=== ocr-pages-1.ppm ===
Republic of the Philippines
DEPARTMENT OF ENERGY

(Kagawaran ng Enerhiya)

,
ee: :®

PX.
S

DEPARTMENT CIRCULAR NO. _DC 2022 ~ 12 - 0049 Ww

DECLARING THE COMMERCIAL OPERATION OF THE WHOLESALE
ELECTRICITY SPOT MARKET (WESM) IN THE MINDANAO GRID

WHEREAS, Republic Act No. 9136 titled, “Electric Power Industry Reform Act of 2001”
or the EPIRA, declares the policy of the State, among others, to ensure the quality,
reliability, security, and affordability of the supply of electric power and to ensure
transparent and reasonable prices of electricity in a regime of free and fair competition
and full public accountability to achieve greater operational and economic efficiency
and enhance the competitiveness of Philippine products in the global market;

WHEREAS, the EPIRA provides that the Department of Energy (DOE) shall:

a. Ensure the reliability, quality, and security of supply of electric power;

b. Jointly with the electric power industry participants, establish the Wholesale
Electricity Spot Market (WESM) and formulate the detailed rules governing the
operations thereof;

c. Develop policies and procedures, as appropriate, and promote a system of
energy development incentives to enable and encourage electric power
industry participants to provide adequate capacity to meet demand including,
among others, reserve requirements; and

d. Integrate the Transmission Development Plan (TDP) to the Power
Development Plan. I

WHEREAS, on 28 June 2002, the DOE promulgated Department Circular (“DC”) No.
DC2002-06-0003 or the WESM Rules;

WHEREAS, on 04 May 2017, the DOE promulgated DC No. DC2017-05-0009 titled,
“Declaring the Launch of the WESM in Mindanao and Providing for Transition
Guidelines” effective 26 June 2017 to provide sufficient time for the Market Operator
(“MO”), System Operator (“SO”), and WESM Participants to prepare and familiarize
themselves in WESM operations;

WHEREAS, on 25 June 2021, the DOE promulgated DC No. DC2021-06-0015 titled,
“Declaring the Commercial Operations of Enhanced Wholesale Electricity Spot Market
(WESM) Design and Providing Further Policies” which provides for implementation of
WESM Central Scheduling (WCS) for Mindanao in transition to the commercial
operations for the WESM;

WHEREAS, on 24 July 2021, the DOE issued an Advisory extending the
implementation of WCS in the Mindanao Grid in light of the pending registration of
WESM Mindanao Participants, until further notice on the DOE’s declaration of the |
actual Commercial Operation Date (COD) of the WESM in Mindanao;

CREE yy |

Energy Center, Rizal Drive cor. 34th Street, Bonifacio Global City, Taguig City, Philippines 1632
Tel. No. (Trunkline) (632) 8479-2900
Website: http://www.doe.gov.ph; Email: info@doe.gov.ph

JUCUCFUUQ0C0TUJUj(J=“= (} =} (= }#}=}°00((0..) <r ee

=== ocr-pages-2.ppm ===
WHEREAS, pursuant to the TDP, the Mindanao-Visayas Interconnection Project
(MVIP) is expected to be completed by March 2023, the commercial operation of
which necessitates the implementation of WESM in Mindanao to allow the efficient
transfer and settlement of electricity exchanges through the Mindanao-Visayas
Interconnection;

WHEREAS, based on 24 November 2022 registration update from the MO, sixty-nine
(69) out of the one hundred one (101) expected participants in Mindanao have
completed registration in the WESM;

WHEREAS, the remaining requirements of the unregistered participants, including the
Lanao del Sur Electric Cooperative, Inc. (LASURECO) and Maguindanao Electric
Cooperative, Inc. (MAGELCO), need not necessarily impede the commercial
operations of the WESM in Mindanao;

WHEREAS, the commercial operation of WESM Mindanao and the MVIP is expected
to improve the reliability of electric power supply not only in the Mindanao Grid but
also in the Luzon and Visayas Grids;

NOW THEREFORE, from the foregoing premises and pursuant to its authority under
the EPIRA and the WESM Rules, the DOE hereby declares the following:

Section 1. Declaration of Commercial Operation of the WESM in the Mindanao
Grid. Tne DOE hereby declares 26 January 2023 as the COD of the WESM in
Mindanao. For this purpose, the scheduling and dispatch of capacities in Mindanao
shall be based on the schedules generated by the MO in accordance with the WESM
Rules and the relevant Market Manuals, and as otherwise provided herein.

