=== dc2025-04-0006-pages-01.ppm === Republic of the Philippines DEPARTMENT OF ENERGY (Kagawaran ng Enerhiya) BAGONG PILIPINAS DEPARTMENT CIRCULAR NO. _PC TAxpspp Allocation for Customers in the Energy Market GESQpm Flowback Allocationy » = FA x m ener gyn GES Qcustomer-total,m === dc2025-04-0006-pages-06.ppm === DC on Providing Specific Policy for the Optimal Utilization of the KPSPP Phases | and I/ Page 6 of 11 Allocation for System Operator in the Reserve Market Flowback Allocationsg im = (TTAxpsppm — TAxpspp,m) X rn Where: Flowback Allocation per buyer is the buyer’s share of the flowback amount in PhP for the billing period. Flowback Allocationp,m is the share in the KPSPP Flowback Amount in PhP for customer b during the billing month m based on transactions in the Energy Market. Flowback Allocationso,m is the System Operator's share in the KPSPP Flowback Amount in PhP for the billing month m based on transactions in the Reserve Market. GESQb»,m is the total GESQ of customer b (buyer in the WESM) for the billing month m in MWh. GESQcustomer-totalm is the total customer GESQ (buyers in the WESM) for the billing month m in MWh. Flowback Amountenergy,m (FAenergym) is the energy share for the difference between TTAkpspp and TAxespp for billing month m where TTAkpsppr is higher than TAkpspp for the same billing month m in PhP. GESQxpspp, FAenergym = (TTAxpspp,m — TAxpspp,m) X TTOccce,, KPSPP,m TTAkpsppm is the total trading amount in PhP of the KPSPP for the billing month m. TAxpsppm is the total amount in PhP of the KPSPP for the billing month m. GESQkxpsprm is the total GESQ in MWh of the KPSPP for the billing month m. TTQkpsrpm is the total transacted quantity that represents the sum of the GESQ and the Scheduled Reserve Quantity in MWh of the KPSPP that was scheduled and/or dispatched in the WESM for the billing month m. SRQxpsppwm is the total scheduled reserve quantity in MWh of the KPSPP for the billing month m. Section 6. Payment and Settlement Applicable Upon ERC Approval of KPSPP Tariff. The payment and settlement mechanism for the Total KPSPP Amount provided herein shall apply to the KPSPP upon application for a KPSPP Tariff, as provided in Section 6.1, and confirmation that the KPSPP Tariff applied for is equal to or lower === dc2025-04-0006-pages-07.ppm === DC on Providing Specific Policy for the Optimal Utilization of the KPSPP Phases | and II Page 7 of 11 than the ceiling set by the ERC. For this purpose, the ERC shall, within fifteen (15) calendar days from the effectivity of this Circular, issue the KPSPP Tariff ceiling. Section 6.1. Filing of KPSPP Tariff Application. PSALM’s transferee of the KPSPP may file the application for KPSPP Tariff with the ERC not later than five (5) years from the effectivity of the complete turnover of the KPSPP: Provided, That the filing of the Tariff Application shall be made after the following are in place: a. The approval by the ERC of the payment and settlement mechanism under Section 5; b. The issuance of the necessary amendments to WESM Rules and Market Manuals for Billing and Statement to operationalize the payment and settlement mechanism; and c. The issuance by the DOE of such other rules and regulations for the smooth integration of the KPSPP in the market, including the grant to said facility of preferential dispatch in relation to its scheduling and dispatch for the attainment of the purposes of this Circular. Provided, further, That the above requirements shall be accomplished within two (2) years from the effectivity of this Circular. Section 6.2. Considerations for the KPSPP Tariff. The ERC shall allow recovery of capital infused by PSALM’s transferee, to the extent allowed under applicable laws. The KPSPP Tariff shall consider the residual/current value of the KPSPP (including equipment, facilities and installations, and appurtenant devices and structures of the KPSPP), Incremental Costs and other costs/amounts recoverable by PSALM’s transferee under the EPIRA and other applicable laws, rules and regulations. As used herein, the phrase “capital infused” shall include the costs paid by PSALM’s transferee in the acquisition of the KPSPP and “Incremental Costs” shall refer to the additional cost, net of capital costs, incurred by PSALM or PSALM’s transferee of the KPSPP in operating the facility such as maintenance costs, and any other variable costs associated with the operations and upkeep of the KPSPP. The KPSPP Tariff shall exclude pumping cost which shall be net of house load as measured from a separate metering facility installed for said purpose. Section 6.3. Term of the KPSPP Tariff. The KPSPP Tariff approved by the