 37(f) of the Electric Power Industry Reform Act (EPIRA)
provides that the Department of Energy (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,
Retail Rules and their Market Manuals shall be undertaken in accordance with the
provisions of Chapter 8 of the WESM Rules;

WHEREAS, on 12 February 2020, the Market Operator submitted to the Rules
Change Committee (RCC) its proposed amendments to the WESM Rules and
Market Manual on the Management of Net Settlement Surplus for the
implementation of the Energy Regulatory Commission (ERC) Resolution No. 07,
Series of 2019 “A Resolution Adopting Amendments to the Rules for the Distribution
of Net Settlement Surplus (NSS)”;

WHEREAS, on 20 February 2020, the Philippine Electricity Market Corporation
(PEMC) also submitted to the RCC its proposed amendments to the WESM Rules,
particularly on NSS or net settlement deficit (NSD);

WHEREAS, both proposed amendments submitted aim to harmonize the WESM
Rules and Market Manuals with the said ERC Resolution No. 07, Series of 2019,
particularly on the transparency and effective determination of settlement surplus or
deficit in the WESM;

WHEREAS, on 21 February 2020, the RCC during the 1618* RCC Meeting discussed
the abovementioned proposal, and thereafter approved the posting of the proposed
amendments in the PEMC’s information website to solicit comments from the market
participants and other interested parties;

WHEREAS, on 24 April 2020, the RCC during its 164° RCC Meeting deliberated on
the proposal giving due course to the comments received from the stakeholders;

Energy Center, Rizal Drive cor. 34th Street, Bonifacio Global City, Taguig City, Philippines 1632
Tel. No. (Trunkline} (632) 479-2900;
Website: http:/Avww.doe.gov.ph; E-mail: info@doe. gov.ph

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WHEREAS, on 15 May 2020, the RCC during its 165"" RCC Meeting finalized and
approved the proposed amendments for endorsement to the PEM Board;

WHEREAS, on 27 May 2020, after due evaluation and deliberation, the PEM Board
during its 24'" Regular PEM Board Meeting, approved for endorsement to the DOE
the above stated RCC-approved proposal;

WHEREAS, on 08 June 2020, the PEM Board-approved amendments to the WESM
Rules and Market Manual on Management of Net Settlement Surplus were
submitted to the DOE for fina! approval, in compliance with Chapter 8 of the WESM
Rules;

WHEREAS, on 31 July 2020, the DOE posted the draft Department Circular
adopting the proposed amendments in the DOE website to solicit comments from the
market participants and other interested parties;

WHEREAS, on 27 and 29 October 2020, the DOE conducted public consultations on
the abovementioned proposed amendments to solicit inputs and consider comments
of stakeholders in the finalization of the same;

NOW THEREFORE, after careful review of the PEM Board-approved proposal and
the comments and recommendations received on the same, the DOE, pursuant to its
authority under the EPIRA, hereby adopts, issues, and promulgates the following
amendments to the WESM Rules and Market Manual on the Management of Net
Settlement Surplus:

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

a. Clause 3.13.16.1 (Treatment of Remaining Settlement Surplus) under
Settlement Quantities and Amounts is amended to read as —

*3.13.16.1 If the transactions required by Clauses 3.13.14.2 (a), (b) and (d), in
aggregate, result in a surplus or deficit remaining, this will be known as the
net settlement surplus or net settlement deficit.”

b. Clause 3.13.16.2 (Treatment of Remaining Settlement Surplus) under
Settlement Quantities and Amounts is amended to read as —

“3.13.16.2 The net settlement surplus or net settlement deficit:

(a) may be flowed back to the WESM Participants in accordance with the
procedures to be developed under Clause 3.13.16.3, or may be used
by the Market Operator to establish and support the market for financial
transmission rights subject to the approval of the PEM Board; and

