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Republic of the Philippines
f ) DEPARTMENT OF ENERGY
(Kagawaran ng Enerhiya)

DEPARTMENT CIRCULAR NO. _0C2022 -06 -00/9 Va

DECLARING THE INTERIM COMMERCIAL OPERATIONS
OF THE RENEWABLE ENERGY MARKET

WHEREAS, Republic Act (RA) No. 7638, otherwise known as the “Department of
Energy (DOE) Act of 1992,” declares as a policy of the State to, among others,
ensure the continuous, adequate and economic supply of energy through the
integrated and intensive exploration, production, management and development of
the country’s indigenous energy resources;

WHEREAS, RA No. 9136 otherwise known as the “Electric Power Industry Reform
Act of 2001,” or “EPIRA,” declares as a policy of the State to, among others, ensure
the quality, reliability, security and affordability of the supply of electric power;

WHEREAS, Section 37, Chapter Ill of EPIRA mandates the DOE to encourage
private sector investments in the electricity sector and promote the development of
indigenous and RE resources;

WHEREAS, RA No. 9513, otherwise known as the “Renewable Energy Act of
2008” or the “RE Act,” declares as a policy of the State to increase the utilization
of renewable energy (RE) by institutionalizing the development of national and
local capabilities in the use of RE systems, and promoting their efficient and cost-
effective commercial application by providing fiscal and non-fiscal incentives;

WHEREAS, Section 6 of the RE Act states that all stakeholders in the electric
power industry shall contribute to the growth of the RE industry of the country.
Towards this end, the National Renewable Energy Board (NREB) shall set the
minimum percentage of generation from eligible RE resources and determine to
which sector the Renewable Portfolio Standards (RPS) shall be imposed on a per
grid basis;

WHEREAS, Section 8 of the RE Act and Section 10 of its Implementing Rules and
Regulations (IRR) state that the DOE shall establish the Renewable Energy Market
(REM) and shall direct the Philippine Electricity Market Corporation (PEMC) to
implement changes to the Wholesale Electricity Spot Market (WESM) Rules in
order to incorporate the rules specific to the operation of the REM under the
WESM;

WHEREAS, Section 8 of the RE Act and Section 11 of its IRR state that the PEMC
shall, under the supervision of the DOE, establish and operate the Renewable
Energy Registrar (RER) and shall issue, keep, and verify RE Certificates (RECs)
corresponding to energy generated from eligible RE facilities, which shall be used
by Mandated Participants for compliance under the RPS;

Energy Center, Rizal Drive cor. 34th Street, Bonifacio Global City; Taguig City, Philippines 1632
Tel. Nos. (Trunkline) (632)479-2900; :
Website: http://www.doe.gov.ph; E-mail: info@doe.gov.ph
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WHEREAS, on 22 December 2017 and 24 August 2018, the DOE issued
Department Circulars (DC) Nos. DC2017-12-0015 and DC No. DC2018-08-0024,
promulgating the rules and guidelines governing the establishment of the RPS
Rules for On-Grid Areas and RPS Rules for Off-Grid Areas, respectively;

WHEREAS, on 04 December 2019, the DOE issued DC No. DC2019-12-0016,
“PROMULGATING THE RENEWABLE ENERGY MARKET RULES’, otherwise
known as the “REM Rules” to establish the basic rules, requirements and
procedures that govern the operation of the REM;

WHEREAS, Section 2 of the REM Rules prescribes that the PEMC for the
establishment of the REM and the development of the Philippine Renewable
Energy Market System (PREMS) shall perform the RER functions, Provided, That
no later than one (1) year from the start of commercial operations of the REM, the
functions, assets and liabilities of PEMC in performing the RER functions shall be
transferred to the entity performing market operations;

WHEREAS, Section 4 of the REM Rules prescribe that the REM Governance
Committee (RGC) shall, among others, oversee and monitor the activities of the
RER with regard to the REM processes to ensure that the REM participants and
Mandated Participants comply with the REM Rules;

WHEREAS, Section 5(d) of the REM Rules prescribes that prior to the
commencement of the REM, corresponding changes to the WESM Rules shall
have been implemented by the PEMC to facilitate the operation of the REM in
relation to the WESM;

WHEREAS, Section 5(a) of the REM Rules prescribes that PEMC shall submit,
for approval, to the DOE the following: (1) Readiness Criteria consisting of the
activities and scenarios necessary to enable the effective implementation of the
REM; and (2) Certification on the level of compliance of all REM Participants and
Mandated Participants in the Readiness Criteria for the
commencement/operationalization of the REM, including a recommendation as to
whether or not the Readiness Criteria have been met;

WHEREAS, Section 5(a) of the REM Rules further prescribes that the start of the
commercial operations of the REM shall be based on the Department's validation
and verification of PEMC’s certification and recommendation as to whether or not
the activities identified in the Readiness Criteria have been completed;

