DIRECTING DOE ATTACHED AGENCIES, ALL ELECTRIC POWER INDUSTRY PARTICIPANTS, CONSUMERS AND VARIOUS STAKEHOLDERS TO ADOPT AND IMPLEMENT CONTINGENCY MEASURES TO ENSURE ADEQUATE AND …

WHEREAS, Section 2 of Republic Act No. 9136,
otherwise known as the Electric Power Industry Reform Act of 2001 or
EPIRA, declared as a policy of the State, among others, to ensure the
quality, reliability, security and affordability of the supply of
electric power, to protect the public interest as it is affected by the
rates and services of electric utilities and other providers of
electric power, and to encourage the efficient use of energy and other
modalities of demand side management;

WHEREAS, pursuant to Section 37(h) of EPIRA, the
Department of Energy (DOE) exercises supervision and control over all
government activities relative to energy projects in order to attain the
goals embodied in Section 2 of Republic Act No. 7638, known as the
“Department of Energy Act of 1992”, as amended by EPIRA and that the DOE
is authorized under Section 5(k) thereof to formulate rules and
regulations as may be necessary to implement the objectives of said R.A.
No. 7638, as amended;

WHEREAS, Section 37 of EPIRA further provides for the following powers and functions of DOE, among others:

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(d) Ensure the reliability, quality and security of supply of electric power;

(e) Following the restructuring of the electricity sector, the DOE shall, among others:

(i) Encourage private sector investments in the electricity
sector and promote development of indigenous and renewable energy
sources;

(ii) Facilitate and encourage reforms in the structure and
operations of distribution utilities for greater efficiency and lower
costs;

(iii) In consultation with other government agencies, promote a
system of incentives to encourage industry participants, including new
generating companies and end-users to provide adequate and reliable
electric supply;

xxx

(i) Develop policies and procedures and, as appropriate, promote a
system of energy development incentives to enable and encourage energy
participants to provide adequate capacity to meet demand including,
among others, reserve requirements

xxx

(m) Formulate and implement programs, including a system of
providing incentives and penalties, for the judicious and efficient use
of energy in all energy-consuming sectors of the economy;”

WHEREAS, the cooperation of all electric power
industry participants and various stakeholders is indispensable in
achieving a reliable and secure supply of electricity in the country;

WHEREAS, the current power situation in the Visayas
Grid demonstrated the need for additional capacity as certified by the
System Operator (SO) of the National Transmission Corporation to meet
the increasing demand and reserve;

WHEREAS, the new generating plants in the Visayas
Grid as reported by the private proponents to the DOE are expected yet
to come on stream by 2010 and 2011;

WHEREAS, the availability and
adequacy of electricity in the Visayas Grid at this time is vested with
public interest such that it is incumbent upon the government to take
the necessary measures to ensure the continuous operation of vital
industries in the region by ensuring that there will be no interruptions
in the delivery of electricity;

NOW, THEREFORE, premises considered, the DOE is
issuing this Circular with the objective of ensuring that the declared
policies of the State under EPIRA are properly achieved and implemented:

SECTION 1. Scope and Coverage. This Circular shall apply
to all DOE-attached agencies namely, the National Power Corporation
(“NPC”), National Transmission Corporation (“TransCo”) through its
System Operator, Power Sector Assets and Liabilities Management
Corporation (PSALM), Philippine Electricity Market Corporation (PEMC),
National Electrification Administration (“NEA”), Philippine National Oil
Company (PNOC) and relevant Visayas stakeholders such as Distribution
Utilities (DUs) including Electric Cooperatives (ECs) in the Visayas
grid, Independent Power Producers (IPPs) or other power generation
companies and major power users, shall collaborate in ensuring the
provision of adequate and reliable supply of electric power in the
Visayas Grid.

Further, this Circular provides for the power supply contingency
measures in the Visayas grid to include, but not be limited to, a supply
augmentation program until new generating capacities come on stream.
This also serves as reiteration of the existing mandates of the agencies
and industry participants under the energy sector.