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DC — ADOPTING FURTHER AMENDMENTS TO THE WHOLESALE ELECTRICITY SPOT
MARKET (WESM) RULES AND MARKET MANUAL ON THE MANAGEMENT OF NET SETTLEMENT
SURPLUS (Harmonization with the Energy Regulatory Commission Resolution No. 07, Series of 2019)
=== dc2021-03-0007-pages-03.ppm ===
(b) shall be clearly accounted for and taken into account when setting the
allowable charges under any regulatory instruments applying to the
Market Operator and the System Operator.”

c. New Clause 3.13.16.4 (Treatment of Remaining Settlement Surplus) under
Settlement Quantities and Amounts is added to read as —

“3.13.16.4 The calculation and flow back mechanism of net settlement surplus
or net settlement deficit shall be in accordance with the ERC’s issuances as
prescribed in its Rules for the Distribution of Net Settlement Surplus.”

d. New Clause 3.13.16.5 (Treatment of Remaining Settlement Surplus) under
Settlement Quantities and Amounts is added to read as —

“3.13.16.5 The ERC may issue changes to the flow back of the net settlement
surplus or net settlement deficit to the WESM Participants. Such changes
shall be reflected in the procedures referred to in Clause 3.13.16.3 by the
Market Operator in accordance with the rules change process in Chapter 8.”

e. The definition of the term “Net Settlement Surplus” under the Glossary is
amended to read as —

“Net Settlement Surplus or Net Settlement Deficit. The settlement surplus or
settlement deficit remaining after all market transactions have been accounted
for, including the assignment of transmission line rentals to Network Service
Providers. This remainder is assumed to be attributable to economic rentals
arising from other binding constraints, and accounted for in accordance with
Clause 3.13.16.”

Section 2. Amendments to the WESM Rules for the Implementation of
Enhancement to WESM Design and Operations. The following provisions in the
WESM Rules for the Enhanced WESM Design and Operations are hereby amended:

a. Clause 3.13.12.1 (Treatment of Remaining Settlement Surplus) under
Settlement Quantities and Amounts is amended to read as —

“3.13.12.1 If the transactions required by Clauses 3.13.12.2 (a), (b) and (d), in
aggregate, result in a surplus or deficit remaining, this will be known as the
net settlement surplus or net settlement deficit.”

b. Clause 3.13.12.2 (Treatment of Remaining Settlement Surpius) under
Settlement Quantities and Amounts is amended to read as —

“3.13.12.2 The net settlement surplus or net settlement deficit:

(a) may be flowed back to the WESM Participants in accordance with the
procedures to be developed under Clause 3.13.12.3, or may be used
by the Market Operator to establish and support the market for financial
transmission rights subject to the approval of the PEM Board, and

3/14
DC — ADOPTING FURTHER AMENDMENTS TO THE WHOLESALE ELECTRICITY SPOT
MARKET (WESM) RULES AND MARKET MANUAL ON THE MANAGEMENT OF NET SETTLEMENT
SURPLUS (Harmonization with the Energy Regulatory Commission Resolution No. 07, Series of 2019)

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(b) shall be clearly accounted for and taken into account when setting the
allowable charges under any regulatory instruments applying to the
Market Operator.”

c. New Clause 3.13.12.4 (Treatment of Remaining Settlement Surplus) under
Settlement Quantities and Amounts is added to read as —

“3.13.12.4 The calculation and flow back mechanism of net settlement surplus
or net settlement deficit shall be in accordance with the ERC’s issuances as
prescribed in its Rules for the Distribution of Net Settlement Surplus.”

d. New Clause 3.13.12.5 (Treatment of Remaining Settlement Surplus) under
Settlement Quantities and Amounts is added to read as —

“3.13.12.5 The ERC may issue changes to the flow back of the net settlement
surplus or net settlement deficit to the WESM Participants. Such changes
shall be reflected in the procedures referred to in Clause 3.13.16.3 by the
Market Operator in accordance with the rules change process in Chapter 8.”