Section 2. Compliance with WESM Registration Requirements. All Mindanao
Electric Power Industry Participants and entities mandated to become WESM
Members shall ensure completion of their WESM registration not later than 15 January
2023. For this purpose, the MO shall facilitate registration in the WESM considering
the following:

2.1 Full compliance with the requirement to install main meters, including the
submission of the following duly executed supporting documents:

i. Metering Installation Registration Form (MIRF); and
ii. Single Line Diagram

2.2 Full compliance with the requirement to submit Direct WESM Member
Counterparty Confirmation for those participants registering as Indirect WESM
Member, subject to the provisions of Section 8.2 for LASURECO and
MAGELCO;

2.3 Participants with pending requirements, other than those specified under
Sections 2.1 and 2.2, are deemed registered, provided that full compliance
shall be observed not later than 25 April 2023 or as otherwise specified herein.

Section 3. Non-Compliance with WESM Registration Requirements. The MO,
subject to the provisions of Section 8.2 for LASURECO and MAGELCO, shall be
authorized to initiate the process of disconnection of all Mindanao Electric Power
Industry Participants and entities mandated to register in the WESM but are unable to

DC No. Declaring the Commercial Operation of the Wholesale Electricity Spot
Market (WESM) in the Mindanao Grid Page 2 of 7

=== ocr-pages-3.ppm ===
comply with Section 2.1 or 2.2, as applicable. In such case, the MO shall issue a notice
and request for disconnection to the relevant Network Service Provider (NSP) and the
non-complying participant at least seven (7) days prior to the implementation of the
disconnection. The disconnection shall be implemented by the NSP at least one (1)
calendar day before the COD.

In case the Participants referred to in Section 2.3 fail to comply with the pending
requirements within the timeline set therein, the process for suspension, disconnection
or cessation under the relevant provisions of the WESM Rules, market manuals and
amendments thereto, shall be followed.

Section 4. Compliance with Real-time Monitoring Requirements and Scheduling
of Generators. Generators which lack requirements specific to Real-time Monitoring
shall submit their respective compliance plans for the completion of the installation of
Real-time Monitoring requirements to the MO and SO, furnishing copies to the DOE
and the Energy Regulatory Commission (ERC), within two (2) weeks from the
effectivity of this Circular. The timeline in the compliance plan for the completion of the
Real-time Monitoring requirements shall not be more than three (3) months from the
Actual COD. In the event that: (a) the Generator fails to submit the compliance plan
within the stated deadline; or (b) the Generator is unable to complete this requirement
within the timeline set in the submitted compliance plan, the SO shall initiate the
disconnection of the concerned Generator and inform the MO of such disconnection.
Upon receipt of such notice of disconnection, the MO shall initiate the process for
Suspension, or cessation in accordance with the relevant provisions of the WESM
Rules, market manuals, and amendments.

Pending the completion of the Real-time Monitoring requirements, the MO and the SO
shall irmplement interim procedures for updating of the real-time monitoring of
concerned generating units as provided in Annex A of this Circular.

Immediately upon the start of the Commercial Operations, the SO shall submit a
monthly status report on the compliance with the Real-time Monitoring requirements
to the MO, the DOE, and the ERC.

Section 5. Relaxation of Prudential Requirements (PR). The posting of PR by
WESM Mindanao Trading Participants shall be relaxed for the first three (3) billing
months following the COD, subject to Section 1 of this DC. For this purpose, the
following shall be observed:

5.1. The Mindanao WESM Trading Participants shall be allowed to post the
required PR within the three (3) billing month’s relaxation period or not
later than 25 April 2023.