SECTION 2. Responsibilities. In addition to the functions
and responsibilities of the agencies and entities under their
respective charters and under existing laws, rules and regulations, they
are further directed to closely coordinate with the Department and
extend their full support in adopting the following measures in the
Visayas Grid. The DOE, being the agency tasked to supervise and oversee
the electric power industry, shall be the lead agency in ensuring that
all plans and programs to achieve the purposes of this Circular are
properly carried out.

NPC

(a) Ensure that all power plants including those of its
contracted IPPs shall operate in accordance with the declared individual
dependable capacities. All maintenance outage of power plants shall be
in accordance with the Grid Operation and Maintenance Program (GOMP)
under the Philippine Grid Code. A report containing the list of plants
and their operational status should be submitted on a monthly basis to
DOE, through the Electric Power Industry Management Bureau (DOE-EPIMB),
with a copy furnished the SO and Market Operator (MO).

(b) Secure oil-based power plants/IPPs to meet the average
required 30-day fuel oil inventories/supply. For this purpose, oil-based
power plants/IPPs shall submit to DOE-EPIMB, on a monthly basis, a
report on fuel inventory based on typical load dispatch and fuel
consumption.

(c) Provide an average 45-day coal inventory in all coal power
plants. For this purpose, an inventory report should be submitted to
DOE-EPIMB on a monthly basis based on typical load dispatch and fuel
consumption.

(d) Guarantee the readiness of all oil-based power plants for operation;

(e) Inform and update NPC customers on the power supply situation, and the corresponding load curtailment schedules.

TransCo/ National Grid Corporation of the Philippines (NGCP)

(a) Implement maintenance of major transmission line/s and
substation equipment that will add to load limitation to generating
plant/unit only during weekends and non-working holidays, and perform
system tests and Ancillary Services certification tests only during
weekends and non-working holidays. A monthly report should be submitted
to DOE for this purpose.

(b) Effect load curtailment in distribution utilities (private
utilities and ECs) without specific contracts or supply arrangements
with NPC/PSALM and other generation companies. For this purpose, the “no
contract, no connection” policy shall be strictly enforced.

(c) Ensure that the manual load dropping schedule is updated and in place.

(d) Enforce strictly the disconnection policy, in coordination
with NPC.Report immediately to the DOE Secretary and the DOE designated
focal person, in the most expedient manner available, if there are any
changes in the normal operation of the power system.

PSALM

(a) Determine, together with DOE and NPC, if there is a resulting
instability in the supply of power in the continued execution of the
current privatization program being implemented by PSALM inasmuch as the
70% of NPC’s generating assets has been bidded out. This is for
purposes of Section 71 of EPIRA.

(b) Coordinate the required operation of disposed assets in the Visayas Grid with the new owners, as the case may be.

NEA

(a) Inform properly the ECs of the situation and its possible
impact to the system. Towards this end, NEA shall render appropriate
assistance to the ECs in ensuring their readiness to (i) respond to any
event arising from the problem and (ii) take appropriate measures to
mitigate the problem by entering into any power supply contracts and/or
(iii) assist ECs in the development of available renewable energy
sources.

(b) Advice ECs with customers having self-generating capability
to effect necessary preparations to ensure readiness of the embedded
generating sets participating in the supply augmentation program of the
government.

(c) Assist ECs in promoting energy conservation measures for the electricity consumers.

(d) Submit monthly reports to DOE on the status of the regular
activities undertaken together with the ECs in the performance of their
responsibilities under this Circular.

NEA is hereby directed to submit to DOE within two weeks after the effectivity of this circular a detailed plan and program to implement
its responsibility.

PEMC

(a) Continue with its preparations for the possible launch of the
commencement of the commercial operations of the WESM in the Visayas.

(b) Submit to the DOE a detailed plan to implement the transition to the commercial operations of the WESM.

DUs/ECs

(a) Take cognizance and assume full responsibility to forecast,
assure and contract for the supply of electric power in their franchise
areas to meet their obligations as distribution utility.

(b) Limit their actual demand to their contracted demand/load, particularly during peak hours.

(c) Submit regularly to DOE the prescribed Distribution
Development Program (DDP) in compliance with DOE Circular No. DC
2003-012-011 to monitor the existing, available and future supply
requirements.