Section 3. Amendments to the WESM Market Manual on the Management of
Net Settlement Surplus. The following provisions in the Market Manual on the
Management of Net Settlement Surplus, issue No. 3.0, are hereby amended:

a. Section 2.2 (References) under Definitions, References and Interpretation is
amended to read as —

“2.2 This document should be read together with the —
XXX XXX XXX

(e) Energy Regulatory Commission Resolution No, 7, Series of 2019, A
Resolution Adopting Amendments to the Rules for the Distribution of
Net Settlement Surplus (NSS).”

b. Section 3.1.1 (Market Operator) under Responsibilities is amended to read as

“3.1.1 In accordance with WESM Rules Clause 3.13.16.3, the Market
Operator shall:

XXX XXX XXX

c. New Section 3.1.2 (Market Operator) under Responsibilities is added to read
as —

“3.4.2 In accordance with ERC Resolution No. 07, Series of 2019, the Market
Operator shall:

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DC — ADOPTING FURTHER AMENDMENTS TO THE WHOLESALE ELECTRICITY SPOT
MARKET (WESM) RULES AND MARKET MANUAL ON THE MANAGEMENT OF NET SETTLEMENT
SURPLUS (Harmonization with fhe Energy Regulatory Commission Resolution No. 07, Series of 2019)

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DC

(a) Ensure the accurate implementation of the said ERC Resolution
including the corresponding Net Settlement Surplus (NSS) or Net
Settlement Deficit (NSD) re-distribution pursuant to Articles Il!, IV, V
and VI of the Resolution; and

(b) Hold liable for any erroneous implementation of the formula as
contained in the said ERC Resolution.”

d. Section 4.2 (Ownership of Net Settlement Surplus) and its Subsections under

Net Settlement Surplus Allocation are amended to read as —
“4.2 RE-DISTRIBUTION OF NET SETTLEMENT SURPLUS/DEFICIT

4.2.1 WESM Participants that paid for the surplus line loss and congestion
payments shall receive a share in the NSS. Pursuant to Article IV Section 1
of ERC Resolution No. 7 Series of 2019, the NSS or NSD shail be billed to
Direct WESM Members including, but not limited to, the following entities:

(a) Distribution Utilities (DUs);

(b) Retail Electricity Suppliers (RES), including Local RES and the
Supplier of Last Resort (SoLR), and other electricity suppliers;

(c) Generation Companies;

(d) Independent Power Producer (IPP) Administrators; and

(e) Other parties registered as Direct WESM Members.

4.2.2 The total of the hourly NSS and/or NSD allocation for every billing period
shall be reflected immediately as a deduction to or an adjustment to the total
settlement amount of the Direct WESM Member, whether for its own WESM
transactions or on behalf of its Indirect WESM Member. This shall be
correspondingly re-distributed to the end-users at the retail level as part of the
monthly generation rate pursuant to their corresponding power supply
agreements approved by the ERC.

4.2.3 NSS or NSD allocation corresponding to adjustments for transactions
prior to the switching of an /ndirect WESM Member to another Direct Member
shall be billed to the current Direct WESM Member.

4.2.4 Any NSS or NSD allocation billed to the RES shall be subject to re-
distribution to its Contestable Customers pursuant to their Retail Supply
Contract.”

. Section 5.1 (Calculation of Net Settlement Surplus) and its Subsections under

Methodology and Procedure are amended to read as —

“5.1 CALCULATION OF NET SETTLEMENT SURPLUS AND NET
SETTLEMENT DEFICIT

5.1.1 The adoption of locational marginal pricing for the WESM under different
market trading nodes accounts for congestion and losses in the transmission
system. As a result, the price differences occur between generator nodes and

5/14
~— ADOPTING FURTHER AMENDMENTS TO THE WHOLESALE ELECTRICITY SPOT

MARKET (WESM) RULES AND MARKET MANUAL ON THE MANAGEMENT OF NET SETTLEMENT
SURPLUS (Harmonization with the Energy Regulatory Commission Resolution No. 07, Series of 2019)
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customer nodes due to the losses and congestion. The aggregate WESM
settlement amount may result to:

(a) Net Settlement Surplus which is also known as NSS; or

(b) Net Settlement Deficit which is also known as NSD.

5.1.2 The NSS or NSD amount shall be calculated based on the total frading
amount for every trading interval.

5.1.3 The NSS occurs when the total collectibles exceed the total payables.
5.1.4 The NSD occurs when the total payables exceed the total collectibles.

