=== dc2021-08-0025-pages-01.ppm === Republic the Philippines ee DEPARTMENT OF ENERGY DEPARTMENT CIRCULAR NO.__DC202|- 08-0025 PROVIDING POLICIES FOR THE ADOPTION OF THE WHOLESALE ELECTRICITY SPOT MARKET (WESM) PENALTY MANUAL FOR THE IMPLEMENTATION OF ENHANCEMENTS TO WESM DESIGN AND OPERATIONS 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, WESM Rules, as amended, mandates the Market Surveillance Committee (MSC) to design and regularly review penalty levels and appropriate ranges of penalties for breach of the WESM Rules; WHEREAS, on 20 March 2017, the Enforcement and Compliance Office (ECO) submitted to the MSC its recommendations for the amendment of the WESM Financial Penalty Manual: WHEREAS, on 24 May 2017 and 13 July 2017, the MSC and ECO discussed the proposed WESM Penalty Manual, which shall be in lieu of the WESM Financial Penalty Manual; WHEREAS, the proposed WESM Penalty Manual aims to: (a) Enhance the process in determining applicable penalties by specifying the categories or types of breaches and the corresponding applicable penalty levels; (b) Establish penalty levels that take into consideration the nature of the breach and that are commensurate to the probable impact of the breach on the operations of the market; (c) Consolidate in a single document and harmonize all applicable guidelines for determining penalties to avoid confusion; and (d) Establish the procedures and respective obligations of responsible persons or entities with regard to the issuance of notice of penalty, remedies available to the WESM Members in case there is a finding of breach, and utilization of penalties collected; WHEREAS, on 19 May 2017, the MSC reviewed the proposed WESM Penalty Manual and conducted consultation to solicit comments and recommendations from stakeholders and interested parties; | - Tel. No.: 840-2267 * Trunkline: 479-2900 7 Se Website: www.doe.gov.ph * E-mail: info@doe.gov.ph * A === dc2021-08-0025-pages-02.ppm === a a WHEREAS, the MSC presented and discussed the proposal to the Philippine Electricity Market Corporation (PEMC) Transition Committee on 14 August 2017, 14 February 2018 and 17 May 2018, respectively; WHEREAS, the MSC published the proposal in the WESM website on 22 May 2018 for comments of stakeholders and interested parties; WHEREAS, the MSC presented and discussed the proposal to the Board Review Committee on 22 May 2018; WHEREAS, the MSC presented and discussed the proposal to the PEM Board on 30 May 2018: WHEREAS, the MSC presented and discussed the proposal to the Rules Change Committee on 01 June 2018; WHEREAS, the ECO presented and discussed the proposal to the PIPPA, upon request, on 05 July 2018; WHEREAS, the ECO and Market Assessment Group presented and discussed the proposal to the DOE on 30 July 2018; WHEREAS, on 01 August 2018, the MSC reviewed and deliberated on the proposal giving due course to the comments and recommendations received from the stakeholders and the DOE; WHEREAS, on 10 September 2018, the MSC finalized the proposed WESM Penalty Manual, and thereafter approved for endorsement to the DOE; WHEREAS, on 11 September 2018, the MSC-approved proposed WESM Penalty Manual was submitted to the DOE for final approval; WHEREAS, on 15, 17 and 24 January 2019, the DOE conducted various public consultations on the said proposed WESM Penalty Manual to ensure transparency and consistency with the objectives of the EPIRA and the WESM; WHEREAS, on 14 March 2019, the DOE reverted the said proposal to the PEMC to seek their appropriate response, considering the comments received from the stakeholders; WHEREAS, on 07 June 2019, the MSC, after due deliberation of the comments of the stakeholders, sent a letter to the DOE formally submitting their respective response; WHEREAS, on 27 August 2019, with respect to the comments of the stakeholders and the response of the MSC, the DOE conducted another public consultation on the revised version of the WESM Penalty Manual to ensure transparency and consistency with the objectives of the EPIRA and the WESM; DC — Providing Policies for the Adoption of the Wholesale Electricity Spot Market (WVESM} Penalty Manual for the Implementation of Enhancements to WESM Design and Operations === dc2021-08-0025-pages-03.ppm === WHEREAS, on 09 October 2019, the MSC sent a letter to the DOE, providing further comments and recommendations to the proposed WESM Penaity Manual; WHEREAS, the DOE reviewed the said MSC-approved proposal and the comments and recommendations from the public consultation and MSC recommendations, made further revisions on the proposed amendments for consistency with the objectives of the WESM such as transparency and efficiency; NOW THEREFORE, pursuant to its authority under the EPIRA and the WESM Rules, the DOE hereby adopts, issues, and promulgates the following: Section 1. WESM Penalty Manual Issue No. 1.0. The WESM Penaity Manual Issue No. 1.0 (referred to as WPM) hereto attached as Annex Ais hereby adopted to govern the penalty system to be applied in cases of breach of the WESM Rules and the Retail Rules and their implementing Market Manuals. This Market Manual also provides for the procedures for imposition of penalties and the responsibilities of concerned persons or entities. Section 2. Applicability and Transition. The WPM shali be applied upon the commercial operations of the Enhanced WESM design particularly the implementation of five (5) minute dispatch interval and its associated changes to the WESM operations. Until such time, the WESM Financial Penalty Manual adopted by the Market Surveillance Committee shall continue to be in effect. Section 3. Separability. 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 4. Effectivity. This Circular shall take effect immediately following its complete publication in at least two (2) newspapers of general circulation and shall remain in effect until otherwise revoked. Copies thereof shall be filed with the University of the Philippines Law Center — Office of National Administrative Register (UPLC-ONAR). Issued this 2021 at the DOE, Energy Center, Rizal Drive, Bonifacio Global City, Taguig City, Metro Manila. FONSOG. A ecretary G Republic of the Podippines a DEPARTMENT OF ENERGY s a 1W REPLYING PLS, CITE: DOE-AGC-21004595 UT JUL Su 2021 ele — Providing Policies for the Adoption of the Wholesale Etectricity Spot Market (WESM) Penalty Manual for the Implementation of Enhancements to WESM Design and Operations yo Ss, a fo 3/3 === dc2021-08-0025-pages-04.ppm === } Wholesale Electricity Spot Market Penalty Manual WESM-PM-1.0 PUBLIC » WESM Market Manual Penalty Manual Issue No. 1.0 This Manual sets out the penaity system that is applied in cases of breach of the WESM Rules and the Retail Rules and their implementing Market Manuais. This Abstra bstract Manual also provides for the procedures for imposition of penalties and the responsibilities of concerned persons or entities. Document Identity: WESM-PM Issue No.: Issue No. 1 Reason for Issue: Revision Approval Date: Publication Date: Effective Date: === dc2021-08-0025-pages-05.ppm === Wholesale Electricity Spot Market Penalty Manual WESM-PM-Issue No. 1.0 Effective Date: DOCUMENT CHANGE HISTORY Date of | ete | Proponent | Effectivity Reason for Amendment Originat This Manual was developed and adopted in reference with the WESM Financial Penalty Manual issue 1.0 promulgated by the Market Surveillance Committee. The Manual was promulgated by the DOE in line with its mandate pursuant to the WESM Rules and in line with the following objectives: The amendment was made for the following reasons — 10 PEMC 1) To rationalize the process of determining applicable , penalties for breach; 2) To specify the acts or omissions that can constitute a breach which is subject to penaities; 3) To include breach of the Retail Rules and Market Manuals in the scope of the WESM penaifty system; and 4) To further clarify the responsibilities of various parties in implementing the WESM penalty system; and 5) To align the penalty system in accordance with changes to the enforcement and compliance processes in the WESM. DOCUMENT APPROVAL PEM Board MSC Approval MSC Resolution No. | RCC Consultation Consultation REFERENCE DOCUMENTS Document ID Document Title PO Wholesale Electricity Spot Market Rules (WESM Rules Rules for the Integration of Retail Competition in the Wholesale Electricity Spot Market (Retail Rules) Po WESM Enforcement and Compliance Manual Po WESM Dispatch Protocol! ee WESM Price Determination Methodolog WESM Manual on Management of Must Run and Must Stop Units WESM Registration Manual Page 2 of 56 === dc2021-08-0025-pages-06.ppm === Wholesale Electricity Spot Market Penalty Manuai WESM-PM-lIssue No. 1.0 Effective Date: Table of Contents SECTION 1 INTRODUCTION 6 1.1 Legal Framework 6 1.2 Purpose and Scope 7 SECTION 2. DEFINITIONS, REFERENCES AND INTERPRETATION 8 2.1 Definitions 8 2.2 References 8 2.3 Interpretation 8 SECTION 3 RESPONSIBILITIES 9 3.1 Philippine Electricity Market Corporation 9 3.2 PEMC President 9 3.3. Market Surveillance Committee 9 3.4 Enforcement and Compliance Office 9 3.5 Market Operator i] 3.6 System Operator 9 3.7 Other Service Providers 10 3.8 WESM Members 10 SECTION 4 PENALTY SYSTEM 11 4.1 Principles 11 4.2 Penalty Assessment 13 4.3 Description of Penalty Levels 14 4.4 €xclusion: Suspension & Deregistration 15 4.5 Qualifying Circumstances 16 4.6 Penalty Levels Application 20 4.7 Level 1 - Reprimand 20 4.8 Level 2 - Financial Penalties 21 4.9 Level 3—Escalated Financial Penalties 22 4.10 Suspension 23 4.11 Exclusion - Deregistration 24 4.12 Request for Reconsideration and Appeal Proceedings 25 4.13 Service of Notice of Specified Penalty/ies 30 4.14 Effect of Notice of Specified Penalties or Revocation Thereof 31 4.15 Submission of Reports 31 SECTION 5 SCHEDULE OF BREACH AND PENALTIES 32 SECTION 6 UTILIZATION OF FINANCIAL PENALTY 53 SECTION 7 AMENDMENT, REPEALING CLAUSE, PUBLICATION AND EFFECTIVITY 53 7.1 Amendments 53 Page 3 of 56 === dc2021-08-0025-pages-07.ppm === evhol esate Electricity Spot Market Penalty Manual WESM-PW-lssue No. 4.0 Effective Date: 7.2 Effectivity and Publication 54 SECTION 8 GLOSSARY 55 Page 4 of 56 === dc2021-08-0025-pages-08.ppm === ©! Wholesale Electricity Spot Market Penalty Manual WESM-PM-Issue No. 1.0 Effective Date: SECTION 1 INTRODUCTION 1.1 LEGAL FRAMEWORK 1.1.1 The WESM Rules authorize the imposition of penalties for breach of the rules and supporting Market Manuals. The inclusion of such authority in the WESM Rules is pursuant to Section 30 of Republic Act No. 9136 (otherwise known as the Electric Power Industry Reform Act of 2001 or EPIRA) and its implementing rules and regulations (EPIRA-IRR). Section 30 of Republic Act No. 9136 expressly provides that the WESM Rules shall provide for, among other things, the surveillance and assurance of compliance of the participants with the rules. This is reiterated in Rule 9, Section 5 (c) of the EPIRA-IRR. The WESM Rules shall be formulated to provide adequate penalties in cases of breaches of the WESM Rules (Section 5 [b] (iv), Rule 9). Pursuant to this legal mandate, WESM Rules Clause 1.6.3 (Chapter 1)', provides that the Market Surveillance Committee shall design the penalty ievels and appropriate range of penalties that will be applied for breaches of the WESM Rules. This is to be done in consultation with the Rules Change Committee and the PEM Board. The penaflty levels and ranges are to be reviewed by the Market Surveillance Committee from time to time and as may be necessary. Clause 7.2 (Chapter 7) of the WESM Rules, meanwhile, provides for the manner of enforcement of the WESM Rules, particularly the requirements and procedures that are to be followed before penalties can be imposed for breach of the WESM Rules, and the manner by which the financial penalties collected shal! be managed and utilized. Meanwhile, the Rules for the Integration of Retail Competition in the Wholesale Electricity Spot Market (otherwise known as the Retail Rules) expressly provide in its Clause 1.5.1 that the provisions of Chapter 1 of the WESM Rules shall apply with respect to the governance of the integration of retail competition, the operations of the Central Registration Body and the transactions in the WESM of contestable customers and retail electricity suppliers. Furthermore, Clause 1.7 of the Retail Rules expressly provide that Chapter 7 of the WESM Rules shall apply in respect to the enforcement of the Retail Rules. ‘ WESM Rules clauses 1.6.3 is being amended and transferred to WESM Rules Section 7.2. Page 5 of 56 === dc2021-08-0025-pages-09.ppm === Wholesale Electricity Spot Market Penalty Manuat WESM-PM-tssue No. 1.0 Effective Date: 1.1.6 The authority to impose penalties under the WESM Rules is without prejudice to the original jurisdiction of the Energy Regulatory Commission to enforce the WESM Rules and to impose fines and penaities in case of violations of the EPIRA. 