5.2 For each of the spot transactions during the period of relaxation of the
posting of PR, the concerned Mindanao WESM Trading Participants shall
ensure timely settlement of its monthly bills with the MO in accordance
with the WESM timetable provided under the WESM Rules and Market
Manuals. Otherwise, interest shall apply in accordance with the applicable
provisions of WESM Rules and Market Manuals.

"Heh 5

5.3. The Mindanao Trading Participants under Direct WESM Membership
which are unable to post the required PR within the three (3) - billing
months relaxation period shall update its registration status to Indirect

DC No. Declaring the Commercial Operation of the Wholesale Electricity Spot
Market (WESM) in the Mindanao Grid Page 3 of 7

a
=== ocr-pages-4.ppm ===
WESM Membership not later than fifteen (15) days prior to the lapse of
said period and shall comply with other requirements pursuant to the
WESM Rules. For clarity, the lapse of the relaxation period shall be 26
April 2023. Otherwise, applicable sanctions and/or penalties shall be
imposed in accordance with the relevant provisions of WESM Rules and
Market Manuals.

Section 6. Relaxation of Dispatch Conformance Standards (DCS). The
compliance with DCS shall be relaxed for the first three (3) billing months following the
COD subject to Section 1 of this DC. For this purpose:

6.1 The WESM Trading Participants in Mindanao shall be exempted from
sanctions and penalties in case of breach of DCS provided under the
WESM Dispatch Protocol during the first three (3) billing months of the
COD. Notwithstanding, the Enforcement and Compliance Office (ECO)
shall continue to monitor the observance of the DCS by the Trading
Participants for the purpose of evaluation of the initial commercial
operation of the WESM in Mindanao;

6.2 All Trading Participants shall ensure full compliance with all other
obligations under the WESM Rules and Market Manuals; and

AG

6.3 Starting 26 April 2023, all concerned WESM Mindanao Trading
Participants shall ensure full compliance with the DCS in accordance with
the applicable provisions of the WESM Rules and Market Manuals.

Section 7. Transitory Provisions. Until the energization of the MVIP, the settlement
for transactions of the participants located in Mindanao shall be separate from the
market in Luzon and Visayas.

Section 8. Responsibilities of the National Electrification Administration, Power
Sector Assets and Liabilities Management Corporation, WESM Governance
Arm, Market Operator, System Operator, and Network Service Providers

For the smooth transition to and effective implementation of the commercial operation
of WESM Mindanao, the following entities are mandated to:

8.1 National Electrification Administration (NEA)

8.1.1. Ensure and render the necessary assistance to Electric Cooperatives (ECs)
in the completion of their registration in the WESM in accordance with the
provisions of this Circular, the WESM Rules and other relevant issuances;

8.1.2. Coordinate with relevant entities, as necessary, to fulfill compliance of the
ECs with the financial and technical requirements relative to WESM
registration;

Assist ECs, particularly those which are unable to post the necessary
prudential requirements, in securing supply contract and a Direct WESM
Member counterparty. For this purpose, the NEA shall render continuing
assistance to LASURECO and MAGELCO, particularly in facilitating

DC No. Declaring the Commercial Operation of the Wholesale Electricity Spot
Market (WESM) in the Mindanao Grid Page 4 of 7

a
=== ocr-pages-5.ppm ===
arrangements for timely payments of their obligations with PSALM and/or
their other suppliers, if any;

8.1.3. Formulate and implement action plans for addressing viability problems of
ECs to ensure continuous supply of electricity to member-consumer-
owners.

8.2 Power Sector Assets and Liabilities Management Corporation (PSALM)

In addition to its obligations under relevant laws, rules and other issuances, PSALM
shall continue to fully supply LASURECO and MAGELCO, in accordance with the
following:

8.2.1 PSALM shall fulfill the obligations of a Direct WESM Member Counterparty
to LASURECO and MAGELCO.

8.2.2 All energy withdrawals of LASURECO and MAGELCO shall be exclusively
allocated to the energy output of PSALM-owned plants within the
Bangsamoro Area (i.e., Agus 1 and 2 Hydroelectric Power Plants (HEPPs)),
and should be declared as bilateral contract quantity by and with PSALM.
This notwithstanding, the energy output of Agus 1 and 2 HEPPs in excess
of the allocation to LASURECO and MAGELCO, shall continue to be
allocated by PSALM to other customers;