5.1.5 Pursuant to Article Ill] Section 1 of ERC Resolution No. 07 Series of
2019, the total NSS or NSD (NSStota or NSDtotal) shall be determined by
getting the difference of the total collectibles (TAcottectiies) and the total
payables (TApayabies):

NSStotati or NSDtotai,i = TAcottectibles,i- TApayabies,i
Where:

NSStotai or NSDtotai,i = Total Net Settlement Surplus or Net Settlement
Deficit, in PhP, for trading interval i

TAcollectibles = Total frading amount, in PhP, to be collected by the
Market Operator from the Trading Participants for trading interval i

TApayables = Total trading amount, in PhP, to be paid by the Market
Operator to the Trading Participants for trading interval i

i= trading interval’

f. Section 5.2 (Net Settlement Deficit) and its Subsections under Methodology
and Procedure are amended to read as —

“5.2 DERIVATION OF NET SETTLEMENT SURPLUS AND NET
SETTLEMENT DEFICIT

5.2.1 Pursuant to Article II! Section 2 of ERC Resolution No. 07 Series of
2019, allocation of the NSS or NSD shall be based on the cause of the
surplus (e.g., surplus transmission loss payment, surplus congestion
payment, among others). As such, the NSS or NSD calculation is
disaggregated into NSS or NSD due to losses (NSSioss or NSDtoss) and the
NSS or NSD due to congestion (NSScongestion or NSDcongestion), which are
allocated separately. The following formula illustrates the components of the
disaggregated NSS or NSD:

NS Stotaip,i of NSD Fotaip,i = NSS tossi OF NSDtoss,i + NSScongestion,i OF NSDcongestion,i

6/14
BC — ADOPTING FURTHER AMENDMENTS TO THE WHOLESALE ELECTRICITY SPOT
MARKET (WESM) RULES AND MARKET MANUAL ON THE MANAGEMENT OF NET SETTLEMENT
SURPLUS (Harmonization with the Energy Regulatory Commission Resolution No. 07, Series of 2019)

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Where:

NSSrotaip,i or NSDrotaipi = Sum of disaggregated Net Settlement
Surplus or Net Settlement Deficit due to transmission loss and
congestion, in PhP, for trading interval i

NSStoss,i Of NSDiossi = Net Settlement Surplus or Net Settlement
Deficit due to transmission loss payments, in PhP, for trading interval i

NSScongestioni OF NSDcongestioni = Net Settlement Surplus or Net
Settlement Deficit due to congestion payments, in PhP, for trading
interval i

i = trading interval

5.2.2 In order to determine NSSioss or NSDtoss and NSScongestion OF
NSDceongestion, the trading amounts shall also be disaggregated among its
components. Based on the components of the locational marginal prices
(LMP), the frading amounts collected and paid by the Market Operator for
each trading participant shall be disaggregated as follows:

TApayabie,p,i OF TAconectibie,P,i = TAtnergy.p.i + TAtoss,p.,i + TAcongestion,P.i
Where:

TApayabie,P.i OF TAcotectibie,P,i = Trading amount of Trading Participant P, in
PhP, for trading interval i

TAgneny,P,i = Trading amount for energy of Trading Participant P, in
PhP, for trading interval t

TAtoss,P.i = Trading amount for transmission loss of Trading Participant
P, in PhP, for trading interval i

TAcongestion,P,i = Trading amount for congestion of Trading Participant
P, in PhP, for trading interval i

5.2.3 The NSS or NSD due to line loss payment (NSS toss or NSDtoss) shall be
determined as the difference of the collectibles and the payables for energy
and transmission loss as shown be the equation below:

NSSioss,i OF NSDtoss,i = Scpece (TA Energy,cp.i + TA Loss,cp,i) - Dppepe (TA Energy.pp,i +TA
Loss,pp,i)

Where:

NSStossi Or NSDtossi = Net Settlement Surplus or Net Settlement
Deficit due to transmission loss payments, in PhP, for trading interval i