1.2 PURPOSE AND SCOPE 1.2.1 This Manual, and the penalty system set out, applies to breach of the Market Rules. 1.2.2 This Manual sets out the following — a) Provisions of the WESM Rules, the Retail Rules and their implementing Market Manuals (collectively referred to as Market Rules) which, if not complied with, will constitute a breach and correspondingly, the types of breach that are subject to penalties under this Manual; b} Categories and levels of penalties that will be applied for each type of breach, and qualifying circumstances that will be considered in determining the penaity that wilt apply in case of breach; c) Procedures for and respective obligations of responsible persons or entities in implementing penalties imposed under this Manual and remedies available to the WESM Members in case there is a finding of breach; and 1.2.3 This Manual, including the penalty system, applies to and is binding to all WESM Members in all grids where the WESM is in operation. By having registered in the WESM, a WESM Member is bound to comply with the Market Rules. 1.2.4 This Manual covers only the penalty system, the manner of assessment and implementation of penalties, the remedies available to the WESM Members in case there is a finding of breach, and the utilization of the financial penalties collected for breach of the Market Rules. The rules, guidelines and procedures pertaining to enforcement of the Market Rules, and investigations of breaches are not covered by this Manual. Page 6 of 56 === dc2021-08-0025-pages-10.ppm === Wholesale Electricity Spot Market Penalty Manual WESM-PM-Issue No. 1.0 Effective Date: SECTION 2 DEFINITIONS, REFERENCES AND INTERPRETATION 2.1 DEFINITIONS 2.1.1 All terms and abbreviations used in this Manual that are defined in the Market Rules shall have the same meaning as defined in the said rules. 2.1.2 Where italicized the term or abbreviation shall have the definition given in the Glossary of this Manual. 2.2 REFERENCES This Manual shall be read in conjunction with the Market Rules approved for use in the WESM and for the integration of retail competition in the WESM, including but not limited to the documents listed in the Reference Documents table of this Manual. 2.3 INTERPRETATION Unless otherwise stated in this Manuai, the rules of interpretation set out in Chapter 9 of the WESM Rules shall also apply to this Manual. Page 7 of 56 === dc2021-08-0025-pages-11.ppm === Se . “ Wholesale Electricity Spot Market Penaity Manual WESM-PM-lssue No. 1.0 Effective Date: SECTION 3 RESPONSIBILITIES | 3.1 PHILIPPINE ELECTRICITY MARKET CORPORATION The PEMC shall oversee the administration and implementation of this Manual. This responsibility is subject only to the limitations set out in this Manual. 3.2 PEMC PRESIDENT The PEMC President shall sign all notices pertaining to penalties that are required to be issued under this Manual and shall exercise this authority on behalf of the PEM Board, except those notices that are authorized to be issued by the Market Operator under Section 4.8.4 of this Manual. 3.3 MARKET SURVEILLANCE COMMITTEE The Market Surveillance Committee shall annually review the levels and range of penalties as set out in this Manual. From time to time and as may be necessary, the Market Surveillance Committee shall submit to the Department of Energy its proposed amendments thereto, in consultation with the WESM Members, Rules Change Committee and the PEM Board. 3.4 COMPLIANCE COMMITTEE The Compliance Committee shall have the following responsibilities: 3.4.1 Review reports of investigations and decide on the outcome of each case based on the findings of facts and the recommendations of the Enforcement and Compliance Office in accordance with the relevant provisions of the Enforcement and Compliance Manual and the Market Surveillance Manual. 3.4.2 Recommend to the PEM Board the imposition of penalties for breaches other than those arising from, and determined through the compliance monitoring and assessment by the Enforcement and Compliance Office; 3.4.3 Review and recommend to the PEM Board action on appeals filed by any concerned WESM Member in accordance with the Section 4.12 of this Manual. Page 8 of 56 === dc2021-08-0025-pages-12.ppm === ©} Noe Nee” Wholesale Electricity Spot Market Penalty Manual WESM-PM-lssue No. 1.0 Effective Date: 3.5 ENFORCEMENT AND COMPLIANCE OFFICE The Enforcement and Compliance Office shalt - 3.5.1 3.5.2 3.5.3 3.5.4 Monitor the compliance of WESM Members and, based on the result of its own monitoring and assessment, impose the specified penalties therefor in accordance with the Market Rules and the WESM Penalty Manual, and issue a resolution on a request for reconsideration if any is filed by any WESM Member. The Notice of Specified Penalty to be issued for this purpose shall be signed by the PEMC President in accordance with Section 3.2 of this Manual. Conduct investigation of probable breach or as endorsed to it by the PEM Board through request for investigation by any WESM Member, the Market Operafor, or the System Operator, and issue a report thereon to be submitted to the Compliance Committee for review. Submit the reports required under this Manual to the PEM Board, the Energy Regulatory Commission, and the Department of Energy. Implement all other notices, resolutions or decisions, as the case may be, pursuant to this Manual, and shall have custody of all notices, reports and records created and issued pursuant to this Manual. 3.6 MARKET OPERATOR The Market Operator shail implement the Notice of Specified Penalties served on it and the distribution of the collected financial penalties in accordance with the guidelines it shall develop pursuant to Section 6 of this Manual, and shall carry out any other action required of it under any notice that is issued and served pursuant to this Manual. 3.7 SYSTEM OPERATOR The System Operator shail faithfully and timely implement any action or measure required of it under any notice that is issued and served pursuant to this Manual. Page 9 of 56 === dc2021-08-0025-pages-13.ppm === Nee Wholesale Electricity Spot Market Penalty Manual WESM-PM-lssue No. 1.0 Effective Date: 3.8 OTHER SERVICE PROVIDERS Other service providers in the WESM, including but not limited to the Network Service Providers and the Metering Service Providers, shall faithfully and timely implement any action or measure required of them under any notice that is issued and served pursuant to this Manual. 3.9 WESM MEMBERS A WESM Member that is served a notice, resolution or decision pursuant to this Manual shail faithfully and timely comply with the requirements or directives thereunder, including but not limited to the payment of financia! penalties, taking of remedial actions or measures and compliance with other directives. Failure to comply with such requirements or directives shall be subject to additional penaities pursuant to Section 4.1.2.2 and Section 5 of this Manual. Page 10 of 56 === dc2021-08-0025-pages-14.ppm === Wholesale Electricity Spot Market Penalty Manual 4.1 PRINCIPLES WESM-PM-Issue No. 1.0 Effective Date: SECTION 4 PENALTY SYSTEM 4.1.1 Enforcement Proceedings. The WESM enforcement proceedings upon which the imposition of penalty or any other form of enforcement actions is based, include: 4.1.1.1. 4.1.1.2. 4.1.1.3. Compliance monitoring and assessment. This shall be carried out by the Enforcement and Compliance Office by determining the occurrence of breach of the Market Rules and Market Manuals, validating or verifying the circumstances related to such occurrences, and assessing whether a breach is committed. investigation of the WESM Members. This shall likewise be conducted by the Enforcement and Compliance Office upon the endorsement by the PEM Board to determine the occurrence of breach of the Market Rules upon the request of any WESM Member, the Market Operator, or the System Operator, or upon its own initiative, as may be necessary. Investigation of the Market Operator and the System Operator. The investigation of the Market Operator and the System Operator by the Enforcement and Compliance Office for probable breach of the Market Rules shall be in accordance with the relevant provisions of the Enforcement and Compliance Manual. The PEM Board, as it may deem necessary, may thereafter file a formal complaint with the Energy Regulatory Commission and the Department of Energy. 4.1.2 imposition of Penalties by the Enforcement and Compliance Office. The Enforcement and Compliance Office shall advise the PEMC President and the Compliance Committee of the specified penalty to be imposed upon the WESM Member concerned based on the results of the compliance monitoring and assessment conducted by the Enforcement and Compliance Office in accordance with Clause 7.2 of the WESM Rules and the WESM Enforcement and Compliance Manual. The PEM Board, the Energy Regulatory Commission and the Department of Energy shall be provided with the monthly status or summary report of the compliance monitoring and assessment activities of the Enforcement and Compliance Office. Page 11 of 56 === dc2021-08-0025-pages-15.ppm === © Wholesale Electricity Spot Market Penalty Manual WESM-PI-issue No. 1.0 4.1.6 Effective Date: 4.1.2.1 The specified penalty to be imposed shall be in accordance with Sections 3, 4, and 5 of this Manual. 