8.2.3. PSALM may determine the amount of energy allocation for LASURECO and
MAGELCO for each billing period which may be based on the actual
payments made by the two (2) ECs for the current power bills, provided that
all energy withdrawn by both ECs are accounted for as bilateral contract
quantity with PSALM;

8.2.4 All energy withdrawn by LASURECO and MAGELCO shall be declared as
bilateral contract quantity in the WESM for the account of PSALM until the
cessation of this arrangement as provided in this Circular. For this purpose,
PSALM, in coordination with the SO and MO, shall closely monitor the
energy withdrawals and payments of the two (2) ECs taking into
consideration its allocation of energy output to its other customers as
provided under Section 8.2.2 and as necessary, immediately inform the
NSP, SO, and the MO on any action needed to mitigate effects of non-
payment of both ECs to PSALM operations and the WESM;

8.2.5 In case the energy withdrawn by either or both ECs exceed the available
capacity of Agus 1 and 2 HEPPs, inform MO and SO to implement
measures to prevent the ECs in further withdrawing energy, otherwise
PSALM may issue a Notice of Disconnection from the Grid for these two (2)
ECs which should be implemented by the SO/Transmission Network
Provider (TNP) not later than one (1) day from receipt of such notice from
PSALM. The SO/TNP shall immediately inform the MO of such
disconnection. PSALM shall continue to be accountable for all WESM
transactions of the two (2) ECs until the effectivity of the actual
disconnection from the Grid as communicated by the SO to the MO;

DC No. Declaring the Commercial Operation of the Wholesale Electricity Spot
Market (WESM) in the Mindanao Grid Page 5 of 7

_UJjUCRj (jj

=== ocr-pages-6.ppm ===
8.2.6 PSALM may issue the Notice of Disconnection to any of its indirect WESM
counterparty in accordance with the provisions of the WESM Rules, this
Circular, and other applicable policies; and

8.2.7 This arrangement under Section 8.2 shall cease at the end of the one (1)
year- period which shall be on 26 January 2024, subject to notification by
Co PSALM to the MO and SO of the disconnection of LASURECO and
MAGELCO. The disconnection from the grid of the two (2) ECs should be
implemented by the SO/TNP not later than one (1) day from receipt of such
notice from PSALM. The SO/TNP shall immediately inform the MO of such
disconnection. Upon notice by PSALM, the MO shall immediately
implement the removal of PSALM as the Direct WESM Member
Counterparty.

Notwithstanding, PSALM shall continue to be liable for all the energy
a withdrawn by MAGELCO and LASURECO within the said one (1) year
period and until the actual disconnection of the two (2) ECs upon PSALM’s
issuance of the Notice of Disconnection as provided herein.

cJbfu 4a {

8.3 Independent Electricity Market Operator of the Philippines (IEMOP)

8.3.1 Ensure compliance of WESM Mindanao participants with the registration
requirements and undertake action necessary to address non-compliance
in accordance with the provisions of this Circular, the WESM Rules and
Market Manuals;

8.3.2 Recommend procedures necessary to implement the provisions of this
Circular and ensure smooth transition and operation of the WESM
Mindanao;

8.3.3 Ensure availability and applicability of all systems and procedures for the
successful conduct of electricity trading in Mindanao; and

8.3.4 Be authorized to adopt processes to implement the provisions of this
Circular, including allowing MAGELCO and LASURECO to comply with the
requirements under Section 2.3 beyond the timeline stated therein and
implement the arrangement set out herein for MAGELCO and
LASURECO.

8.4 Philippine Electricity Market Corporation (PEMC)

8.4.1 Monitor and evaluate the initial implementation of the WESM in Mindanao
and recommend measures to address policy issues that may arise during
the initial implementation thereof;

8.4.2 Monitor and ensure compliance of WESM Members with the WESM Rules
and Market Manuals and impose sanctions and penalties in accordance
with the provisions thereof subject to the relaxation period set forth in
Section 6 hereof; and

8.4.3 Facilitate review and endorsement of proposals for changes in the WESM
Rules and Market Manuals, as needed for the efficient operations of WESM
Mindanao.