7/14
DC — ADOPTING FURTHER AMENDMENTS TO THE WHOLESALE ELECTRICITY SPOT
MARKET (WESM) RULES AND MARKET MANUAL ON THE MANAGEMENT OF NET SETTLEMENT
SURPLUS (Harmonization with the Energy Regulatory Commission Resolution No. 07, Series of 2019)

=== dc2021-03-0007-pages-08.ppm ===
TAgnergy = Total trading amount of a Trading participant for energy, in
PhP, for trading interval i

TAtoss = Total trading amount of a Trading Participant for transmission
loss, in PhP, for trading interval i

CP = Set of Trading Participants with collectible trading amounts
cp = Trading Participant with collectible trading amount
PP = Set of Trading Participants with payable trading amounts
pp = Trading Participant with payable trading amount
i = trading interval
5.2.4 The NSS or NSD due to congestion (NSScongestion of NSDcongestion) shail

be calculated as the difference of the collectibles and the payables for
congestion as shown below:

NSScongestion,i or NSDcongestion,i = > cpeCP TA Congestion,cp,i ~ > cpePP TA Congestion, pp,i
Where:
NSScongestioni OF NSDcongestioni = Net Settlement Surplus or Net
Settlement Deficit due to congestion payments, in PhP, for trading

interval i

TAcongestion = Total trading amount of a Trading Participant for
congestion, in PhP, for trading interval i

CP = Set of Trading Participants with collectible trading amounts
cp = Trading Participant with collectible trading amount

PP = Set of Trading Participants with payable trading amounts
pp = Trading Participant with payable trading amount

i = trading interval

5.2.5 During trading intervals when there is no computed transmission loss
and congestion, the NSS or NSD shall be computed as follows:

NSSwortcei or NSD noticr,i = TAcotectabies,i + TApayabtes,i

Where:

8/14
DC ~ ADOPTING FURTHER AMENDMENTS TO THE WHOLESALE ELECTRICITY SPOT
MARKET (WESM) RULES AND MARKET MANUAL ON THE MANAGEMENT OF NET SETTLEMENT
SURPLUS (Harmonization with the Energy Regulatory Commission Resolution No. 07, Series of 2019)

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NSSwortce; Of NSD noticpi = Total Net Settlement Surplus or Net
Settlement Deficit when there is no calculated transmission loss and
congestion payments, in PhP, for trading interval i

TAcolectabies,i = TOtal trading amount, in PhP, to be collected by the
Market Operator from the Trading Participants for trading interval i

TApayabies,i = Total trading amount, in PhP, to be paid by the Market
Operator to the Trading Participants for trading interval i

i = trading interval’

g. Section 5.3 (Flow Back to the Participants) and its Subsections under
Methodology and Procedure are amended to read as —

“5.3 DETERMINATION OF NET SETTLEMENT SURPLUS ALLOCATION

5.3.1 The Market Operator shall allocate the NSS to the Trading Participants
that paid for the surplus loss and congestion charges. The allocation shall be
determined based on each recipient's contribution to the total NSStoss and
NSScongestion.

5.3.2 The allocation of NSSzoss shall be calculated as follows:

LL + ZL
NSS oss,p,i = —-SP26P4 "ERPs x NSSjos5.i
ELL Spotat ELLRa

Where:

NSStoss,P,i = NSS allocation due to line loss payments, in PhP, of
Trading Participant P for trading interval /

LLspotp.i = Surplus line loss payment for spot transaction, in PhP, of
Trading Participant P for trading interval /

LLirp, = Surplus line loss payment for line rental, in PhP, of Trading
Participant P for trading interval /

NSStoss,i = Net Settlement Surplus due to line loss payments, in PhP,
for trading interval i

i= trading interval

5.3.3 The allocation of NSScongestion shall be calculated as follows:

CCspot.pit COLR Pi

NSScongestion,P.i =
g _ ECCspot.it CCLR i

xX NSS congestiorn.i

Where:

9/14
DC ~ ADOPTING FURTHER AMENDMENTS TO THE WHOLESALE ELECTRICITY SPOT
MARKET (WESM) RULES AND MARKET MANUAL ON THE MANAGEMENT OF NET SETTLEMENT
SURPLUS (Harmonization with the Energy Regulatory Commission Resolution No. 07, Series of 2019)

=== dc2021-03-0007-pages-10.ppm ===
NSScongestion,e.i = NSS allocation due to congestion charge payments, in
PhP, of Trading Participant P for trading interval i

CCspot.p,i = Surplus congestion charge payment for spot transaction, in
PhP, of Trading Participant P for trading interval i

CC ir pi = Congestion charge payment for line rental, in PhP, of Trading
Participant P for trading interval!

NSScongestioni = Net Settlement Surplus due to congestion paymenis, in
PhP, for trading interval f

i = trading interval

5.3.4 In trading intervals when there are no calculated transmission loss and
congestion payments, the NSS shall be allocated to all Trading Participants
with withdrawal from the grid. The allocation shall be proportionate to the
actual withdrawal from the grid of the Trading Participant relative to the total
actual withdrawals during the trading interval as shown by the equation below:

—_ M VithdranratPa
NSSwottcpp,i = <—aseerertPi_ __ NSSyorice.i

zy, “ er MO, tadraedl we
Where:

NSSwnorce.ei= NSS allocation when there is no calculated transmission
loss and congestion payments, in PhP, of Trading Participant P for
trading interval i

MQwitncrawai,P,| = Actual withdrawal from the grid, in MWh, of Trading
Participant P for trading interval i

NSSworice; = Net Settlement Surplus when there is no calculated

transmission loss and congestion payments, in PhP, for trading interval
f

ww = Trading Participant with actual withdrawal from the grid

WW = Set of all Trading Participants with actual withdrawal from the
grid
i = trading interval’

h. Section 5.4 (Limitation of Flow Back Mechanism) and its Subsections under
Methodology and Procedure are amended to read as —

“5.4 DETERMINATION OF NET SETTLEMENT DEFICIT ALLOCATION

10/14
DC — ADOPTING FURTHER AMENDMENTS TO THE WHOLESALE ELECTRICITY SPOT
MARKET (WESM) RULES AND MARKET MANUAL ON THE MANAGEMENT OF NET SETTLEMENT
SURPLUS (Harmonization with the Energy Regulatory Commission Resolution No. 07, Series of 2019)

=== dc2021-03-0007-pages-11.ppm ===
5.4.1 The Market Operator shall allocate the NSD to Customers who caused
the deficit. The allocation shall be determined based on each recipient's
contribution to the total NSDzoss and NSD congestion.

5.4.2 The allocation of NSDzoss shall be calculated as follows:

LL + LULR Pi
NSDtoss,p,i= —S22tPt ARPA NSDy oes i
ZLLspotat Lbiri .

Where:

NSDtoss,P,i = NSD allocation due to line loss payments, in PhP, of
Trading Participant P for trading interval /

Ltspot,P,i = Surplus line loss payment for spot transaction, in PhP, of
Trading Participant P for trading interval /

LLtir.p.i = Surplus line loss payment for line rental, in PhP, of Trading
Participant P for trading interval /

NSDtoss,i = Net Settlement Deficit due to line loss payments, in PhP, for
trading interval i

i = trading interval
5.4.3 The allocation of NSDcongestion shall be calculated as follows:

NSDcongestion,P,i =
ZOCSpotit CCLR:

x NSDeongestion.i

Where:

NSDcongestion,P.i = NSD allocation due to congestion charge, in PhP, of
Trading Participant P for trading interval /

CCspotp,i = Surplus congestion charge payment for spot transaction, in
PhP, of Trading Participant P for trading interval /

CC.rp,i = Congestion charge payment for line rental, in PhP, of Trading
Participant resource P for trading interval i

NSDcongestion,i = Net Settlement Deficit due to congestion payments, in
PhP, for trading interval i

i = trading interval

5.4.4 In trading intervals when there are no calculated transmission loss and
congestion payments (e.g. administered pricing, price substitution
methodology and secondary price cap, among others) the NSD shall be
allocated to all Trading Participants with actual withdrawal from the grid. The