4.1.2.2 The following penalties shall be additionally imposed upon the WESM Member concerned in case of failure to comply with the requirements and directives of the notice, resolution or decision, as the case may be: a) Penalty interest in case of non-payment by a WESM Member of the financial penalties imposed on it as a consequence of a breach, and/or b) Penalties in case of non-compliance by a WESM Member with the remedial measures required to be implemented by it under a Notice of Specified Penalty issued under this Manual or a notice issued pursuant to the WESM Enforcement and Compliance Manual. Imposition of Penalties by the PEM Board. These penalties are imposed by the PEM Board on cases arising from the request for investigation by the WESM Member, Market Operator, or System Operator. The imposition is based on the results of investigation by the Enforcement and Compliance Office and the review and recommendations of the Compliance Committee. Imposition of Penalties on the Market Operator and the System Operator. The penalty for breach of the Market Rules by the Market Operator or the System Operator shail be determined and imposed by the Energy Regulatory Commission upon finding of breach of the Market Rules initiated through complaints or reports by the PEM Board in accordance with Section 4.1.1.3 of this Manual and pertinent provisions of the Enforcement and Compliance Manual. Non-compliance or breach subject of penalties. Penalties under this Manual may be imposed only in case of any Breach of the Market Rules that are specified as such under the Schedule of Breach and Penalties of this Manual. Persons or entities subject of penalties. Penalties are imposed on the persons or entities that are registered as WESM Members and not on the individuals or entities that act on behalf of the WESM Members. This is pursuant to WESM Rules Clause 7.2.6 which recognizes that the act or omission of any partner, agent, officer, employee or any person acting for or in behalf of a WESM Member, constituting a breach of the WESM Rules, shall be considered an act or omission of the WESM Member. By having been registered as WESM Members, these Page 12 of 56 === dc2021-08-0025-pages-16.ppm === ©} Wholesale Electricity Spot Market Penalty Manual WESM-PM-Issue No. 1.0 Effective Date: persons or entities are expected to comply with the WESM Rules and be subject of penalties in case of breach. Where the Market Rules provide for solidary liability, the penalty shall be imposed on all WESM Members that have such solidary liability. Exemption. Exemption from sanctions and penaities shall only be granted under the following circumstances and periods — a) Within the first one (1) month of membership in the WESM, with respect to any obligation under the Market Rufes which amounts to a breach if not complied with; or b) Within the first one (1) month of the issuance of a new provision of the Market Rules or of an amendment thereto, with respect to such new rule, manual or amendment if non-compliance with the same amounts to a breach. No exemption shall be applied for or approved, however, if a transition period during which no sanctions or penalties for breach can be imposed has been expressly directed. Notwithstanding, the Department of Energy may issue a longer exemption period as it may deem necessary, to ensure the readiness of the WESM Members and in the implementation of a new policy or program that directly impacts the enforcement of the WESM Rules and its Market Manuals. For this purpose, the DOE shalt issue an advisory to the Governance Arm providing such details of exemption as necessary. No dispute resolution. The imposition of penalties under this Manual cannot be subject to dispute resolution under the provisions of the Market Rules and other relevant iaws, rules and regulations on alternative dispute resolution. However, a WESM Member may avail of the remedies for seeking a reconsideration and appeal under Section 4.12 of this Manual. 4.2 PENALTY ASSESSMENT 4.2.1 4.2.2 4.2.3 Penalty is assessed for each count of breach. A single Notice of Specified Penalty may refer to more than one count of breach as determined for a particular monitoring period. By registered facility. Where an obligation is required to be performed for each registered facility, such as a generating unit or customer facility, one count of Page 13 of 56 === dc2021-08-0025-pages-17.ppm === SN ~~ Wholesale Electricity Spot Market Penalty Manual WESM-PM-Issue No. 1.0 4.2.4 4.2.5 Effective Date: breach is committed for each facility for which an obligation is not performed. For generating units and customer facilities, the identification of the facility shail be in accordance with how such is represented in the market network model prevailing at the time the breach occurred. Thus, for a generating plant that is represented by its component units or by blocks or by aggregated units, a breach is determined for each unit, or block, or aggregated units that is found in breach. By occurrence. Where an obligation is required to be performed on a periodic basis, e.g., by dispatch interval, or hourly, or weekly, etc., one count of breach is determined for each period that an obligation is not performed, except when the relevant implementing Market Manuals provide a different manner of determining the number of breach/es. To illustrate, where an obligation is required to be performed for each dispatch interval and a failure to perform that obligation occurs in five (5) successive intervals, then there will be five (5) separate counts of breach as the non-compliance in each interval to be considered as separate acts and not a single continuous act. Notwithstanding the provisions set forth in Section 4.2.3 and 4.2.4, the Enforcement and Compliance Office shall not be precluded to make assessment of the non-compliances or breaches of any WESM Member with respect to a particular facility in relation to other registered facilities or plants, and/or related occurrences or incidents if such assessment is necessary in determining the breach of the Market Rules and the extent thereof. 4.3 DESCRIPTION OF PENALTY LEVELS 4.3.1 4.3.2 4.3.3 The WESM penalty system consists of three (3) penalty levels. The penalty level to be imposed will depend on the nature of the breach and the circumstances surrounding the breach. The specific penalty levels to be imposed for each type of breach are provided for in the Schedule of Breach and Penatties of this Manual. Level 1 - Reprimand is a notice to the WESM Member that a breach has been committed, and enjoins the WESM Member from doing the same or similar act or omission that constituted the breach. This shall be embodied in a Notice of Reprimand. Level 2 - Financial Penalties. Financial penalties are pre-set amounts according to each type of breach, and are as stated in the Schedule of Breach and Penaities of this Manual. The financial penalty may be a fixed amount or formula-based. A Page 14 of 56 === dc2021-08-0025-pages-18.ppm === NL Sane Wholesale Electricity Spot Market Penalty Manual WESM-PM-lssue No. 1.0 4.3.4 Effective Date: Notice of Financial Penalty is issued stating the amount of penalty that is being imposed. Level 3 — Escalated Financial Penalties. Under certain breaches, a higher financial penalty shall be imposed. The higher financial penalty amounts and the conditions under which they may be imposed are as stated in the Schedule of Breach and Penaities of this Manual. A Notice of Escalated Financial Penalty is issued stating the amount of financial penalty being imposed and reason for applying the escalated amount. 4.4 SUSPENSION & DEREGISTRATION In addition to the penalty leveis provided under Section 4.3 of this Manual, suspension and de-registration may also be imposed as penalty for breaches explicitly specified under the Market Rules or in this Manual. 4.4.1. 4.4.2. 4.4.3. 4.4.4. Suspension. A WESM Member found in breach may be suspended from participating or from providing service in the WESM, and if applicable, be disconnected from the grid until the suspension is lifted. A Notice of Suspension is issued. Deregistration. A WESM Member that has already been suspended for breach, may be ordered deregistered from the WESM, and, if applicable, be disconnected from the grid. A Notice of Deregistration is issued. Where the breach giving rise to suspension or deregistration pertains to a facility, i.e., generating unit or customer facility, the suspension or deregistration shall pertain only to that facility, and not to other registered facilities of the WESM Member found in breach. lf the WESM Member being suspended or deregistered is registered in the WESM under multiple membership categories, the suspension or deregistration shall pertain only to the membership category under which the breach was committed. Take, for example, a generation company registered as a generation company trading participant with one registered generation facility and as a retail electricity supplier. if the company breaches its obligation to submit generation offers, which is an obligation pertaining to generation companies, it shall be suspended or deregistered as a generation company trading participant but not as a registered retail electricity supplier. Page 15 of 56 === dc2021-08-0025-pages-19.ppm === © No ee Wholesale Electricity Spot Market Penalty Manual WESM-PM-lssue No. 1.0 Effective Date: 4.5 QUALIFYING CIRCUMSTANCES 4.5.1 4.5.2 Each type of breach may warrant imposition of different penalty levels depending on the qualifying circumstances surrounding the breach. Such circumstances can determine whether or not a higher or lower penalty level will be applied. The presence of the qualifying circumstances will be considered for each occurrence of breach. The qualifying circumstances that will apply to each type of breach is presented in the Schedule of Breach and Penalties of this Manual. The qualifying circumstances that will be considered are as described in this section. Frequency of occurrence. This indicates persistence of the non-compliance by a WESM Member as reckoned with a reference period as specified in Table 1. Where a WESM Member has more than one (1) facility registered in the WESM, frequency of occurrence shall be determined for each registered facility. The frequency level, reference period and corresponding penalty level for each type of circumstance are set out in the Frequency of Occurrence Matrix in Table 1 of this Manual. 4.5.2.1. First-time occurrence. A breach is considered as having occurred for the first time - a) if the WESM Member has not been found to have previously committed the same type of breach in respect to the facility involved in the breach reckoned from the date of its registration in the WESM; or b) If the type of breach pertains to a new provision of the Market Rules, or a substantial amendment of an existing provision, and the WESM Member has committed that type of breach for the first time since the promulgation of the new provision or amendments of the Market Rules. For this purpose, there is substantial amendment if the amendment resulted in a change in the nature or elements of the breach. It is provided, however, that the breach is not considered as having occurred for the first time if an earlier breach occurs during an exemption period that is granted to the WESM Member, or during a moratorium period from imposition of penaities that has been allowed to all WESIM Members pertaining to that type of breach. Page 16 of 56 === dc2021-08-0025-pages-20.ppm === Wholesale Electricity Spot Market Penalty Manual 4.5.2.2. 