ERC shall apply for a period of twenty (20) years from the date of approval of the KPSPP Tariff by the ERC. During this 20-year period, the KPSPP Tariff shall be subjected to periodical adjustment due to Consumer Price Index and Foreign Exchange Rate variation, as may be determined by the Commission. lf the KPSPP continues its operations after such 20-year period, the KPSPP shall continue to perform its functions herein, and must comply with existing rules and guidelines: Provided, That PSALM's transferee may, subject to existing rules and guidelines, apply for another KPSPP Tariff and the consideration for the KPSPP === dc2025-04-0006-pages-08.ppm === DC on Providing Specific Policy for the Optimal Utilization of the KPSPP Phases land Il Page & of 71 Tariff shall be limited to (a) Incremental Costs, (b) additional or new investments, if any, and (c) reasonable return on investments, as may be allowed under applicable laws. Section 6.4. Bilateral Contracts. During the 20-year period, all or a portion of the Available Capacity of KPSPP shall not be sold or offered through a bilateral contract, as energy and/or ancillary services. Section 7. Action Upon Application for KPSPP Tariff. The ERC shail act on the application for KPSPP Tariff within sixty (60) calendar days from receipt thereof in accordance with applicable laws, rules and regulations to be issued pursuant to this Circular. Section 8. Certificate of Endorsement for the KPSPP. Upon confirmation by the DOE of the plant availability, the KPSPP shall be deemed available and shall be entitled to the issuance of the COE-KPSPP. The COE-KPSPP shall indicate the name of the KPSPP and shall state the capacity of the KPSPP in kW that is eligible for the tariff under this Circular and the actual commencement date of availability. The COE-KPSPP shall be processed as follows: a. PSALM'’s transferee shall provide written notice to the DOE that it has achieved plant availability together with (i) the most recent year’s Generation Company Management Report and Generation Company Information Sheet submitted to the ERC, and (ii) the results of the most recent Annual Ancillary Services Performance Evaluation conducted by the System Operator. The DOE shall, within fifteen (15) working days from receipt of such notice of plant availability, conduct a site validation and inspection of the KPSPP including the interconnection facility. b. Plant availability is deemed attained if the plant successfully passes (i) the capacity tests for its declared capacity as provided in the KPSPP’s most recent year’s Generation Company Management Report and Generation Company Information Sheet, and (ii) the most recent Annual Ancillary Services Performance Evaluation. c. Not later than fifteen (15) working days from the last day of site validation, the DOE shall issue the confirmation or denial of plant availability. In the event the DOE confirms/validates the plant availability, it shall, within fifteen (15) working days from the date thereof, issue the COE-KPSPP. Section 9. Stakeholder Responsibilities. To ensure the implementation of this Circular, the Market Operator, DOE, ERC, WESM Governance Arm (through its committee), System Operator, and PSALM or PSALM’s transferee shall have the following general mandates and responsibilities: === dc2025-04-0006-pages-09.ppm === DC on Providing Specific Policy for the Optimal Utilization of the KPSPP Phases | and II Page 9 of 11 Section 9.1. Responsibilities of the DOE a. The DOE shall issue the COE-KPSPP upon confirmation/validation of the plant availability of the KPSPP. Section 9.2. Responsibilities of the ERC a. The ERC shall act on the Market Operator’s application for approval of the settlement mechanism within one hundred eighty (180) days from receipt of the application; and b. The ERC shall consider updating the Open Access Transmission Service rules to ensure that the KPSPP shall only be subjected to single Power Delivery Service charge, regardless of whether it is injecting or drawing electricity. Section 9.3. Responsibilities of the WESM Governance Arm a. The WESM Governance Arm, through its committee, shall facilitate the rules change process for the proposed amendments that shall be submitted by the Market Operator; and b. The WESM Governance Arm, through its committee, shall conduct audit of market systems in accordance with the WESM Rules and Market Manuals that will be used by the market for the implementation of this Circular. Section 9.4. Responsibilities of the Market Operator a. The Market Operator shall, within thirty (30) days from the effectivity of this Circular, apply for the ERC’s approval of the