11/14
DC — ADOPTING FURTHER AMENDMENTS TO THE WHOLESALE ELECTRICITY SPOT
MARKET (WESM) RULES AND MARKET MANUAL ON THE MANAGEMENT OF NET SETTLEMENT
SURPLUS (Harmonization with the Energy Regulatory Commission Resolution No. 07, Series of 2019)

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DC

allocation shall be proportionate to the actual withdrawal from the grid of the
Trading Participant relative to the total actual withdrawals during the interval
as shown by the equation below:

My aware
NSDwnoticr.p,i = a sen X NSDwyorice.i

wee MQ eh draweng aoe

Where:

NSDnortce.pi= NSD allocation when there is no calculated transmission
loss and congestion payments, in PhP, of Trading Participant P for
trading interval /

MQwithcrewai,p,1 =_Actual withdrawal from the grid, in MWh, of Trading
Participant P for trading interval /

NSDwnoticei = Net Settlement Deficit when there is no calculated
transmission loss and congestion payments, in PhP, for trading interval
i

ww = Trading Participant with actual withdrawal from the grid

WW = Set of all Trading Participants with actual withdrawal from the
grid

i = trading intervaP?

Original Section 5.4 (Limitation of Flow Back Mechanism) under Methodology
and Procedure is renumbered to read as —

“5.5 LIMITATION OF FLOW BACK MECHANISM

”

XXX XXX XXX

Original Section 5.5 (Schedule of Payments to the Participants) under
Methodology and Procedure is renumbered to read as —

“5.6 SCHEDULE OF PAYMENTS TO THE PARTICIPANTS

”

XXX XXX XXX

. Original Section 6.0 (Net Settlement Surplus Retention) and Section 7.0

(Fund Management and Taxation) and their Subsections are hereby deleted.

Original Section 8.0 (Reportorial Requirements) and its Subsections are
renumbered and amended to read as -

“6.0 REPORTORIAL REQUIREMENTS

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~ ADOPTING FURTHER AMENDMENTS TO THE WHOLESALE ELECTRICITY SPOT

MARKET (WESM) RULES AND MARKET MANUAL ON THE MANAGEMENT OF NET SETTLEMENT
SURPLUS (Harmonization with the Energy Regulatory Commission Resolution No. 07, Series of 2019)
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6.1.1. The Market Operator shall prepare the following — reportorial
requirements:

(a) Monthly summary reports on the amount of NSS or NSD distributed to
each Trading Participant which shall include the breakdown of the
computation of line loss and congestion per Trading Participant and
other pertinent details to support the calculations. This report shall be
made available to all WESM Participants and shall be published in the
market information website. A verified copy of the report shalt likewise
be submitted to the ERC on a monthly basis including contributors to
and reasons for the surplus or deficit, no later than ninety (90) business
days from the last day of the billing period covered by the monthly
summary report. The corresponding Value Added Tax (VAT) and
interest amounts, as well as the date when the interests were earned
or credited to the market operator, if any, shall similarly be included in
the subject monthly summary report;

(b) The pertinent data covered by the subject monthly summary report
shall also be submitted in MS Excel format; and

(c) The annual report on the NSS or NSD calculation and allocation shail
be submitted no later than the 30 day of May immediately following
the year in review, comparing the subject year and the preceding
year’s NSS levels and allocations, and analysis of the factors and
constraints giving rise to any NSS or NSD. This report shall! also be
submitted to the market participants and to the PEM Board.

6.1.2 The Market Operator shall comply with Clause 5.2.6 of the WESM Rules
which requires, among others, the conduct of a spot market audit covering
such items as enumerated under Clauses 5.2.6.1 to 5.2.6.4 of the WESM
Rules. The audit shall also include the actual calculation of NSS or NSD, its
breakdown into NSS or NSD due to loss and congestion, and its allocation,
corresponding VAT and interest amounts, as well as the actual billing and
collection.