4.5.2.3. 4.5.2.4. WESM-PM-issue No. 1.0 Effective Date: Isolated occurrence. The act or omission constituting the breach is an isolated occurrence incident if the breach is committed in such frequency as indicated in the Frequency of Occurrence Matrix. Non- compliances occurring during periods when a WESM Member has been granted exemption under prevailing Market Rufes will not be considered. Recurring or repetitive occurrence. The occurrence of a breach is considered repetitive or recurring if the same type of breach is committed more often than the frequency level set to qualify for isolated occurrence within a reference period. That is, the occurrence must not qualify as an isolated occurrence before it can be considered as repetitive or recurring. The frequency and reference period to qualify an occurrence as repetitive or recurring are set out in the Frequency of Occurrence Matrix. Non-compliances occurring during periods when a WESM Member has been granted exemption under prevailing Market Rules will not be considered. Reference Period. The frequency and reference period for each type of circumstance, and corresponding penalty level are presented in the following table. The reference period for a particular breach is reckoned from the date or hour/interval of occurrence of the breach and shall include the date or hour/interval in which the subject breach occurred. For obligations that is determined on hourly or per dispatch interval basis, the frequency or number of occurrence as presented in the table below shall be counted for every one billing period. For example, if the breach of the Offered Capacity Compliance standards is committed two (2) times or less in August billing month (26 July — 25 August), the occurrence is classified as “isolated” and if it exceeds such number, the same shall be “repetitive or recurring”. If the same breach is again committed for two (2) times or less in September billing month (26 August- 25 September), the occurrence is reset to being “isolated” for purposes of penalty imposition. Page 17 of 56 === dc2021-08-0025-pages-21.ppm === Wholesale Electricity Spot Market Penalty Manual WESM-PM-lssue No. 7.0 Effective Date: Table 1 -FREQUENCY OF OCCURENCE MATRIX Isolated we: : Repetitive or Recurring Occurrence Frequency Occurrence 24x or less over the | 25x to 50x over the | 51x or more over the billing month billing month billing month Hourly (.e., | 2x or less over the | 3x to 5x over the | 6x or more over the settlement interval) | billing month billing month billing month More than 2x over the previous 7-day period More than 2x over the previous 7-day 3x over the previous | 2x or less over the | period and more 30-day period previous 7-day | than 3x over the period and more | previous 30-day than 3x over the | period previous 30-day period 1x over a 4-week period and more than 1x over the previous 12-month period Every occurrence after the first time (since registration of First time occurrence | the WESM Member or effectivity of the new Market Rule or Market Manual 6x or less over the | More than 6x over previous 12-month| the previous 12- period month period By dispatch interval (ie., 5-minute More than 1x over a 4-week period 1x over the previous 12-month period Breach occurs for more than two (2) successive periods. Level 3 penalty applies starting from the third consecutive occurrence. Annual, semestral, quarterly, or monthly Occasional (no prescribed period) 4.5.3 Extent of deviation from requirement. This applies to breaches where the degree of deviation from the requirement can vary and is quantifiable. For such type of breach, the penaity level shall depend on the extent of the deviation from Page 18 of 56 === dc2021-08-0025-pages-22.ppm === ©} Wholésale Electricity Spot Market Penalty Manuai WESM-PW-Issue No. 1.0 4.5.4 4.5.5 Effective Date: the requirement. The types of breaches for which this qualifying circumstance will be applied and the extent of deviation that will warrant a different penalty level are presented in the Schedule of Breaches and Penalties of this Manual. Non-compliance during emergency condition, suspension or intervention, or excess generation. Where an obligation is required to be carried out while the system is under an emergency state as declared by the System Operator, or the WESM is suspended by the Energy Regulatory Commission or placed under intervention by the System Operator, or the relevant market run indicates the occurrence of excess generation, a higher penalty level shall be imposed. This qualifying circumstance is given priority over frequency of occurrence. Self-reporting of breach. if a WESM Member has voluntary reported the occurrence of the breach prior to the conduct of compliance monitoring and assessment or investigation to be undertaken pursuant to the WESM Enforcement and Compliance Manual, the penalty jevel next lower to the applicable level may be imposed taking into account the other qualifying circumstances surrounding the breach. A breach is considered to have been voluntarily reported under the following conditions ~ a) If any provision of the Market Rules requires submission of significant events or non-compliances related to the breach, the WESM Member has complied with the reportorial requirement and its report includes a categorical or express admission of the occurrence of the breach. b) If there is no reportorial requirement pertaining to the breach, the WESM Member had submitted to the Enforcement and Compliance Office a non- compliance report that includes a categorical or express admission of the occurrence of the breach. c) In either case, the report must have been submitted prior to the issuance of a Notice of Non-compliance pertaining to the breach. The WESM Member that has voluntarily reported under the above conditions shall be allowed negotiation of financial penalty on the first instance it has reported the breach. Page 19 of 56 === dc2021-08-0025-pages-23.ppm === fp} Wholesale Electricity Spot Market Penalty Manual WESM-PM-Issue No. 4.0 Effective Date: 4.6 PENALTY LEVELS APPLICATION 4.6.1 Notwithstanding the classification set out in Table 1 — 4.6.2.1. 4.6.2.2. 4.7 LEVEL 1 - REPRIMAND if the frequency of occurrence of a type of breach within a reference period would already warrant the application of Level 2 penaity, the financial penalty shall be applied to all counts of breach within a reference period. To illustrate, as shown in Table 1 above, breach of an obligation required to be performed by the hour qualifies for Level 1 penalty if it occurs two (2) times or less in a given billing month, for Level 2 if it occurs more than two (2) times. If, for a billing month, the number of breach is more than two (2), Level 2 penaity shail apply to all counts of breach within a billing month. If the frequency of occurrence of a type of breach within a reference period would already warrant the application of Level 3 penaity, the escalated financial penalty shall be applied only to the counts of breach in excess of the number of breach that would have warranted application of Level 2 penaity. To illustrate, as shown in Table 1 above, breach of an obligation required to be performed by the hour qualifies for Level 2 penalty if it occurs between three (3) and five (5) times in a given billing month, and for Level 3 penalty if it occurs more than five (5) times. If, for a billing month, the number of breach is more than five (5), Level 3 penalty level shall apply only to the counts of breaches in excess of five (5). The first five (5} counts will be meted the Level 2 penalty level. if a reprimand is meted out, a Notice of Reprimand containing the reprimand is issued and shall further states the following — a) Name of the WESM Member subject of the reprimand; b) The name of the registered facility, if applicable, associated with the breach; c) The breach committed and pertinent rules that were breached: d) The relevant date/s and dispatch interval/s that the breach occurred; and e) Remedial measures required of the WESM Member, if any, and the manner of compliance. Page 20 of 56 === dc2021-08-0025-pages-24.ppm === Wholesale Electricity Spot Market Penalty Manual WESM-PM-Issue No. 1.0 Effective Date: 4.8 LeveL 2 - FINANCIAL PENALTIES 4.8.1 4.8.2 4.8.3 4.8.4 4.8.5 The financial penalty may be a fixed rate amount or formula based. The amount of penalty for each type of breach is set out in the Schedule of Breach and Penalties of this Manual. A Notice of Financial Penalty shall be issued to the WESM Member specifying the following — a} Name of the WESM Member, b) The name of the registered facility to which the breach pertains, if applicable; c) The breach committed and pertinent rules that were breached; d) The relevant date/s and dispatch interval/s that the breach occurred; e) The amount of financial penalty imposed for each count of breach; and f) Remedial measures required of the WESM Member, if any, and the manner of monitoring compliance. A copy of the notice shall also be served on the Market Operator and shall serve as the authority of the latter to collect the assessed financial penalties. Upon receipt of a copy of the notice, the Market Operator shall cause the billing and collection of the amount due within three (3) Business Days from receipt of the notice. The concerned WESM Member shail pay the penalty amount within twelve (12) Business Days from receipt of the billing from the Market Operator. The Market Operator shall notify the WESM Member of the penalty amount including interest if applicabie and the due date for payment of the same. In case of failure of the WESM Member to fully pay for the financial penalties on specified due date, a penalty interest in the sum specified in the Schedule of Breach and Penaities of this Manual shall be billed and collected from the WESM Member until the amount is fully paid. The amount shall be paid through issuance of a check payable to the Market Operator. However, collection from settlement amounts through offsetting or debit arrangements may be done as follows: a} ‘If the concerned WESM Member authorizes the Market Operator to collect the penalty amounts from the settkement amounts for the billing period during which the notice was issued; and b) If the concerned WESM Member fails to pay the penalty amounts within the specified due date, despite the finality of the decision and receipt of the Notice of Specified Penaity/ies from the Market Operator, then the Market Operator shall collect the penalty from the settlement amounts of the said Page 21 of 56 === dc2021-08-0025-pages-25.ppm === © Wholesale Electricity Spot Market Penalty Manuai WESWM-PM-lssue No. 1.0 48.6 4.8.7 4.9 LEVEL 3 —-— 4.9.1 4.9.2 Effective Date: WESM Member for the immediately succeeding billing period computed as follows: (i) The penaity amounts shall be deducted from the settlement amounts after deductions from the same of the tax payments, interest payments, and market fees. The Market Operafor shall ensure that the penalty amount is properly labelled as such in the billing statement or equivalent as would distinguish it from other items or