WHEREAS, on 09 July 2021, the DOE issued DC No. DC2021-07-0024,
“ADOPTING FURTHER AMENDMENTS TO THE WHOLESALE ELECTRICTIY
SPOT MARKET (WESM) RULES FOR THE OPERATION OF THE
RENEWABLE ENERGY MARKET”, to harmonize the WESM Rules and Retail
Rules with the policies stipulated in Section 8 of the RE Act and the REM Rules as
well as to enable the RER to carry out its functions in issuing RE Certificates
pursuant to the RPS Rules;

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WHEREAS, on 04 October 2021, the DOE issued DC No. DC2021-10-0032,
“ADOPTING THE RENEWABLE ENERGY MARKET (REM) MANUALS”, to
operationalize the relevant provisions in the REM Rules for the implementation of
the REM through the four (4) manuals: REM Registration Manual; REM
Allocation of RE Certificates for Feed-In Tariff (FIT) RE Generation; REM
Investigation Procedures and Penalty Manual; and REM Dispute Resolution;

WHEREAS, PEWMC through its letter dated 15 September 2021 certified that critical
activities under the Readiness Criteria have substantially been completed while the
following regulatory matters need to be established towards the anticipated full
operationalization of the REM: i) REC Price Cap and Methodology; ii) Rules on
the Recovery Mechanism for the cost of RPS Compliance by regulated entities;
and iii) Structure and Level of Market Transaction Fees for the REM;

WHEREAS, the RPS Composite Team (RPSCT) validated and verified that critical
activities under the Readiness Criteria for the commencement of interim
commercial operations of the REM have been substantially completed. Thus,
through its Resolution No. RPSCT2021-10-05-001, the RPSCT recommended
proceeding with the declaration of the interim commercial operations of the REM
wherein the RE Registrar can perform its functions except for any financial
transactions, until such time that the full Commercial Operations of the REM has
been declared by the DOE.

NOW, THEREFORE, premises considered, the DOE adopts the recommendation
of the RPSCT and declares as follows:

Section 1. Title. This Circular shall be known as the “Declaring the Interim
Commercial Operations of the Renewable Energy Market’.

The Interim Commercial Operations (I-COP) of the REM, its activities and
governing rules hereinafter provided shall be referred to as “REM I-COP”.

Section 2. Commencement of the REM I-COP. In consideration of the
significant milestones reached in the attainment of the Readiness Criteria, and
while awaiting the determination of the REC Price Cap and its Methodology, Rules
on the Recovery Mechanism for the cost of RPS Compliance by regulated entities,
and Structure and Level of Market Transaction Fees for the REM, the
commencement of the REM I-COP is hereby declared.

The REM I-COP shall not yet involve any financial transactions, until such time that
the Commercial Operations of the REM has been declared by the DOE.

Section 3. Responsibilities of the RE Registrar (RER). The RER shall perform
all functions related to the following activities under the REM I-COP:

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(a)

(b)

(c)

(d)

(e)

Registration and Participant Support:

i. Continue accepting applications for REM registration by the REM
Participants to achieve one hundred percent (100%) registration; and

ii. Ensure availability of REM information on the Market Information
Website, consistent with Section 5.1.3 of the REM Rules.

REM Awareness Activities:

i. Conduct REM and PREMS trainings and lectures at least twice a
month for the benefit of REM Participants, electricity end-users
and/or other stakeholders; and

ii. Publish online materials for REM and PREMS on the Market
Information Website for the REM.

RPS Mandates and Computations:

i. Facilitate the uploading to the PREMS of gross sales data from
Mandated Participants; and

ii. Compute the RPS requirements for a compliance period and issue
preliminary and final statement reports to the Mandated Participants.

REC Data Submission and Validation:

i. Secure and process the data required for the full commercial
operation of the REM from the Market Operator and National
Transmission Corporation and upload the same to the PREMS;

ii. Facilitate the submission of data by Distribution Utilities with
registered voluntary generators (i.e., net-metered, RE for own-use,
non-WESM-embedded RE generators) in the PREMS;

iii. Facilitate the validation of data by the REM Participants through
submission of Data Validation Forms, meetings, and email
exchanges;

iv. Address concerns and issues raised by REM Participants on their
data prior to REC issuance; and

V. Coordinate with the data provider for any issues and concerns on the
REM data.

REC Issuance and Validation:

i. Prepare and/or update, as necessary, the REC Manual Computation
Template for the issued RECs under the FIT mechanism for
reference of and use by each REM participant in validation;

ii. Issue RECs under the FIT and Non-FIT Compliance Mechanisms;

iii. Address concerns and issues raised by REM Participants on their
issued RECs; and

iv. Adjust the issued RECs, as necessary.

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(f) REC Reports Submission:

Pr

Prepare and submit REM Reports to the DOE including the Annual
REC Report required under the RPS Rules; and

Prepare other related reports, as required by PEMC Management,
RGC, PEM Board, DOE, or ERC.

(g)  Operability of the Philippine Renewable Energy Market System (PREMS):

iv.

Ensure the 99.5% availability of the PREMS and PREMS public
websites;

Propose and implement PREMS enhancements, as deemed
necessary and approved by the DOE;

Monitor the functioning of the PREMS and ensure that operational
issues are immediately resolved; and

Propose and implement PREMS public website enhancements, as
deemed necessary and approved by the DOE.