Such audit shall be conducted by a qualified third party auditor, and a
quarterly report resulting therefrom shail be submitted to the ERC no later
than ninety (90) business days after the billing period in review.”

m. New Section 7.0 (Interest) and its Subsections are added to read as —
“7.0 INTERESTS

7.1 Should the Market Operator be unable to return the amount of the NSS
due to be flowed back to appropriate WESM Participants under the ERC
Resolution No. 07 Series of 2019 during the period specified, the retained
amount shall be imposed an interest at the rate of the prevailing 91-day
Treasury Bill rate as published by the Bangko Sentral ng Pilipinas (BSP) plus
300 basis points, the return of which shall be in accordance with Article 4 of
ERC Resolution No. 07 Series of 2019. Such interest shall not be passed on
to the market participants.

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SURPLUS (Harmonization with the Energy Regulatory Commission Resolution No. 07, Series of 2019)

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7.2 The DUs and RES, which are recipients of NSS but have not complied
with the re-distribution process under the ERC Resolution No. 07 Series of
2019 during the period specified shall be subject to the interest at the rate of
the prevailing 91-day Treasury Bill rate as published by the BSP plus 300
basis points, the return of which shall be in accordance with Article 4 of ERC
Resolution No. 07 Series of 2019. The subject interest shall be on account of
DUs and RES and shall not be passed on to their respective customers.”

n. New Section 8.0 (Penalties) and its Subsections are added to read as —
“8.0 PENALTIES

8.1 A penalty ranging from One Hundred Thousand Pesos (PhP100,000.00)
to a maximum of Fifty Million Pesos (PhP50,000,000.00) shall be imposed on
the following acts:

(a) Failure to correctly implement NSS Rules, as amended, including the
NSS or NSD formula;

(b) Failure to submit documentary requirements as required under the
ERC Resolution No. 07 Series of 2019;

(c) Failure to conduct audits of the market operations and the settlement
systems and the other procedures, persons, systems or other matters
relevant to the spot market as required under Section 1.5.2 of the
WESM Rules and Section, Article VIl of ERC Resolution No. 07 Series
of 2019.

(d) Non-submission or failure to submit on a timely basis, the required
reports as provided in Article VII of ERC Resolution No. 07 Series of
2019;

(e) Failure to act on and resolve adverse findings of NSS audit within
ninety (90) days upon receipt by the ERC of the subject Quarterly Audit
Report;

(f) Submission of inaccurate NSS and other related data;

(g) Unauthorized disclosure of NSS data; and

(h) Failure to comply with the directives of the ERC pertinent to the
implementation of the ERC Resolution No. 07 Series of 2019.

8.2 The penalties stated in the preceding section shall be without prejudice to
any civil, administrative, and criminal action that may be filed against the
violation/s of the ERC Resolution No. 07 Series of 2019.”

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 fifteen (15) days following its
complete publication in at least two (2) newspapers of general circulation and shall
remain in effect until otherwise revoked. Copies thereof shail be filed with the

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DC —- ADOPTING FURTHER AMENDMENTS TO THE WHOLESALE ELECTRICITY SPOT
MARKET (WESM) RULES AND MARKET MANUAL ON THE MANAGEMENT OF NET SETTLEMENT
SURPLUS (Harmonization with the Energy Regulatory Commission Resolution No. 07, Series of 2019)

=== dc2021-03-0007-pages-15.ppm ===
University of the Philippines Law Center — Office of National Administrative Register
(UPLC-ONAR).

Issued this 2021 at the DOE, Energy Center, Rizal Drive, Bonifacio
Globa! City, Taguig City, Metro Manila.

O S4@’cUSI

ecretary
onset ine
DOE-AGC.-24 oot 171
URI A A HU

MAR 16 2021

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DC — ADOPTING FURTHER AMENDMENTS TO THE WHOLESALE ELECTRICITY SPOT
MARKET (WESM) RULES AND MARKET MANUAL ON THE MANAGEMENT OF NET SETTLEMENT
SURPLUS (Harmonization with the Energy Regulatory Commission Resolution No. 07, Series of 2019)