deductions that may be charged against the settlement amount. (ii) If the collection of penalty cannot be made in full due to inadequacy of the settlement amount from which the penalty amounts will be deducted, the Market Operator shall issue a notice or demand to pay the deficiency to the concerned WESM Member. The Market Operator shall notify the PEMC President of the status of the penalty collection indicating the amount collected, penalty interest imposed and the reason for non-payment by the concerned WESM Member as applicable on a monthiy basis. Penalty interest shall be reckoned from the date the penalty becomes due up to the time the same is actually settled. ESCALATED FINANCIAL PENALTIES The amount of the escalated financial penalty for each type of breach ts set out in the Schedule of Breach and Penalties of this Manual, and, unless otherwise specified, is twice the amount of the Level 2 financial penalty. A Notice of Escalated Financial Penalties is issued on the WESM Member stating the following — a) The name of the WESM Member, b) The name of the registered facility for which the breach was found; c) The breach committed, specifying the rules that were breached; d) The relevant date/s and dispatch intervai/s that the breach occurred; e) The reason/s for imposition of escalated financial penalty, particularly the occurrence of the qualifying circumstance that warranted application of the escalated financial penaity. f} The amount of financial penalty, and Page 22 of 56 === dc2021-08-0025-pages-26.ppm === Wholesale Electricity Spot Market Penalty Manual WESM-PM-Issue No. 1.0 4.9.3 4.10 4.10.1 4.10.2 4.10.3 4.10.4 Effective Date: g) Remedial measures, if any, required of the WESM Member and manner of monitoring compliance. A copy of the notice will also be served on the Market Operator and shall serve as its authority to collect the amount due. Failure to pay the financial penalty amount on due date will result in imposition of penalty interest until fully paid. The Market Operator shall cause the billing and collection of the penalty amount, and shall notify the PEMC President of the status of collection in the same manner as required for Level 2 Financial Penalty under Sections 4.8.3, 4.8.4, and 4.8.5 of this Manual with a copy thereof furnished to the Enforcement and Compliance Office. SUSPENSION Suspension as a penalty may be resorted to only in extreme circumstances and under the following conditions - a) The acts or omission constituting the breach continue to occur even after the periods that the breach subject of a penalty has occurred; and b) The continuing acts or omissions have significant probability of causing an adverse impact on the security and reliability of the power system or grid. if the acts or omissions have significant probability of causing an adverse impact as stated in the foregoing Clause 4.10.1, the System Operator or the Market Operator, as applicable, shall notify the Enforcement and Compliance Office and the PEM Board through the Board Secretary, of the same. A WESM Member registered in the WESM under multiple categories shall be suspended in respect only to the membership category in which it was found in breach. \f the WESM Member has multiple facilities registered in the WESM, the suspension shall extend only to the facility for which the breach was confirmed. The Notice of Suspension issued to the WESM Member and shall specify the following - a) Name of the WESM Member and the registration or membership category under which it will be suspended; b) The name of the registered facility to which the breach pertains and which is covered by the suspension, if applicable: c) The breach committed and pertinent rules that were breached; Page 23 of 56 === dc2021-08-0025-pages-27.ppm === © Wholesale Electricity Spot Market Penalty Manual WESM-PN-Issue No. 1.0 4.10.5 4.10.6 Effective Date: d) The relevant date/s and dispatch intervai/s that the breach occurred; e) The duration of the suspension and its effective date; and f) Remedial measures required of the WESM Member to remedy the breach, and the manner of compliance. The suspension shalt be carried out in the manner set out and shall have the same consequences as stated in WESM Rules Ciause 2.7 and in the WESM Registration Manual.’ The Notice of Suspension is also served upon the Market Operator and the service of such Notice of Suspension on the latter shalt serve as its authority to act on the same in accordance with the requirements and procedures set out in the WESM Registration Manual. The Enforcement and Compliance Office in conjunction with the System Operator or the Market Operator, as applicable, shall monitor the compliance by the suspended WESM Member of the remedial measures required of it. if they determine that the breach has been rectified or that the remedial measures have been successfully implemented, they shall jointly notify the PEM Board and recommend revocation of the suspension. If approved by the PEM Board, the revocation of the suspension shall be implemented in accordance with the requirements and procedures set out in the WESM Registration Manual. 4.11 DEREGISTRATION 4.11.1 4.11.2 2 See WESM The WESM Member suspended in accordance with the foregoing paragraphs may be deregistered from the WESM in accordance with the provisions set forth in WESM Registration Manual* and if it is established that the causes of the breach have not been resolved and that the WESM Member is unable or refuses to rectify the same. The Enforcement and Compliance Office in conjunction with the Market Operator or the System Operator, as applicable, shall jointly submit their recommendation to the PEM Board for the deregistration of the suspended WESM Member based on the results of their monitoring under Clause 4. 10.6. Manual on Registration, Suspension and Deregistration: Procedures and Criteria, * See WESM Manual on Registration, Suspension and Deregistration: Procedures and Criteria, or its subsequent amendments. Page 24 of 56 === dc2021-08-0025-pages-28.ppm === © Wholesale Electricity Spot Market Penalty Manual WESM-PM-Issue No. 1.0 4.11.3 4.11.4 4.11.5 4.11.6 Effective Date: A WESM Member registered in the WESM under multiple categories shall be deregistered only in respect to the membership category in which it was found in breach. lf the WESM Member has multiple facilities registered in the WESM and the breach is found in respect to one or more facilities, the deregistration shall extend only to the facility/ies for which the breach was confirmed. A Notice of Deregistration is issued on the WESM Member which shall specify the following — a) As applicable, the facility being deregistered or the membership category under which it is being deregistered; b) The date on which the deregistration will take effect; and c) The reasons for the deregistration. The deregistration shall be carried out in the manner set out in the WESM Registration Manual and shalt have the same consequences as stated therein. The Notice of Deregistration shall also be served on the Market Operator and this shall serve as its authority to act on the same in accordance with the requirements and procedures set out in the WESM Registration Manual, Any deregistered member or facility/fies may apply for revocation of its deregistration and renew its membership in the WESM provided that it has rectified the breach and complied with the requirements and procedures set out in the WESM Registration Manual. 4.12 REQUEST FOR RECONSIDERATION AND APPEAL PROCEEDINGS 4.12.4 Under the Compliance Monitoring and Assessment Proceedings 4.12.1.1. Period and Ground for Filing a Request for Reconsideration. The concerned WESM Member may request for reconsideration of the results of the compliance monitoring and assessment, subject to the following conditions: a. The request shall be filed within fifteen (15) Business Days from the receipt of the said notice: b. A request for reconsideration shall be based on the ground that the finding of breach is not supported by substantial evidence: Page 25 of 56 === dc2021-08-0025-pages-29.ppm === ‘$) Wholesale Electricity Spot Market Penalty Manual WESN-PM-Issue No. 1.0 Effective Date: and/or the computation is incorrect or the penalties imposed are not in accordance with the Penalty Manual and Market Rules; c. The request for reconsideration shall be filed with the Enforcement and Compliance Office. 4.12.1.2. Form and Contents of the Request for Reconsideration and Notice thereof. The request shall: a. Be made in writing and signed by the WESM Compliance Officer of the WESM Member concerned, and shall be made under oath; b. State the date when the compliance monitoring and assessment report sought to be considered was received by the WESM Member, c. State that the findings of breach by the Enforcement and Compliance Office is not supported by subsiantial evidence, and/or the computation is incorrect or the penalties imposed are not tn accordance with the Penalty Manual and Market Rules; and d. Contain the evidence to support the reversal of the findings of breach by the Enforcement and Compliance Office. Failure to provide the complete requirements pursuant to this clause shall cause the Enforcement and Compliance Office to immediately deny the request for reconsideration. 4.12.1.3. Resolution on the Request for Reconsideration. a. Arequest for reconsideration shail be resoived by the Enforcement and Compliance Office within fifteen (15) Business Days from receipt thereof. This shall be done through a Resolution which shall clearly state the facts of the case and the reasons supporting its findings and conclusions. The Resolution shall be signed by the Enforcement and Compliance Office. A copy of the Resolution shall be served on the concerned WESM Member and appropriate persons or entities. b. Copies of the Resolution witl be furnished to the PEM Board, the Compliance Committee, and the Market Operator. Should this Resolution require implementation of a directive on the part of the Page 26 of 56 === dc2021-08-0025-pages-30.ppm === Wholesale Electricity Spot Market Penalty Manual 4.12.1.4. 4.12.1.5. 4.12.1.6, WESM-PM-Issue No. 7.0 Effective Date: System Operator, a copy of said notice shall likewise be sent to the System Operator and/or Market Operator for appropriate action. Appeal to the Compliance Committee and Period of Appeal. The Resolution issued by the Enforcement and Compliance Office may be appealed by the concerned WESM Member by filing an Appeal Memorandum with the Compliance Committee within ten (10) Business Days from receipt of the Resolution. Ground for Appeal. The appeal shall be based only on the ground that the Enforcement and Compliance Office has committed abuse of discretion in issuing the Resolution, or the penalty/ies the Enforcement and Compliance Office had imposed is not in accordance with this Manual. Form and Contents of the Appeal. The appeal shall: a, Be made in writing and signed by the WESM Compliance Officer of the WESM Member concerned, and shall be made under oath; b. State the date when the Resolution being appealed was received by the WESM Member, and c, Explain how the Enforcement and Compliance Office committed an abuse of discretion in issuing the Resolution or that the penalty/ies imposed by the Enforcement and Compliance Office is not in accordance with this Manual. Failure on the part of the WESM Member concerned to provide the foregoing requirements shall cause outright dismissal of the appeal by the Compliance Committee. 