DC No. Declaring the Commercial Operation of the Wholesale Electricity Spot
Market (WESM) in the Mindanao Grid Page 6 of 7
=== ocr-pages-7.ppm ===
8.5 National Grid Corporation of the Philippines (NGCP)

8.5.1. In coordination with the WESM Members, implement the necessary
upgrading, correction or installation of relevant equipment for the monitoring
of various facilities’ compliance with real-time schedule and dispatch;

8.5.2 Identify and implement the necessary and appropriate technical and
regulatory arrangement for the exclusive allocation of PSALM capacities in
the Bangsamoro Area to LASURECO and MAGELCO;

8.5.3 Implement disconnection of non-complying Mindanao Trading Participants
upon notification by the relevant generator, the WESM Governance Arm or
the MO, as the case may be, subject to existing processes and guidelines
on disconnection; and

8.5.4 Seek regulatory approval on the required transmission facility compliance
applicable to LASURECO and MAGELCO in accordance with the
provisions of this Circular.

Section 9. Regulatory Support. The ERC shall ensure the provision of support in the
regulatory requirements and approvals consistent with the policies set forth under this
Circular and in accordance with existing laws and procedures.

This Circular also recognizes that all generating units availing Feed-In Tariff (FIT) shall
have automatic termination of their Renewable Energy Supply Agreements (RESA)
with concerned Distribution Utility upon the commercial operation of WESM Mindanao,
pursuant to the ERC Guidelines on the Collection of FIT Allowance.

Section 10. Separability. If any provision of this Circular is declared invalid or
unconstitutional, the other provisions not affected shall remain valid and subsisting.

Section 11. Repealing Clause. Except insofar as may be manifestly inconsistent
herewith, nothing in this Circular shall be construed as to repeal any mechanisms
already existing or responsibilities already provided for under existing rules.

Section 12. Effectivity and Publication. This Circular shall take effect immediately
upon its publication in two (2) newspapers of general circulation. Copies thereof shall
be filed with the University of the Philippines Law Center — Office of National
Administrative Register (UPLC-ONAR).

Issued December 2022 at the DOE, Energy Center, Rizal Drive, Bonifacio Global
City, Taguig City.

Cee RAPHAEL P.M.LOTILLA ©
3 Adio, Officer AY Secreta

DC No. Declaring the Commercial Operation of the Wholesale Electricity Spot
Market (WESM) in the Mindanao Grid Page 7 of 7

=== ocr-pages-8.ppm ===
Annex A. Protocol on the Updating of Real-Time Data

Scope

This protocol shall apply to Generators whose facility's real-time information (i.e., analog
MW values and generator breaker status) are not automatically updated in the Energy
Management System of the System Operator (SO).

Procedures

1. The Generator shall regularly monitor its facility's MW output and breaker status.
Note that the necessary MW output to be monitored shall be consistent with their
WESM registration and representation in the market network model.

2. If the generating facility's MW output deviates by 1 MW, or by 1.5%, from its
previous MW output, whichever is higher, then the Generator shall notify the
Mindanao SO of its current MW loading.

3. If the generating facility's breaker status changes from its previous state (i.e., from
CLOSED to OPEN, or vice versa), then the Generator shall notify the Mindanao
SO of its new breaker status.

4. Upon receipt of new information from the Generator, the SO shall then update the
analog MW value, or breaker status, of the relevant facility in their Energy
Management System.

5. The Market Operator (MO) shall regularly monitor these generators’ dispatch
deviations (i.e., actual MW loading in comparison with their RTD schedules) as
reflected in the Market Management System. If any of these generators are non-
complying based on the measures set in the WESM’s Dispatch Conformance
Standards, then the MO shall inform the SO to coordinate with the relevant
Generator.

aan

DC2022- DECLARING THE COMMERCIAL OPERATION OF THE WHOLESALE
ELECTRICITY SPOT MARKET (WESM) IN THE MINDANAO GRID