(h) Support Services to REM Governance Committee (RGC):

see

vi.

Provide technical and administrative support to the RGC;

Facilitate regular meetings and other activities of the RGC;

Facilitate the processing of the REM Rules and Manual change
proposals;

Monitor compliance of the REM Participants;

Conduct studies related to REM implementation and developments;
and

Monitor and report the completion of the items enumerated in the
DOE-approved Readiness Checklist.

(i) REM Transaction Fees:

Consistent with Section 8 of the RE Act, determine the market
transaction fees, and file the same to the ERC for approval.

Section 4. Guidance on the RPS Compliance. The following shall guide the
Mandated Participants of RPS in both On-Grid and Off-Grid areas:

(a) | For Mandated Participants in On-Grid Areas:

Compliance Year 1 of the RPS On-Grid Rules. - Year 2020 shall
remain as the Compliance Year 1 of the full implementation of the RPS
On-Grid Rules. For each compliance year, the compliance period shall
be from 26 December of the current year to 25 December of the
following year based on Section 17(m) of the RPS On-Grid Rules.’

1 To illustrate, the compliance period for Compliance Year 1 is from 26 December 2020 to 25 December 2021; for Compliance
Year 2, 26 December 2021 to 25 December 2022; for Compliance 3, 26 December 2022 to 25 December 2023; and so on.

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Based on available data and result of simulations done by the DOE
through its Renewable Energy Management Bureau (REMB), all
Mandated Participants were deemed compliant with their respective
minimum annual RPS Requirements for Compliance Year 1-3 (2020-
2022). Accordingly, the implementation of the REM-ICOP will not
cause any delays to the full implementation of the RPS On-Grid Rules.

ii. Issuance and Validity of RE Certificates. - RECs shall be issued by the
RE Registrar corresponding to the metered generation (MWh) of RE
Facilities eligible for RPS compliance starting 2018 and onwards. A
REC shall be valid for three (3) years from the date the REC was issued,
regardless of the date the energy component (MWh) was generated
based on Section 17(i) of the RPS On-Grid Rules.?

iii. Suspension or Carry-Over of Compliance Shortfall. -— Upon
recommendation of the RPSCT, the DOE may, in lieu of suspending
compliance of a Mandated Participant, allow such Mandated Participant
to carry-over the compliance shortfall for a period of three (3) years
under any of the following conditions based on Section 25 of the RPS
On-Grid Rules:

(i) Inadequate supply of the Eligible RE Facilities to meet the minimum
annual RPS Requirements;

(ii) Inadequate supply of RECs to meet the minimum annual RPS
Requirements;

(iii) Unavailable capacity at both the transmission and relevant
distribution network to transport the power produced by the Eligible
RE Facilities to the grid;

(iv) Occurrence or existence of a force majeure event affecting or
preventing a Mandated Participant from complying with the
minimum annual RPS Requirements, as the case may be, and that
it exerted all efforts to comply therewith; or

(v) Such other consideration or condition, economic or otherwise,
which is outside the control of a Mandated Participant as may be
determined by the RPSCT.

Since the promulgation of the RPS On-Grid Rules in December 2017, the
Mandated Participants were already advised to commence planning for their
respective RPS compliance requirements provided under Section 26 of the
RPS On-Grid Rules. Hence, a Mandated Participant needs to show,
through clear and convincing proof, that the reason for its anticipated non-

compliance is beyond its control and that it exerted all efforts to comply
therewith.

? All RECs issued in December 2021 will be valid until December 2024; RECs issued in January 2022 will be valid until
January 2025; RECs issued in February 2022 will be valid until February 2025; and so on,

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(b) | For Mandated Participants in Off-Grid Areas:

Compliance Year 1 of the RPS Off-Grid Rules is suspended until further
notice.

Section 5. Regulatory Support. To realize a fully functional RE Market, the
Energy Regulatory Commission (ERC) is hereby enjoined to process and resolve
the following, within 120 working days:

(a) Determination and approval of the REC Price Cap and Methodology;

(b) Rules on the Recovery Mechanism for the cost of RPS Compliance by
regulated entities, are critical components for the anticipated full
operationalization of the REM; and

(c) Structure and Level of Market Transaction Fees for the REM. ©

Section 6. Separability Clause. If any provision in this Circular is declared
invalid or unconstitutional, the other provisions not affected thereby shall remain
valid and subsisting.

Section 7. Repealing Clause. The provisions of other circulars, orders,
issuances, rules, and regulations, which are inconsistent with the provisions of this
Circular are hereby repealed, amended, superseded, or modified accordingly.

Section 8. Effectivity. This Circular shall take effect fifteen (15) days after
publication in two (2) newspapers of general circulation. Copies of this Circular
shall be filed with the University of the Philippines Law Center — Office of the
National Administrative Register.

ALFO soe busi
Secretary

Issued on JUN 10 2022 , at Energy Center, Rizal Drive,

Bonifacio Global City, Taguig City.

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