4.12.1.7. Decision on the Appealed Case. a. The Compliance Committee shall resolve the appealed case within thirty (30) working days from receipt of the Original Records of the Case by issuing a Decision duly signed by its Chairperson. A copy of the Decision shall be served on the concerned WESM Member and appropriate persons or entities, the Enforcement and Compliance Office, PEMC President and the Market Operator. Page 27 of 56 === dc2021-08-0025-pages-31.ppm === Wholesale Electricity Spot Market Penalty Manuat WESM-PM-Issue No. 1.0 Effective Date: b. The Compliance Committee's Decision on the Appeal shall be final and executory upon receipt by the WESM Member concerned of the said Decision. c. Copies of the Decision rendered by the Compliance Committee will be furnished to the PEM Board and the Market Operator. Should this Notice require implementation of a directive on the part of the System Operator, a copy of said Decision shall likewise be sent to the System Operator for appropriate action. Page 28 of 56 === dc2021-08-0025-pages-32.ppm === © Wholesale Electricity Spot Market Penalty Manual 4.12,2 WESM-PM-Issue No. 1.0 Effective Date: Under Investigation Proceedings 4.12.2.1 Ground for Filing a Request for Reconsideration. A WESM Member that is penalized under Section 4.1.3 of this Manual may submit a request for reconsideration of the PEM Board decision on the investigation on the following grounds — 4.12.2.2 4,12.2.3 a. Review of the findings of facts of the Enforcement and Compliance Office or for consideration of additional data that was already existing at the time of the original investigation but was not presented during such investigation due to justifiable reasons; or . Legal issues, including but not limited to issues on the conclusions of the Enforcement and Compliance Office or the Compliance Committee, but does not require review of factual findings, or the propriety of the penalty or other measures approved to be imposed by the PEM Board. Form and Contents. The request for reconsideration shall: a. clearly state the grounds for the request for reconsideration and the findings of facts or the conclusions or resolution that are sought to be reviewed and reconsidered. The request shall be accompanied by supporting data and affidavits; and . be submitted at PEMC Office within fifteen (15) Business Days from receipt of the notice of the PEM Board action. The request shall be in writing and shall be submitted to the PEM Board, through the Office of the Corporate Secretary. No submission by email shall be allowed. Alt requests that were timely filed will be immediately endorsed to the Enforcement and Compliance Office for further investigation. Reconsideration Proceedings. a. The Enforcement and Compliance Office shall evaluate the endorsed request and carry out further investigations. In conducting further investigations, the Enforcement and Compliance Office may require submission of additional information or obtain information from parties other than the requesting party, or conduct a conference with the requesting party or other relevant parties, or carry out ocular inspections of relevant facilities. . Within thirty (30) Business Days from endorsement of the request for reconsideration, the Enforcement and Compliance Office shalt Page 29 of 56 === dc2021-08-0025-pages-33.ppm === Wholesale Electricity Spot Market Penalty Manual WESM-PM-Issue No. 1.0 Effective Date: submit a report to the PEM Board containing the additional findings of fact, assessment and recommendations. 4.12.2.4 Resolution on the Request for Reconsideration. a. The PEM Board shall decide on the request for reconsideration within thirty (30) business days from receipt of the case review report submitted by the Enforcement and Compliance Office. b. Where penalties and other mitigation measures are approved, the Enforcement and Compliance Office shail cause the issuance of the appropriate notices. 4.12.2.5 Effect of PEM Board Decision. The decision of the PEM Board on the request for reconsideration shalt be final and executory upon receipt of the same by the concerned trading participant. No further request for reconsideration shall be allowed. 4.13 SERVICE OF NOTICE OF SPECIFIED PENALTY/IES 4.13.14 A Notice of Specified Penaity/ies required to be issued in accordance with this Manual shall be issued and signed by the PEMC President in accordance with Section 3.2 of this Manual, and served on the concerned WESM Member upon the issuance of the compliance monitoring and assessment report or investigation report by the Enforcement and Compliance Office. The said Notice shall become executory upon issuance thereof. 4.13.2 Ifa Request for Reconsideration or Appeal is filed, and resolution is made thereon, a separate Notice of Specified Penalty or revocation of said Notice, as the case may be, shall be issued by the Enforcement and Compliance Office or the Compliance Committee, as applicable, which either confirms the Notice of Specified Penaity previously issued or revokes the said notice in whole or in part. Similarly, the subsequent notices as a result of the reconsideration or appeal process shall become executory upon issuance thereof and shall supersede ail other notices which may have been previously issued. In all cases, the Notice of Specified Penalty or revocation thereof shall be accompanied by: 4.13.3.1 A copy of the compliance monitoring and assessment report; or 4,13.3.2 A copy of resolution on the request for reconsideration or decision on the Appeal, as the case may be. 4.13.3 This remedy of Request for Reconsideration or Appeal, notwithstanding, shall not stay the execution adverted to in Section 4.13.1 above. Page 30 of 56 === dc2021-08-0025-pages-34.ppm === © Wholesale Electricity Spot Market Penalty Manual WESM-PM-lssue No. 71.0 4.13.4 4.13.5 4.13.6 Effective Date: A Notice of Specified Penalty/ies or any related notices shall be served on the WESM Member through its WESM Compliance Officer as appearing in the records of the Enforcement and Compliance Office, or if none is designated, to the president or chief executive officer of the WESM Member as appearing in the records of the Market Operator. WESM Members have the obligation to ensure that the information on the contact persons provided to the Enforcement and Compliance Office and to the Market Operator is updated at all times. All notices required to be served on the Market Operator shall be served through its WESM Compliance Officer. The Compliance Committee shall also be furnished of the Notice of Specified Penalty or revocation of said notice, as the case may be. Should this Notice require implementation of a directive on the part of the System Operator, a copy of said notice shall likewise be sent to the System Operator for appropriate action. 4.14 Eerect oF NOTICE OF SPECIFIED PENALTIES OR REVOCATION THEREOF 4.14.1 4.14.2 Imposition of financial and non-financial penalties shall become executory upon issuance of the Notice of Specified Penalty. The Notice of Specified Penalty/ies or the revocation thereof as a result of the reconsideration and/or appeal process shall serve as the authority of the Market Operator to immediately collect or refund the amount of the financial penalty/ies or such other amounts adverted to in the notice, to or from, the concerned WESM Member's account, as the case may be. 4.15 SUBMISSION OF REPORTS The Enforcement and Compliance Office shall submit a monthly summary report of all Notices of Specified Penailtyfes and Resolutions on the requests for reconsideration made by the Enforcement and Compliance Office, and decisions of the Compliance Committee on appeals, that have been issued during the month, and the status of their implementation to the PEM Board, through the PEMC President, the Department of Energy, the Energy Regulatory Commission, the Market Surveillance Committee and the Market Operator. Such report may be included in any monthly report that the Enforcement and Compliance is required to prepare, publish and disseminate in accordance with the WESM Enforcement and Compliance Manual. Page 31 of 56 === dc2021-08-0025-pages-35.ppm === Wholesale Electricity Spot Market Penalty Manuat WESM-PM-Issue No. 1.0 Effective Date: SECTION 5 SCHEDULE OF BREACH AND PENALTIES‘ Failure of generation company to submit valid generation and/or reserve offers, or failure to submit valid generation and/or reserve offers that is equivalent to the registered maximum available capacity of their generating units at any dispatch interval; Valid generation or reserve offer refers to the offer that is considered in the real time dispatch optimization run for the relevant dispatch interval. $ This is a non-exhaustive list Market Rule Breached & Associated Market Manual WESM Rules ¢ 3.5.5.1; 3.5.5.2: Appendix A1.1 e 3.5.7.2 {n relation fo 3.5.12.1& the WESM Dispatch Protocol Level 3 Level 2 - Financial | Escalated Penalty Financial Penal Applicable Penalty Level 1 - Reprimand | PhP10,000.00/ PhP20,000.00/ Level 2 - Financial | breach breach Penalties Level 3 — Escalated Financial Penalties Suspension & Deregistration Page 32 of 56 === dc2021-08-0025-pages-36.ppm === Wholesale Electricity Spot Market Penalty Manual WESM-PM-Issue No. 1.0 Effective Date: Market Rule Level 3 - Breached & Applicable Penalty Level 2 - Financial | Escalated Associated Market Penalty Financial Manual | | Penalty There is failure to submit valid offer if there is no offer that is considered in the real time dispatch market run for the relevant dispatch interval because of any of the following conditions — a) The offer submitted has zero (0) MW value, or b) The offer submitted did not pass the validation as provided for in the WESM Dispatch Protocol and/or other relevant Market Manual or WESM Rules provision, so that, effectively, there are no offers considered in the market run; or c) The offer submitted was cancelled so that, effectively, there are no offers considered in the relevant market run, Page 33 of 56 === dc2021-08-0025-pages-37.ppm === Wholesale Electricity Spot Market Penalty Manual No. Breach Market Rule Breached & Associated Market Manual Breach is counted as follows — a) One breach is counted for each trading hour, ie. settlement interval, during the trading day that the failure occurs in three or more dispatch intervals; or b) If the failure occurs in three or more successive dispatch intervals over two successive trading hours, i-e., settlement intervals, one breach ts counted for each trading hour that the failure occurs, regardless that the failure for that hour occurred in less than three dispatch intervals. The obligation is to submit offers equivalent to maximum available capacity, as defined in the WESM Applicable Penaity WESM-PN-issue No. 1.0 Effective Date: Level 2 - Financial Penaity Level 3 Escalated Financial Penal Page 34 of 56 === dc2021-08-0025-pages-38.ppm === Wholesale Electricity Spot Market Penalty Manual No. Breach Dispatch Protocol. For