(d) Submit to DOE customers having self-generating capability to effect necessary preparations to ensure readiness of their generating
sets in case of participation in the Supply Augmentation Program of the
government;

In addition, the DOE declares the following:

SECTION 3. Supply Side Management. A Supply Augmentation Program is hereby introduced.

a) The PEMC, in coordination with NGCP/SO, is hereby directed to
formulate a comprehensive Supply Augmentation Program (the “Program”)
including the timetable of activities, which shall be submitted for
approval by the DOE within two weeks from the effectivity of this
Circular. The Program shall be implemented in the Visayas grid
immediately subject to the following conditions:

(i) Consistent with the objectives of the government’s energy
development program and shall comply with the provisions of the EPIRA,
its Implementing Rules and Regulations and, in applicable cases, the
WESM Rules.

(ii) Include, among other things, mechanisms for participation
and provision of power supply by embedded generators and other
self-generation facilities; demand-side participation such as the
provision of interruptible load as ancillary service; and the
corresponding pricing and compensation mechanism and, if appropriate,
the provision of incentives for participants.

(iii) Specify the duration for the implementation of the Program, the criteria or grounds for its termination.

b) Upon approval by the DOE of the Program, PEMC, in coordination
with the NGCP-SO, shall be responsible for the implementation of the
same, and, either individually or jointly, shall –

(i) Secure the necessary approvals and comply with necessary
regulatory requirements, including but not limited to the approval by
the Energy Regulatory Commission (ERC) and other relevant government
agencies on the implementation of the Program or of any mechanism or
procedure contained therein, such as, but not limited, to scheduling,
dispatch, pricing and compensation methodologies.

(ii) Formulate rules, guidelines and procedures for the
implementation of the Program, in consultation with the electric power
industry participants.

(iii) Establish the criteria, requirements and qualifications
for participation in the Program, and to register qualified
participants.

(iv) Facilitate the provision of the necessary infrastructure,
facilities and equipment including development of protocols or any
mechanism as may be necessary to implement the Program. For this
purpose, secure the necessary regulatory approvals for the cost recovery
mechanisms by NGCP-SO and PEMC of the costs incurred for the
development, establishment and operations of the Program.

(v) Implement the Program, in accordance with the approved rules, procedures and guidelines; and

(vi) Submit monthly reports to the DOE as well as other related reports as may be required from time to time.

c) All electric industry participants are directed to
participate in the Program, in accordance with this Circular, and the
rules, guidelines and procedures as may be issued and promulgated by the
NGCP-SO, PEMC and the DOE, from time to time.

SECTION 4. Renewable Energy Development.
The Renewable Energy Management Bureau, as created by Republic Act No.
9513 (the “Renewable Energy Act of 2008”), or the responsible DOE
Bureau/s or entities involved in the renewable energy resource
development shall:

(a) Assess the maximum contribution of renewable energy resources for power generation to the Visayas Grid.

(b) Require the renewable energy service con tractors to prepare
plans and ensure readiness to maximize the use of renewable energy
sources to ensure stability of power supply.

SECTION 5. Demand Side Management – The Energy
Utilization Management Bureau of the DOE, in coordination with other
concerned DOE units and relevant entities, is hereby directed to develop
a market-oriented demand side management program which shall likewise
be submitted to the DOE Secretary for approval.

All electric power stakeholders herein mentioned are encouraged to
adopt the demand side management program to be developed as prescribed
herein including, but not limited to, the engagement of energy service
companies (ESCOs) to achieve the purposes of this Circular.

SECTION 6. Regulatory Support. The DOE and the Energy
Regulatory Commission (ERC) shall closely coordinate in order that the
applications filed with the ERC to specifically address the Visayas grid
supply issues be duly resolved and acted upon expeditiously through the
use of modes such as, but not limited to, Section 4(e) Rule 3 of the
Implementing Rules and Regulations of EPIRA as amended in June 2007.

SECTION 7. Nothing in this Circular shall be construed as
to amend, supplant, or repeal any of the mechanisms or institutions
already existing or responsibilities already allocated and provided for
under any existing law, rule or contract.

SECTION 8. Effectivity and Publication. This Circular shall be effective immediately upon its publication in two (2) newspapers of general circulation.

This Circular shall remain in effect until otherwise revoked.

Adopted: 16 Jan. 2009

(SGD.) ANGELO T. REYES
Secretary