settlement mechanism provided under Section 5 hereof for the KPSPP; b. Within thirty (30) days from the ERC’s approval of the settlement mechanism, the Market Operator shall file an urgent amendment of the relevant provisions of the Market Rules and Manuals to reflect the approved settlement mechanism; c. The Market Operator shall pay and settle the Total KPSPP Amount in accordance with the ERC-approved settlement mechanism; and d. The Market Operator shall: i. Implement necessary enhancements to the market systems; ii. Propose necessary amendments in the WESM Rules and Market Manuals to implement this Circular; ii. Ensure availability of adequate manpower that will facilitate implementation of this Circular; and === dc2025-04-0006-pages-10.ppm === DC on Providing Specific Policy for the Optimal Utilization of the KPSPP Phases | and I! Page 10 of 11 iv. Seek the ERC’s approval on the recovery of costs for the implementation of this Circular including the settlement mechanism referred to in Section 5 hereof. Section 9.5. Responsibilities of the System Operator a. The System Operator shall, as far as practicable, consider the KPSPP capacities under its roster/list of Ancillary Service Providers; b. Based on the dispatch schedule provided by the Market Operator, the System Operator shall ensure maximum dispatch of the KPSPP; c. The System Operator shall adhere to the ERC-approved ancillary services cost recovery mechanism when recovering costs associated with the provision of ancillary services from the KPSPP; d. The System Operator shall ensure that the procurement of the energy needed during pumping mode of the KPSPP is at the least cost, whenever practicable. For the avoidance of doubt, the pumping costs of KPSPP shall be collected from WESM trading participants prorated based on their GESQ as defined in the WESM Rules and Market Manuals; and e. The System Operator shail coordinate with PSALM or PSALM's transferee to ensure that the KPSPP's Available Capacity is optimally utilized. Section 9.6.Joint Responsibilities of the Market Operator and System Operator a. The System Operator and Market Operator shall ensure the full utilization of the KPSPP; b. The Market Operator shall handle the scheduling of the KPSPP while the dispatch in the grid shall be handled by the System Operator; c. The System Operator and Market Operator shall implement the optimal dispatch of the capacity from the KPSPP providing energy and/or ancillary services to ensure that the demand and/or ancillary service grid requirements are always met; and d. The System Operator and Market Operator shall ensure that the KPSPP provide other grid support services, such as utilization of excess energy from VRE Facilities for pumping of the KPSPP. Section 9.7. Responsibilities of PSALM or PSALM’s Transferee. During the period of availment of the KPSPP Tariff, PSALM or PSALM’s Transferee, as the case may be, shall: a. Ensure compliance of the KPSPP with all permitting, licensing and other regulatory requirements under applicable laws, rules and regulations such === dc2025-04-0006-pages-11.ppm === DC on Providing Specific Policy for the Optimal Utilization of the KPSPP Phases | and II Page 11 of 11 as RE Contract from the DOE and Certificate of Compliance from the ERC; b. Ensure the KPSPP’s efficient operation; c. Ensure the KPSPP’s readiness to run upon scheduling and dispatch by the Market Operator and the System Operator, respectively; d. Ensure that the KPSPP shall undergo Testing, and secure Certification of Ancillary Service Capability by the System Operator or any accredited third-party testing entity; e. Diligently coordinate with the Market Operator on the timely recovery of compensation in accordance with the ERC-approved settlement mechanism; and f. Ensure that the KPSPP shall strictly comply with the WESM Rules and Manuals and other applicable rules and regulations. Section 10. Separability Clause. If any provision of this Circular is declared invalid or unconstitutional, the other provisions not affected thereby shail 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 of the mechanisms already existing or responsibilities already provided for under existing rules. Section 12. Effectivity. This Circular shall take effect immediately after its publication in at least two (2) newspapers of general circulation or in the Official Gazette. A copy of this Circular shall be filed with the University of the Philippines Law Center - Office of the National Administrative Register (UPLC-ONAR). Issued this APR 15 20?5at the DOE, Energy Center, Rizal Dri Bonifacio Global City, Taguig City. cor. 34th Street, L P.M. LOTILLA ecretary