purposes of determining breach, the constraints considered in determining maximum available capacity are considered as exempting circumstances. Failure of a generation company to submit a valid nomination of the target loading levels of its non-scheduled generating units at any dispatch interval. There is failure to submit a_ valid nomination if there is no nomination that is considered in the relevant real time dispatch market run for the relevant trading interval because of any of the following conditions — Market Rute Breached & Associated Market Manual WESM-PN-Issue No. 1.0 Effective Date: Level 3 - Level 2 - Financial | Escalated Penalty Financial Penal Applicable Penalty WESM Rules e 3.5.5.4 e 3.5.11.2 T {— e Level 1- Reprimand | PhP1,000.00/ PhP2,000.00/ e Level 2 - Financial | breach breach Penalties e Level 3 - Escalated Financial Penalties e Suspension & Deregistration Page 35 of 56 === dc2021-08-0025-pages-39.ppm === ©: Wholesale Electricity Spot Market Penalty Manual! No, Breach WESM-PN-Issue No. 1.0 Market Rule Breached Associated Market Manual Applicable Penalty Level 2 - Financial Penalty a) b) c) The nomination submitted has zero (0) MW value, or The nomination submitted did not pass the validation as provided for in the WESM Dispatch Protocol and/or other relevant Market Manual or WESM Rules provision, so that, effectively, there are no offers considered in the market run; or The nomination submitted was cancelled so that, effectively, there are no offers considered in the relevant market run, Breach is counted as follows — a} One breach is counted for each trading hour, ie, settlement interval, during the trading day that the failure occurs in three or more dispatch intervals; or Effective Date: Level 3 - Escalated Financial Penalty Page 36 of 56 === dc2021-08-0025-pages-40.ppm === Wholesale Electricity Spot Market Penalty Manual Breach —<$——$ $$$} b) If the failure occurs in three or more successive dispatch intervals over two successive trading hours, i.e., seitlement intervals, one breach ts counted for each trading hour that the failure occurs, regardless that the failure for that hour occurred in: less than three dispatch intervals. Market Breached Associated Market Manual Rule & Applicable Penalty WESM-PM-lssue No. 7.0 Effective Date: Level 3 - Level 2 - Financial | Escalated Penalty Financial Failure of generation company to submit a valid nomination of the projected output of its must dispatch generating unit or priority dispatch generating unit at any dispatch interval: There is failure to submit a_ valid nomination if there is no nomination that is considered in the relevant real time WESM Rules 3.5.5.5 e Level 1 - Reprimand e Level 2 - Financial Penalties « Level 3 — Escalated Financial Penaities e Suspension & Deregistration PhP1,000.00// breach tL Penal PhP2,000.00/ breach Page 37 of 56 === dc2021-08-0025-pages-41.ppm === © Wholesale Electricity Spot Market Penalty Manual Breach Market Rule Breached Associated Market Manual dispatch market run for the relevant trading interval because of any of the following conditions — a) b) The nomination submitted has zero (0) MW value, or The nomination submitted did not pass the validation as provided for in the WESM Dispatch Protocol and/or other relevant Market Manual or WESM Rules provision, so that, effectively, there are no offers considered in the market run; or The nomination submitted was cancelled so that, effectively, there are no offers considered in the relevant market run, Breach is counted as follows — Applicable Penalty WESM-PM-Issue No. 1.0 Level 2 - Financial Penalty Effective Date: Level 3 - Escalated Financial Penalty Page 38 of 56 === dc2021-08-0025-pages-42.ppm === qholesale Electricity Spot Market Penalty Manual Breach a) b) WESM-PM-issue No. 1.0 Market Rule Breached & Associated Market Manual One breach is counted for each trading hour, i.e. settlement interval, during the trading day that the failure occurs in three or more dispatch intervals; or If the failure occurs in three or more successive dispatch intervals over two successive trading hours, i.e., settlement intervals, one breach is counted for each trading hour that the failure occurs, regardless that the failure for that hour occurred in less than three dispatch intervals. Applicable Penalty po Effective Date: Level 3 - Level 2 - Financial | Escalated Penalty Financial | Penalty _ - Page 39 of 56 === dc2021-08-0025-pages-43.ppm === Wholesale Electricity Spot Market Penalty Manual No. j Breach 4 Failure to comply with forecast accuracy standards in respect to projected output submitted for a must dispatch generating unit. One breach is counted for each year that the failure occurs. One breach is counted for each category of forecast accuracy standard that was not complied with. That is, failure to comply with the prescribed mean absolute percentage error (MAPE) and failure to meet the prescribed percentile 95 of the forecasting error (Perc95) are counted as separate breaches even if they occur on the same periods. Market Rule Breached & Associated Market Manual Applicable Penalty WESM-PM-Issue No. 1.0 Level 2 - Financial Penalty Effective Date: Level 3 Escalated Financial Penalty WESM Rules e 3.5.5.5. e 3.5.5.8 © 3.5.5.10 in relation to the WESM Manual on Procedures for the Monitoring of Forecast Accuracy Standards for Must Dispatch Generating Units Breach of MAPE with deviation < 30%: e Level 1 - Reprimand ¢ Level 2 - Financial Penalties ¢ Level 3-Escalated Financial Penalties e Suspension & Deregistration Breach of MAPE with deviation > 30%: e Level 2 - Financial Penalties (first time occurrence} « Level 3-Escalated Financial Penalties PhP500,000/ Breach of MAPE PhP 500,000/ Breach of PERC95 PhP1,000,000/ Breach of MAPE PhP 1 ,000,000/ Breach of PERC95 Page 40 of 56 f ™ === dc2021-08-0025-pages-44.ppm === Wholesale Electricity Spot Market Penaity Manual WESM-PWI-lIssue No. 1.0 Effective Date: Market Rule Level 3 - Breached & Applicable Penalty Level 2 - Financial | Escalated Associated Market Penalty Financial Manual Penal Non-compliance shall be determined e Suspension & based on the report of the Market Deregistration Operator on annual compliance, required under WESM Rules clause Breach of Per95: 3.5.5.117. e Level 1 - Reprimand e Level 2 - Financial Penalties e Level 3 —-Escalated Financial Penalties e Suspension & Deregistration WESM Rules e 3.8.6 in relation to 3.8.4 e dn relation to the WESM Dispatch Protocol Failure of a scheduled generating unit or priority dispatch generating unit to comply with its dispatch schedule in accordance with the dispatch conformance standards. e Level 1-Reprimand | For each breach: For each breach: Level 2 - Financial Penalties Absolute Value ; Absolute value Level 3 — Escalated | [Nodal price, PhP x | [Nodal price, Financial Penalties | (Deviation, MW — | PhP x Suspension & | Dispatch Threshold, | (Deviation, MW — Deregisiration MW Dispatch Page 41 of 56 === dc2021-08-0025-pages-45.ppm === CA inclesale Electricity Spot Market Penaity Manual WESM-PM-lssue No. 1.0 Market Rule Breached & Associated Market Manual Applicable Penalty | Excess Generation « WESM Rules Clause 3.9.8.3 e WESM Dispatch Protocol (Issue 13) Section 12.5.2 (g), and Section 18.3 Breach occurred in dispatch intervals with impending excess generation: e Level 3 — Escatated Financial Penalties « Suspension & Deregistration Level 2 - Financia! Penalty QO Nodal price is the price at the generator node, PhP/MWh. For this purpose, the nodal price per MVWEH must be converted to the MW to consider consistency in the calculation of penalty. U Deviation is the difference between target and the schedule actual Effective Date: Level 3 Escalated Financial Penal Threshold, MW)} x2 QO Nodal price is the price at the generator node, PhP/MWh. Q Deviation _ is the difference between the target schedule and actual generation, in MW. O Dispatch threshold is Page 42 of 56 === dc2021-08-0025-pages-46.ppm === Chelsea Electricity Spot Market Penalty Manual WESM-PM-lssue No. 1.0 Effective Date: Market Rule Breached & Associated Market Manual Level 3 Escalated Financial Penalty generation, i the MW MW. equivalent of the allowed deviation tolerance. Level 2 - Financial Penalty Applicable Penalty Q) Dispatch threshold is the MW equivalent of the allowed deviation tolerance. Failure to comply with dispatch | WESM Rules instructions tssued by the Systend|«3.8.8, 38.3 and Operator, including re-dispatch | 3.8.4 in relation to Level 1- Reprimand | PhP10,000.00/ Level 2 - Financial | breach Penalties PhP20,000.00/ breach aa . instructions for a generating unit to be constrained on/off, or to dispatch as must run unit, of to emergency directions issued under emergency conditions or during market intervention or suspension. 2.3.1.7 (for generators) or 2.3.2.3 (for customers) In relation to relevant WESM manuals Level 3 - Escalated Financial Penaities Suspension & Deregistration Page 43 of 56 === dc2021-08-0025-pages-47.ppm === Wholesale Electricity Spot Market Penalty Manual Market Rule Breached & Associated Market Manual Breach Applicable Penalty WESM-PM-lssue No. 1.0 Effective Date: Level 3 Escalated Financial Penaity Level 2 - Financial Penalty setting out procedures for re-dispatch, management of must- run units, and emergency procedures Market intervention or suspension, or emergency conditions ¢ 6.3.2.6 and 6.2.2.1 « In relation to relevant WESM manuals setting out emergency procedures, and procedures during market intervention or suspension Under emergency conditions, or during market intervention or suspension e Level 3 - Escalated Financial Penalties Suspension & Deregistration Page 44 of 56 === dc2021-08-0025-pages-48.ppm === Wholesale Electricity Spot Market Penalty Manuai WESM-PN-Issue No. 1.0 Effective Date: Market Rule [Level 3 - Breached & . Level 2 - Financial | Escalated Breach Associated Market Applicable Penalty Penalty Financial | Manual Penalty > Emergency ir | Procedures > WESM _ Dispatch Protocol an { | Failure of a must dispatch generating | WESM Rules « Levei 1 - Reprimand | PhP10,000.00/ PhP20,000.00/ unit to strictly comply with its dispatch |e 3.6.1.7, 3.8.1 (g &;« Level 2 - Financial | breach breach schedule in intervals when its output h) Penalties was restricted pursuant to WESM Rules |* 3.8.4.3 « Level 3 - Escalated Clause 3.6.1.7 and communicated|« 3.8.8.1 Financial Penalties pursuant to Clause 3.8.1 (g & h). Suspension & Deregistration There is breach if the actual output for the relevant interval exceeds the dispatch schedule. Page 45 of 56 === dc2021-08-0025-pages-49.ppm === Wholesale Electricity Spot Market Penalty Manuat WESM-PM-lssue No. 1.0 Effective Date: Market Rule Level 3 Breached & . Level 2 - Financial | Escalated Breach Associated Market Applicable Penalty Penalty Financial Manuai Penal Failure of a must dispatch generating | WESM Rules PhP20,000.00/ unit or priority dispatch generating unit |e 3.8.3.4 e Level 3 — Escalated breach to comply with dispatch instructions to|« 3.8.8.1 Financial Penaities restrict its output or constrain its ramp Suspension & rate to a level specified by the System Deregistration Operator, when the grid is in emergency state. Non-submission of data, report or information under the following circumstances — Failure of network service provider to |; WESM Rules e Level 1 - Reprimand | PhP5,000.00/ PhP10,000.00/ submit to the System Operator or | 3.5.2.1 to 3.5.2.4, « Level 2 - Financial breach update standing network data Appendix A.2 Penalties « Level 3 — Escalated Financial Penalties Page 46 of 56 === dc2021-08-0025-pages-50.ppm === Wholesale Electricity Spot Market Penalty Manual Breach WESM-PN-Issue No. 1.0 Failure of network service provider to immediately notify the System Operator of any circumstance which threaten significant probability of material adverse change in the state of its network Failure of a Trading Participant to immediately advise the System Operator and the Market Operator of any circumstance which _ threaten significant probability of material change in state of facilities Failure of a WESM Participant to advise the Market Operator of a metering installation malfunction or other defect within three (3) hours from the time the Effective Date: Market Rule Level 3 - Breached & Applicable Penalty Level 2 - Financial | Escalated Associated Market PP Penalty Financial Manual Penal WESM Rules Level 1 - Reprimand | PhP5,000.00/ PhP 10,000.00/ 3.5.2.5 Level 2 - Financial | breach breach Penalties Level 3 — Escalated Financial Penalties WESM Rules Level 1 - Reprimand | PhP5,000.00/ PhP10,000.00/ 3.5.14.6 Level 2 - Financial | breach breach Penalties Level 3 — Escalated Financial Penalties WESM Rules Level 1 - Reprimand |; PhP5,000.00/ PhP 10,000.00/ 4.5.7.3 Level 2 - Financial | breach breach Penalties Page 47 of 56 === dc2021-08-0025-pages-51.ppm === © Wholesale Electricity Spot Market Penalty Manual WESM-PM-Issue No. 1.0 Effective Date: Market Rule Level 3 Breached & . Level 2 - Financial | Escalated Associated Market | “PPlicable Penalty | a sity Financial Manual Penal malfunction or defect was detected by Level 3 — Escalated the participant Financial Penalties — Failure of a Distribution Utility to notify | Retail Rules * Level t - Reprimand | PhP5,000.00/ PhP10,000.00/ the Central Registration Body of any | «2.2.2& e Level 2 - Financial | breach breach end user within its franchise area that | ¢ 2.3.1.1 Penalties has met the requirements to be certified Level 3 — Escalated as a contestable customer and to Financial Penalties provide customer information required under the Clause 2.3 of the Retail Rules. Registration by the Contestable Customer in the WESM is not an exempting circumstance Page 48 of 56 o_ === dc2021-08-0025-pages-52.ppm === Wholesale Electricity Spot Market Penalty Manuai WESM-PM-Issue No. 1.0 Effective Date: Market Rule Level 3 Breached & . Level 2 - Financial | Escalated Breach Associated Market Applicable Penalty Penalty Financial Manual Penalty Failure of the Supplier/s to notify and | Retail Rules Teva 1 -Reprimand | PhP5,000.00/ PhP10,000.00/ enroll with the Central Registration | ¢ 2.3.3.1 & ¢ Level 2 - Financial | breach breach Body their bilateral power supply | « 2.3.3.3 Penalties contracts with Generation Companies Level 3 — Escalated that they wish to be accounted for in the Financial Penalties WESM settlements within thirty days before effectivity of the contract. Compliance by either party is deemed a compliance by the other. Likewise, either party is also deemed compliant if the Generation Company counterparty has complied with enrofment procedures set in relevant Market Manual in respect to the relevant bilateral contract. Page 49 of 56 om s ~m, === dc2021-08-0025-pages-53.ppm === Wholesale Electricity Spot Market Penalty Manual WESM-PM-Issue No. 1.0 Effective Date: Market Rule Breached & Associated Market Manual Level 3 Escalated Financial Penaity Level 2 - Financial Breach ac Penalty Applicable Penalty Failure of the Suppliers to notify the | Retail Rules Central Registration Body of their retail | « 2.3.3.2 & electricity supply contracts and provide | « 2.3.3.3 required information, within thirty days before the effectivity of the contract. PhP10,000.00/ breach Level 1 - Reprimand | PhP5,000.00/ e Level 2 - Financial | breach Penalties Level 3 -— Escalated Financial Penalties The compliance by either the Customer or the Supplier shalf be considered as compliance of the other party. PhP10,000.00/ breach Failure to implement remedial | WESM Enforcement Level 1 - Reprimand | PhP5,000.00/ measures required as a consequence | and Compliance Level 2 - Financial | breach of a breach, which failure was | Manual Penalties established in accordance with Market Level 3 — Escalated Rules and implementing Market | Penalty Manual Financial Penalties Manual. Suspension & Deregistration Page 50 of 56 === dc2021-08-0025-pages-54.ppm === CD neleate Electricity Spot Market Penalty Manual T Market Rule Breach Breached & This is an automatic penalty and shalf be imposed at the instance of the Enforcement and Compliance Office. 11 Failure to pay financial penalty amounts imposed as a consequence of breach. This is a penalty interest that shall be imposed automatically by the Market Operator upon failure to pay the financial penalty on due date. 12 Failure to satisfy margin call Manual Associated Market Applicable Penalty WESM-PM-Issue No. 1.0 Effective Date: Penalty Level 2 - Level 3 Financiai | Escalated Financial Penal WESM Manual Section 4.2.2 of the Registration Manual Penalty Prevailing legal interest rate for WESM setilement obligations set in the WESM Rules or in the applicable WESM Manuals Market a N/A Suspension Deregistration Page 51 of 56 === dc2021-08-0025-pages-55.ppm === Wholesale Electricity Spot Market Penalty Manual Failure to comply with express mandatory provisions of the Market Rules, that are not otherwise covered in other identified breach but which expressly provide for imposition of penaities. WESM-PM-Issue No. 1.0 Effective Date: Market Rule Breached & Associated Market Manual e WESM Rules e Retail Rules ¢ Market Manuals Applicable Penalty Level 2 - Financial 3 Level Escalated Penalty Financial Penal — Level 1 - Reprimand | PhP5,000.00/ PhP10,000.00/ Level 2 - Financial | breach breach Penalties Level 3 — Escalated Financial Penalties Suspension & Deregistration Page 52 of 56 ~~ === dc2021-08-0025-pages-56.ppm === See Oia Electricity Spot Market Penalty Manual Effective Date: WESM-PiW-Issue No. 1.0 SECTION 6 UTILIZATION OF FINANCIAL PENALTY The financial penalties and interest amounts collected by the Market Operator pursuant to this Manual shall be distributed to the electricity end-users. For this purpose, the Market Operator shall formulate the guidelines and procedures for distribution of the penalties and interest collected. Such guidelines and procedures shall be subject to the approval of the Department of Energy and the Energy Regulatory Commission in respect to the formula for distribution to electricity end users. L SECTION 7 AMENDMENT, REPEALING CLAUSE, PUBLICATION AND EFFECTIVITY 7.1 AMENDMENTS 7.1.1 a Amendments to this Manual may be initiated by the Market Surveillance Committee, the Compliance Committee, the Enforcement and Compliance Office, the Market Operator, the System Operator or any other WESM Member. Amendments initiated by parties other than the Market Surveillance Committee shall be done by submitting formal proposals for amendment to the Market Surveillance Committee. Without limiting the grounds upon which this Manual may be amended, amendments to this Manual shall be made to make this Manual consistent with - a) Amendments to the EPIRA and its Implementing Rules and Regulations affecting enforcement and compliance in the WESM; b) Amendments to the Market Rules affecting enforcement and compliance in the WESM; c) issuances of the Energy Regulatory Commission concerning enforcement of the WESM Rules: or d) Issuances of the Department of Energy affecting enforcement and compliance in the WESM. The Market Surveillance Committee shall conduct consultations on the proposed changes with the WESM Members, Rules Change Committee and the PEM Board, in accordance with the WESM Rules. Amendments to this Manual shall be approved and promulgated by the Department of Energy. Page 53 of 56 === dc2021-08-0025-pages-57.ppm === Wholesale Electricity Spot Market Penalty Manuai WESM-PW-issue No. 1.0 Effective Date: 7.2 EFFECTIVITY AND PUBLICATION This Penalty Manual shall become effective upon approval of the Department of Energy and fifteen (15) days following its publication in at least two (2) newspapers of general circulation and shall remain in effect until otherwise revoked. This Penalty Manual shail likewise be published in the market information website. Page 54 of 56 === dc2021-08-0025-pages-58.ppm === Wholesale Electricity Spot Market Penalty Manual WESM-PM-Issue No. 1.0 Effective Date: SECTION 8 GLOSSARY | Unless the context indicates otherwise, the following terms shali have the meaning set out in this Section. Term/ Abbreviation Definition Failure to comply with the provisions of the Market Rules that is subject of a penalty under the WESM Penalty Manual. Breach For purposes of this Manual, breach is not synonymous with non- compliance. An integral part of enforcement proceedings in the WESM that is initiated and carried out by the Enforcement and Compliance Office, primarily for the purpose of determining the occurrence of Compliance Monitoring | reach of the Market Rules. Assessment is done by taking into and Assessment consideration all the relevant and verified market data and information from the Market Operator, the System Operator, the WESM Members, among others, with the end in view of determining the appropriate enforcement actions, if warranted. An amount in Philippine pesos imposed on a WESM Member as a consequence of breach pursuant to the Market Rules and this Manual, excluding the cost of investigation of an actual breach by a WESM Member. Market fees Refers to the revenue requirements of the Market Operator for a specified period, approved by the Energy Regulatory Commission. is refers to the WESM Rules, Retail Rules, their Market Rules . implementing manuals, and amendments thereto. Notice issued to a WESM Member found in breach which directs the payment of a financial penalty and or a non-financial penalty and or additional penalties. An integral part of enforcement proceedings in the WESM that may be initiated by the Enforcement and Compliance Office, from a Investigation notice of probable breach by the Market Operator or the System Operator, or by request for investigation from other WESM Members or WESM Committees. Philippine Electricity Market Corporation is the governance arm of the WESM. Financial penaity Notice of Specified Penalty Penalty Interest Penalty Interest shall mean the prevailing legal rate of interest. Page 55 of 56 === dc2021-08-0025-pages-59.ppm === + ee’ aaa Wholesale Electricity Spot Market Penalty Manual WESM-PI-Issue No. 1.0 Effective Date: ACRONYMS New Market Management System — Compliance Monitoring Module CPEMS Compliance Post-Evaluation Monitoring System Accounts Management System File Transfer Protocol Trading Participant Market Surveillance Committee Independent Electricity Market Operator of the Phill Enforcement and Compliance Office EC Manual Enforcement and Compliance Manual MS Manual Market Surveillance Manual NMMS-CMON Page 56 of 56